Saturday, August 13, 2011

NYC Cops Collar Phony Real Estate Agent Accused Of Clipping Unwitting Would-Be Tenants Out Of Thousand$ In Upfront Rent On Home He Didn't Own

From a recent New York Post Daily NYPD Blotter:

  • A con man posing as a Realtor duped five people into paying him rent for an apartment in Corona that he didn't own, authorities said.

  • On July 18 and 19, José Ramirez, 36, leased a single apartment on 102nd Street near Lewis Avenue to the five victims and collected between $1,200 and $2,400 from each as payment for the first month's rent and security deposits, court documents show. Cops tracked down Ramirez on July 23, said a spokeswoman for DA Richard Brown.

Source: Daily NYPD Blotter (Queens).

Banks' 'Bulldozer' Efforts Used To Alleviate Choking On Unwanted F'closed Collateral, Avoid Accumulating Fines, Full Cost Of Abating Self-Created Mess

Bloomberg reports:

  • Bank of America Corp., faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer.

  • The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property.

  • The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are conducting or considering their own programs.(1)

For more, see BofA Donates Then Demolishes Houses to Cut Glut of Foreclosures.

(1) According to the story:

BofA will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest U.S. home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage. Since 2009, Wells Fargo made more than 800 donations, the bank said.

Fannie Mae, the mortgage-finance company operating under U.S. conservatorship, made its first deal with the Cuyahoga land bank in 2009, and sells houses to the organization at a “very nominal value,” or about $1 and an additional $200 in closing costs, said P.J. McCarthy, who heads alternative disposition programs.

JPMorgan, the second-biggest U.S. bank, has donated or sold at a discount almost 1,900 properties valued at more than $100 million in more than 37 states since late 2008, including 22 in Cleveland, said Jim O’Donnell, manager of community revitalization. The majority aren’t demolished, he said.

Citigroup has been donating foreclosures since 2008 through the National Community Stabilization Trust, according to an e- mailed statement from Natalie Abatemarco, managing director for the bank’s office of homeownership preservation.

Abandoned Homes In Foreclosure Called 'Ticking Time Bombs;' Banksters File Actions, Then Sit On Unwanted Collateral As City Bureaucrats Fiddle

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

  • The Garcia family lost three family members in an April blaze on Prospect Avenue. Reports say innumerable building code violations in forclosed Bronx buildings could lead to more such catastrophes.

  • Bronx foreclosures have racked up hundreds of building code violations of the type that led to a deadly fire on Prospect Ave., according to new report released on Monday. As of July, there were 899 open violations at 273 bank-owned buildings across the borough, including a property less than three blocks away from 2321 Prospect Ave., the site of the April blaze that killed a family of three.

  • Banks such as Wells Fargo and Deutsche Bank are ignoring a state law that requires lenders to maintain and secure the foreclosures, said state Sen. Jeff Klein (D-Bronx/Westchester), who issued the damning report. The law took effect in 2010.

  • The banks and the city Department of Buildings need to better to safeguard the buildings, said Klein, calling the foreclosures "ticking time bombs."

  • "The banks are very quick to foreclose on a family and deny them the American Dream, but then do nothing to fix the property," he said, standing in front of the charred shell of 2321 Prospect Ave. "I'm calling on the Buildings Department and the banks to maintain the property."

  • The three-family home in Belmont, owned by car dealer Domingo Cedano, had been illegally subdivided into 12 single-room units when it burst into flames. Prior to the blaze, Buildings recorded five complaints of illegal units with faulty wiring and blocked exits, and inspectors visited the site 10 times. But drug dealers operating there wouldn't let the inspectors inside.

  • Bank of New York Mellon failed to keep up the property, despite obtaining a foreclosure judgment in 2009, Klein said. Juan Lopez, 36; Christina Garcia, 43; and their son Christian, 12, were trapped as the building burned. "It was so tragic what happened," said neighbor Elba Marrera, 49. "But the bank didn't care. The landlord didn't care."

  • Klein's report lists the worst foreclosures in the Bronx, including 1055 Martin Luther King Jr. Blvd. in Highbridge, with 84 open violations. A two-family home near Prospect Ave., 2209 Beaumont Ave., boasts 13 complaints for illegal subdivisions.

  • "We have a tough law on the books that allows the Buildings Department to make repairs and send the lender the bill," said Klein. "We can prevent fires, we can prevent dangerous situations and we can save lives."

  • In June, Buildings teamed up with the Department of Investigation to file criminal charges against landlords who ignore dangerous violations. Hundreds of owners have been charged. Mayoral spokeswoman Julie Wood said the Bloomberg administration attempts to hold banks accountable, but insisted that Buildings inspectors have no right to force entry.

  • Meanwhile, the drug dealers who operated out of 2321 Prospect Ave. have moved to an empty building next door, said neighbor Chancy Marsh, 39. "If you live on Prospect Ave. you live in fear of low-level criminals," he said.

For the story, see Bank-owned Bronx buildings 'Ticking time bombs'; Wells Fargo and Deutsche ignore building codes.

Rat Incident Rate Skyrockets While Quality Of Life Declines In Baltimore As Boarded Up Foreclosed Homes Accumulate, Remain Neglected

In Baltimore, Maryland, The Huffington Post reports:

  • Richard Faison didn't mind that a neighbor's home was seized and boarded up until the rats from the vacant house killed one of his dogs. "That's when it hit me," said Faison, a Baltimore retiree. "That home is hurting mine."

  • Baltimore's continuing foreclosure epidemic is a particularly poignant example of the continuing national foreclosure crisis. The city has affixed some of the blame on one major lender, Wells Fargo. In a case that has captured headlines, the city sued Wells in 2008, arguing that it targeted African-American communities with subprime loans the bank knew would not be repaid.


  • But while that action plays out in the courtroom, a daily battle plays out on city streets, as homeowners try to maintain their properties in the face of abandonment and rot in seemingly every direction.


  • The rise in rats is an example of the declining quality of life in some sections of the city as foreclosures and vacant properties have begun to take their toll. Since 2003, rat incidents in his majority-black city of nearly 621,000 are up more than 300 percent, according to the Baltimore Neighborhood Indicators Alliance-Jacob France Institute at the University of Baltimore. There were more than 37,000 reports of rats in 2009, data show.

For more, see Rats Spread As Baltimore Fights Foreclosures.

NYC Targets Low-Income Co-Ops For Possible Seizure As Groups Stiff City Out Of Million$ In Real Estate Taxes

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

  • Shareholders at a low-income co-op at 1175 Gerard Avenue are furious the city is considering turning it over to a real estate developer. They realized the American Dream two decades ago, becoming homeowners at co-op buildings in the Bronx through a city program. Now, the Bloomberg administration wants to seize their properties and transfer them to a real estate company.

  • Three Bronx co-ops created for low-income shareholders have declared bankruptcy in an attempt to keep the city at bay. They owe millions of dollars in unpaid property taxes and are among a slew of low-income co-ops across the city now threatened with tax foreclosure.

  • "It feels like a slap in the face," said Luis Reyes, co-op board president at the six-story 1175 Gerard Ave. "We worked hard for this. You can't just take it away."

For more, see Low-income co-op in the Bronx files for bankruptcy, threatened with tax foreclosure.

Friday, August 12, 2011

Sibling Duo Faces Hate Crimes Charges In Home Repair Scam Targeting Elderly NYC Homeowners; Accused Of Threatening Liens On Homes To Squeeze Victims

From the Office of the District Attorney for Queens County, New York:

  • Queens District Attorney Richard A. Brown [] announced that two Long Island brothers who are not licensed to operate a chimney contracting business in New York City have been charged under New York State’s Hate Crime Law with stealing more than $30,000 from three elderly Queens homeowners for chimney and roof work that was never done.

  • District Attorney Brown said, “This alleged crime is particularly egregious as the defendants are accused of targeting elderly homeowners. It is charged that once they managed to get their foot in the door, they used high pressure sales tactics to steal substantial amounts of additional monies from their victims by telling them that more and more work needed to be done and that if they didn’t pay, a lien would be placed on their properties and they would be forced to move. In two instances, it is alleged that the defendants drove their victims to the bank to collect the money.”

The District Attorney identified the two defendants as Bruce Wimmer, 29, of Holbrook, New York, and his brother Michael Cristiano, 32, of Patchogue, New York. The defendants, allegedly operated either under Reliable Chimney, Inc., a business incorporated by Wimmer and located in Holbrook or under a false name, American Chimney.

The complaining victims included a 94-year female homeowner, a 72-year-old male homeowner, and a 79-year-old female homeowner.

For the Queens County DA press release, see Two Long Island Brothers Charged Under Hate Crimes Statute For Targeting Elderly Homeowners In Chiminey Scam (Allegedly Fleeced Homeowners Out of Over $30,000 For Chimney Work That Was Never Done).

Baltimore Feds Score Guilty Plea From Local Landlord Over Improper Lead-Based Paint Abatement At Rentals Throughout City

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

  • Cephus Murrell, age 68, of Catonsville, Maryland, pleaded guilty [] to three misdemeanor counts of violating the Toxic Substances Control Act, in connection with improper lead paint abatement at rental properties owned and managed by Murrell, as well as failure to disclose to tenants the presence of documented lead-based paint hazards. Murrell owns and manages approximately 175 rental housing units throughout Baltimore.


  • Cephus Murrell placed Baltimore children at risk of permanent injuries by violating federal law and ignoring repeated orders to comply with lead paint regulations,” said U.S. Attorney Rod J. Rosenstein. “It is unacceptable in 2011 for pregnant women and children to be exposed to lead paint in violation of the law.”


  • [Among a slew of other things,(1)] Murrell provided [the Maryland Department of the Environment] with a Project Notification Form for this project in which he falsely stated that a particular supervisor would be on site at the particular place and date, when in fact no supervisor was on site, also in violation of the lead-paint abatement regulations.

  • Murrell admits that there were several instances in which he falsely certified that workers would be conducting lead abatement work and that a particular supervisor would be on site to supervise the work, when in fact, no supervisor was on site.

For the U.S. Attorney press release, see Baltimore City Landlord Pleads Guilty To Lead Based Paint Violations In Rental Properties He Owns And Manages (Previously Cited by the State for Numerous Lead Paint Violations and Documented Children with Elevated Lead Blood Levels Living in His Properties).

(1) According to the press release, Murrell also admitted that he and his company failed to disclose to tenants the presence of documented lead-based paint hazards when they rented units he owned and managed. Many of these units had a history of lead-based paint problems that had been documented by MDE.

Despite these findings and prior enforcement actions by the State and municipal agencies, Murrell did not provide tenants with the required Lead-Based Paint Notification Disclosure Form and failed to:

  • give prospective tenants an EPA-approved information pamphlet on identifying and controlling lead-based paint hazards;
  • disclose to prospective tenants any known information concerning lead-based paint or lead-based paint hazards, the location of those hazards, and the condition of the relevant surfaces;
  • provide prospective tenants with any records and reports on lead-based paint and/or lead-based paint hazards; and
  • include an attachment to the lease (or to insert relevant language in the lease itself) which provides a Lead Warning Statement and confirms that the landlord has complied with all notification requirements.

Landlord Pinched For Allegedly Renovating Apartment w/out Permission While Tenant Away On Vacation; Faces Unlawful Eviction, Criminal Mischief Charges

From a recent New York Post Daily NYPD Blotter:

  • A landlord illegally renovated a tenant's apartment in Richmond Hill while the man was on vacation for a week, authorities said. The tenant left his 91st Avenue pad near 104th Street on June 28, only to return on July 5 and find that his belongings had been scattered about the front and rear yards and that "new Sheetrock had been placed in his apartment and some walls had been changed," court papers state.

  • When confronted about the unauthorized alterations, landlord Ancil Goorahoo, 26, allegedly replied, "I have been doing construction." He was arrested later that day and charged with unlawful eviction(1) and criminal mischief, said a spokeswoman for DA Richard Brown.

Source: Daily NYPD Blotter (Queens).

(1) See NYPD Patrol Guide Procedure No. 117-11 setting forth the law and official Police policy regarding the New York City Illegal Eviction Law (and go here for what to do in New York City when victimized by an illegal lock-out.

Banksters Continue Disregard For Tenants' Rights In F'closed Homes; Illegal Constructive Evictions Believed To Be On Upswing As 'Boot' Filings Decline

In Chicago, Illinois, Community Media Workshop reports:

  • Banks routinely violate state and federal laws protecting tenants in rental buildings in foreclosure, particularly in a “foreclosure belt” stretching across the South and West Sides, according to a new report.

  • Lenders and their agents “willfully ignore” laws that protect tenants in foreclosures(1) and have “institutionalized in their practices the wholesale violation of tenants’ [legal] rights,” according to a report from the Lawyers Committee for Better Housing.

  • Banks “generally ignorefederal law requiring them to honor existing leases after foreclosure on a rental building, according to the report.

  • Banks seek to vacate properties they’ve acquired – through illegal lockouts and through “misleading, harassing and threatening communicationswith tenants – in order to evade legal responsibilities under the city’s tenant landlord ordinance, the report suggests.


  • Eviction filings have fallen steadily since 2007 – and one reason may be that “a substantial number of evictions are carried out extra-judicially,” according to the report. Tenants who refer to existing leases “are routinely ignored,” and when LCBH lawyers alert banks and their attorneys to illegal practices they too “are often ignored,” according to the report.


  • Illegal constructive evictions that lead to building vacancies and boardups have a clear solution: enforce the already existing laws that protect tenants living in foreclosed buildings,” according to the report. It calls for “adding teeth” to existing statutes.

For more, see Foreclosure and renters: banks break the law.

See Banks Avoid Foreclosure Laws, Uproot Renters: A Call for Enforcement of Tenant Protections for the Lawyers Committee for Better Housing report.

Thanks to Deontos for the heads-up.

Editor's Note: Illinois case law suggests that representing poor or otherwise 'cash-lacking' tenants in unlawful eviction cases in the City of Chacago might be somewhat more lucrative than many may think (and, consequently, may pose an unexpected minefield for unscrupulous landlords, banksters, and their henchmen who may find themselves footing the victimized tenant's legal bill in a successful defense of an illegal eviction). See Pitts v. Holt, 304 Ill. App.3d 871, 710 NE 2d 155 (Ill. App. 1st Dist., 6th Div. 1999),(2) a case which, coincidentally, was litigated by the Lawyers Committee for Better Housing.

(1) The Federal Protecting Tenants at Foreclosure Act of 2009 provides important protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term.

For more on the rights of tenants in homes/apartments in foreclosure, see National Law Center on Homelessness & Poverty: Staying Home: The Rights of Renters Living in Foreclosed Properties.

(2) The Illinois appeals court made these observations regarding the imposition of a tenant's legal fees upon an unscrupulous landlord (and the calculation thereof) in a successful defense in an illegal eviction case (bold text is my emphasis):

  • In this case, defendant's attorneys itemized 69.40 hours of work performed to defend their client against an unlawful eviction, ultimately securing the maximum statutory damages provided by the Ordinance.

    At the hearing, the court indicated that it had no objection to the amount of work claimed done on behalf of the defendant, with the exception of the fact that she used two attorneys to represent her at the trial when one would have been sufficient. The second attorney's trial work accounted for $3,787.50 of the total $9,368.75 sought by plaintiff.

    The court specifically stated that the rates charged by the defendant's attorneys were low, and further stated that, given their experience, higher rates could have been charged if the defendant's attorneys had been in private practice.


  • Defendant suggests that the trial court discounted the defendant's fee award based upon the fact that her attorneys were employed by a not-for-profit legal services agency. Comments made by the court support this inference. If this is in fact the basis of the court's low award, we simply reject it, pointing out the lack of Illinois precedent supporting consideration of such a factor.

    Indeed, at least one Illinois decision has rejected the notion that legal services attorneys should be compensated at lower-than-market rates. See Merchandise National Bank v. Scanlon
    , 86 Ill.App.3d 719, 728-29, 41 Ill.Dec. 826, 408 N.E.2d 248 (1980).

    As the federal courts have recognized, discounting the legal fees awarded to legal aid attorneys would serve only to chill the impulse of attorneys to pursue and continue careers in legal service work since the receipt of such fees promotes the health and continued existence of their employing organizations. See Torres v. Sachs
    , 538 F.2d 10, 13 (2d Cir., 1976); Rodriguez v. Taylor, 569 F.2d 1231, 1245 (3d Cir., 1977).

    We agree with the observation made in Fairley v. Patterson
    , 493 F.2d 598 (5th Cir., 1974), where the court wrote:

    "`Whether or not [the client] agreed to pay a fee and in what amount is not decisive. * * * The criterion for the court is not what the parties agreed but what is reasonable.' [Citation] Whether the attorney charges a fee or has an agreement that the organization that employs him will receive any awarded attorneys' fees are not bases on which to deny or limit attorneys' fees or expenses." Fairley
    , 493 F.2d at 607, quoting Clark v. American Marine Corp., 320 F.Supp. 709, 711 (E.D.La., 1970), aff'd. 437 F.2d 959 (5th Cir., 1971).

    In addition, we note that assessing reasonable fees has the potential added benefit of deterring wrongdoing in the first place. Rodriguez
    , 569 F.2d at 1245.

Rental Complex Owner/Developer, Architect Settle 'Inaccessibility' Allegations With NYC Feds In Civil Rights/Fair Housing Lawsuit

From the Office of the U.S. Attorney (New York City):

  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced [] that the United States has settled a federal civil rights lawsuit alleging that The Melar, a 22-story, 143-unit residential apartment complex in Manhattan, is inaccessible to persons with disabilities and in violation of the federal Fair Housing Act.

  • The United States has entered into settlement agreements with L&M 93RD STREET LLC, the developer and owner of The Melar, and COSTAS KONDYLIS & PARTNERS, LLP, the architectural firm that designed the building, in the form of two consent decrees.


  • The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin, and disability. Since 1991, the Fair Housing Act has required that new multi-family housing complexes with four or more units be built with certain accessible features.

For the entire U.S. Attorney press release, see Manhattan U.S. Attorney Settles Civil Rights Lawsuit Against Developer And Architect Of Manhattan Rental Complex.

Thursday, August 11, 2011

Financially Beleaguered Baseball Club 'Dodges' Threat Of Foreclosure Under Terms Of New $150M Financing Deal With MLB; Arrangement Awaits Court OK

The New York Times reports:

  • Under the terms of a $150 million loan agreement submitted to federal bankruptcy court on Friday, Major League Baseball cannot seize control of the Los Angeles Dodgers if the team defaults.

  • The worst that can happen — in the narrow case of default — is they can stop funding,” said Bruce Bennett, one of the Dodgers’ lawyers. “It is not a secured loan, so baseball can’t foreclose on anything.”

  • Bennett said that the team’s current cash needs were not dire and that it did not immediately need to ask for any of the $150 million. “They have more than adequate resources to meet all their payables as they come due,” he said, adding, “We don’t need to borrow the maximum amount of the loan.”


  • At a hearing in bankruptcy court in Delaware last month, the Dodgers insisted they wanted to borrow $150 million from Highbridge Capital, a hedge fund, despite a higher interest rate than baseball offered and the risk of foreclosure in case of a default. Gross rejected the Highbridge loan and told M.L.B. and the Dodgers to negotiate a deal.

For the story, see Terms of Loan From Baseball Ease Dodgers’ Fear of Seizure.

Suit: BofA Harassed Widow w/ Repeated Calls To Speaker Phone During Hubby's Wake To Collect Debt, Failing To Give Her 30 Days To Sort Out Affairs

In Honolulu, Hawaii, Courthouse News Service reports:

  • A widow says Bank of America cruelly harassed her during her husband's wake, making repeated dunning calls to a speaker phone set up for condolences, though the bank knew her husband had just died, and that it would get its money as soon as she received her life insurance check.

  • Deborah Crabtree sued Bank of America Home Loans Servicing, Bank of America, and Countrywide Home Loans on 16 counts, including unconscionability, bad faith, outrage, misrepresentation, unjust enrichment and violations of state laws.

  • She says the bank called her "incessantly every day" after her husband died. During the wake at their home, she says, she and her children had set up a speaker phone to receive condolence calls. She says the bank called "every 15 minutes during the wake," broadcasting "throughout the house, stating, 'This is Bank of America, and we are calling to collect with regards to a debt.'"

  • Crabtree says that other companies granted her requests for 30 days to get her husband's business affairs in order, and her life insurance money - but not Bank of America.

  • She says the bank's collectors called throughout the wake, "every 15 minutes, forcing plaintiff, her son, Daniel, or her daughter, Tracy, to rush to the phone to hang it up before the message was broadcast throughout the house again."

For more, see Widow Says BofA Dunned Her at Wake.

For the lawsuit, see Crabtree v. Bank of America Home Loans Servicing, L.P., et al.

Allegations Of Real Estate Agent's Short Sale Fraud, Closing Attorney's Mortgage Refinance Ripoffs Among Charges That Mark Recent Miami Indictments

In Miami, Florida, The Miami Herald reports:

  • Four separate indictments were unsealed Tuesday by the U.S. Attorney’s Office in Miami accusing 27 people in various mortgage fraud schemes against banks and South Florida homeowners. The charges range from mail fraud to insurance fraud to arson, and highlight the problems that South Florida faces as the nation’s top market for mortgage loan fraud, U.S. Attorney Wilfredo Ferrer said.


  • [According to one indictment,] In 2009, [Miami real estate agent Gerardo] Wilhelm engaged in a fraudulent short sale of the property, selling it to a friend for $77,000, despite the fact that he owed $300,000 on the mortgage. A year after the sale, the buyer transferred the property to a company controlled by Wilhelm. That company, whose vice president is Wilhelm’s mother, sold the townhome in March for $240,000.


  • A [separate] case charges Miami attorney David Donet Sr. with misappropriating more than $1 million in client funds during the closing process of real estate transactions. Instead of using the proceeds of a client’s refinance to pay off the existing mortgage, Donet allegedly kept the money for personal use, leaving homeowners susceptible to foreclosure.

For the story, see U.S. attorney accuses 27 in South Florida of mortgage fraud (U.S. Attorney Wilfredo Ferrer announced charges in four separate cases against South Floridians accused of participating in various mortgage fraud schemes).

For the U.S. Attorney press release, see Mortgage Fraud Take-Down Leads To Charges Against Twenty-Seven South Florida Residents.

Mortgage Broker Gets 60 Months In Straw Buyer Mortgage Scam That Included Targeting Homeowners In Foreclosure With Bogus Sale Leaseback Ripoffs

From the Office of the U.S. Attorney (New York City):

  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced that MICAH MEYERS was sentenced [] in Manhattan federal court to 60 months in prison for his role in a sub-prime mortgage fraud scheme involving dozens of residential mortgages that totaled more than $10 million.


  • As part of the scheme, MEYERS identified properties for sale primarily in New York City and Long Island (the "target properties"). In some instances, he identified target properties whose homeowners were facing foreclosure, and fraudulently convinced them that selling their properties would be a way to pay off their debts and save their homes. In other instances, MEYERS identified target properties that he believed could be resold quickly, or "flipped," so that he would bear minimal risk of loss should the properties' values decline.


  • Once the purchase of the target properties had been funded, MEYERS often failed to make mortgage payments as he had promised, causing some of the straw buyers to default on their mortgages. As a result, mortgage lenders were forced either to foreclose on those properties or to re-purchase the properties from the straw buyers for less than the face amount of the loan.

  • This often left the original homeowner -- who had been promised that selling his or her home would be a way to save it -- facing eviction. With respect to other target properties, MEYERS rented them to tenants and used the rent and other monies earned from the scheme to make mortgage payments on behalf of the straw buyers for a certain period of time before allowing the mortgages to go into default.

For the U.S. Attorney press release, see Manager Of Mortgage Brokerage Firm, Bridgewater Funding, LLC, Sentenced In Manhattan Federal Court To 60 Months In Prison For His Participation In A Multi-Million Dollar Mortgage Fraud Scheme.

Chase To Forgive $100K In Short Sale, Stick $35K In Homeowner's Pocket; Finally Coming To Its Senses, Or Acknowledging It Can't Prove It Owns Loan?

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • The bank spent the last two years denying Deborah Johnson's efforts to save her Sarasota home from foreclosure, and then out of nowhere, last month, sent her an unbelievable offer.

  • If Johnson can find someone to buy the property for half of what is owed on the mortgage, JP Morgan Chase bank will not only forgive the remaining $100,000 or so of debt, but also send her away with $35,000 in her pocket.

  • The proposal was far better than a foreclosure, which would punish her credit score more severely, strand her without money for a new place to live, and expose her to collection efforts for the unpaid balance for the rest of her life.

  • "I thought it was a gimmick," Johnson said of the offer. So she called the phone number given, and yes, the offer is real and it surprises even veteran real estate experts.


  • At least eight other homeowners in Sarasota and Manatee counties have received cash offers up to $35,000 from Chase in the last two months to encourage so-called "short sales," say attorneys who work with troubled homeowners.


  • But real estate attorneys who work with troubled homeowners suspect banks have a less benign reason for the offers: covering up for bad or missing paperwork that would make foreclosure in court difficult. [...] "My only guess there is these guys don't have the note," [Real estate attorney Anne] Weintraub said.

For more, see Bank makes foreclosure offer she can't refuse.

Wednesday, August 10, 2011

Score Another For Media; Bankster Backpeddles On 'Land Grab' F'closure Attempt Of Business Owner One Day Late On Mtg. Payment After Published Story

In St. Petersburg, Florida, the St. Petersburg Times reports:

  • It looks like Saji Mathew will get to keep his gas station, at least for now. The 41-year-old man faced foreclosure after missing a mortgage payment on the gas station by just one day. He made several attempts to continue paying and made a $50,000 offer in court earlier this week to settle the case that the bank refused.

  • On Thursday, a day after the St. Petersburg Times published an article detailing the saga, the bank, BB&T, said it would suspend the foreclosure action and work with Mathew to clear up the case. Mathew was elated to hear the news.

For more, see Bank suspends foreclosure against gas station that tried to pay one day late mortgage.

Attorney Suspected Of 'Renting Out' Law License To Outfit With Ties To Man Implicated In Fla AG Loan Mod Lawsuit Slammed With Emergency Bar Suspension

The Palm Beach Post reports:

  • The Florida Supreme Court has ordered the emergency suspension of a Boca Raton attorney after the Florida Bar said his home loan modification and foreclosure defense business was causing "great public harm." William O'Toole, whose firm Summit Legal Group worked with as many as 3,000 clients nationwide, is prohibited from accepting new clients and withdrawing money from company accounts per the July 25 order.(1)


  • A Florida Bar petition asking for O'Toole's suspension says he is the subject of 20 bar disciplinary matters filed by disgruntled customers. According to the petition, O'Toole's troubles stem from business he conducted in conjunction with non-attorneys in his company where up-front fees of between $1,500 and $3,000 were charged to clients.

  • It is against Florida law for loan modification firms to accept up-front fees from clients, but there is a provision that allows for up-front fees to be paid to attorneys representing clients seeking loan modifications. The Florida Bar has warned attorneys to be wary of groups trying to skirt the fee law by joining forces with a lawyer.(2)

  • In a deposition, O'Toole admitted that he allows almost exclusive control of the office to the non-lawyers who control all the contact with the clients from the initial call to advising the client of the outcome of their case.


  • "I did think it was weird dealing with a Florida company," [one unwitting homeowner] said, "but they told me they had lawyers all over the country." O'Toole was the only lawyer in the firm, according to his deposition.

  • Also implicated in O'Toole's deposition is Randy Baker, who is listed in state records as secretary for the former Boca Raton company of Baker, Kennedy and Associates. The company is facing a state attorney general's lawsuit that accuses it of posing as a law firm and taking up-front fees for loan modifications.

  • Baker went on to a management position at Summit Legal Group. A woman answering the phone at a number listed for Summit referred calls to a Fort Lauderdale attorney who did not return a message.

For the story, see Boca Raton attorney's office was causing 'great public harm,' Florida Bar says.

(1) See The Florida Bar v. O'Toole for the Florida Supreme Court order.

(2) See The Florida Bar News: ETHICS ALERT : Lawyers should be very wary of loan modifiers.

Michigan Homeowners Warned Against Florida Outfits Peddling Possible Foreclosure Scams Involving Loan Modification Pitches, Mass Joinder Lawsuits

In Ingham County, Michigan, The Michigan Messenger reports:

  • Ingham County Register of Deeds Curtis Hertel, Jr. is alleging that two Florida companies may be engaged in scams involving Michigan residents facing foreclosure. Hertel, in an interview with Michigan Messenger, says he received complaints from residents about the two different companies over the last month. As a result he called both, and confirmed what residents were telling him they were experiencing.

  • The first company, Hope for Hamp, says on its website it is selling people software that will assist them in getting their mortgage refinanced. But Hertel says when he called the company, he had a very different experience.


  • The first company, Home for Hamp, started out talking about software but quickly changed the subject to modifications. [They said] that they worked with hundreds of banks across the country to get people modifications. Every time I asked about the software they said it was not important and that they were trying to save my home,” Hertel said.


  • The site is also coming under fire by the campaign team for President Barack Obama for using the campaign logo as well as an image of the White House, implying the programs are supported by the President. “The use is not authorized, and they will be asked to cease use immediately,” said a campaign spokesperson.

  • In the second example Hertel is warning residents about, the company is soliciting participants for litigation against the banks and foreclosure mills. The catch? They are asking for thousands of dollars up front for the homeowner to participate in a class action lawsuit. This company in question is the Mortgage Relief Center.

  • The second company offered to get me legal representation for case. They again wanted to know my story. I gave them a few pieces of information and they quickly believed I would be perfect for the mass joinder suit that was being filed,” Hertel says.

  • When I asked how much it would cost they said I would receive a call from a supervisor. When I asked how much on average he told me roughly $5000. I asked if I could talk to the attorney that would be handling my case and i was told not until I paid the $5,000. I asked if any of the attorneys referenced in their materials would be the one handling my case. They told me it would likely be an associate.”

For more, see Hertel warns of possible foreclosure scams (Two companies accused of bilking victims).

NYC Comptroller: Banking Regulator Gave Financial Firms Free Pass For Roles In F'closure Crisis, Blowing Chance To Squeeze Them Over Improper Conduct

From the Office of New York City Comptroller John C. Liu:

  • City Comptroller John C. Liu stated the following in response to questions about today’s New York City Banking Commission vote to designate 35 financial institutions as depository banks:

    “Today the New York City Banking Commission rubber-stamped a motion to assign these banks the privilege to serve as depositories without first considering what, if any, role they are playing in the current foreclosure crisis.

    This obscure but powerful commission had the opportunity to engage financial institutions in a dialogue on how keep New Yorkers in their homes and they blew it by giving these banks a free pass.

    “Most New Yorkers have never heard of the Banking Commission, which is controlled by City Hall and has been given broad authority to regulate financial institutions holding City deposits.

    As a result of today’s development, my office will be working with the City Council to enact legislation aimed at holding banks designated as depositories accountable to New York City homeowners and taxpayers. In addition, my staff will be analyzing ways to restructure the Commission in order to better serve New Yorkers.”

For the rest of the NYC Comptroller press release, see Liu: NYC Banking Commission Misses Opportunity To Help New Yorkers Facing Foreclosure (Rubber-Stamps Approvals for Depositories, Liu to Explore Legislation and Other Means to Spur Change at Mayoral-Controlled Commission).

Tuesday, August 9, 2011

AIG To Tag BofA, Affiliates With $10B+ Suit Over Losses On Crappy MBS Deals; Similar Suits Targeting Other Banksters Expected

The New York Times reports:

  • The American International Group is planning to sue Bank of America over hundreds of mortgage-backed securities, adding to the surge of investors seeking compensation for the troubled mortgages that led to the financial crisis.

  • The suit seeks to recover more than $10 billion in losses on $28 billion of investments, in possibly the largest mortgage-security-related action filed by a single investor. It claims that Bank of America and its Merrill Lynch and Countrywide Financial units misrepresented the quality of the mortgages placed in securities and sold to investors, according to three people with knowledge of the complaint.

  • A.I.G., still largely taxpayer-owned as a result of its 2008 government bailout, is among a growing group of investors pursuing private lawsuits because they believe banks misled them into buying risky securities during the housing boom. At least 90 suits related to mortgage bonds have been filed, demanding at least $197 billion, according to McCarthy Lawyer Links, a legal consulting firm.

  • A.I.G. is preparing similar suits against other large financial institutions including Goldman Sachs, JPMorgan Chase and Deutsche Bank, said the people with knowledge of the complaint, as part of a litigation strategy aimed at recovering some of the billions in losses the insurer sustained during the financial crisis.

  • The private actions stand in stark contrast to the few credit crisis cases brought by the Justice Department, which is wrapping up many of its inquiries into big banks without filing any charges. The lack of prosecutions — the Justice Department has brought three cases against employees at large financial companies and none against executives at large banks — has left private litigants, mainly investors and consumers, standing more or less alone in trying to hold financial parties accountable.

  • When federal authorities don’t fulfill their obligation to enforce the law, they essentially give an imprimatur to the financial entities to do whatever they want and disregard the law,” said Kathleen C. Engel, a professor at Suffolk University Law School in Boston. “To the extent there are places where shareholders and borrowers can pursue claims, they are really serving the function of the government. They are our private attorneys general.”

  • Though many in the public have called for more accountability for parties involved in the financial crisis, criminal charges on complex financial matters can be difficult to prosecute.

For more, see A.I.G. to Sue Bank of America Over Mortgage Bonds.

Washington State AG Tags 'Rogue' Trustee In Faulty F'closure Suit Saying 1000s Of State Homeowners Were Victimized By Allegedly Illegal Sale Procedure

From the Office of the Washington State Attorney General:

  • Washington Attorney General Rob McKenna [] announced that his office is suing ReconTrust Company, a subsidiary of Bank of America, for conducting illegal foreclosures on thousands of Washington homeowners.

  • ReconTrust ignored our warnings, repeatedly broke the law and refused to provide information requested during our investigation,” McKenna said. “ReconTrust’s illegal practices make it difficult, if not impossible, for borrowers who might have a shot at saving their homes to stop those foreclosures.”

  • ReconTrust is a foreclosure trustee that is legally required to act as a neutral party on behalf of both the lender and the borrower while conducting foreclosure proceedings in good faith and in accordance with the law.

  • The lawsuit filed in King County Superior Court by McKenna and Assistant Attorney General Jim Sugarman, of the office’s Consumer Protection Division, alleges that “ReconTrust has failed to comply with the Washington Deed of Trust Act, RCW 61.24, in each and every foreclosure it has conducted since at least June 12, 2008.” The company is also accused of violating the state’s Consumer Protection Act.


  • McKenna said an essential requirement of the Deed of Trust statute is that a trustee maintains an office in the state where homeowners can go to ask questions, make last-minute payments and request a foreclosure be postponed for a legitimate reason. But ReconTrust doesn’t have an office in Washington. “ReconTrust’s claim that the company doesn’t have to follow Washington law and procedures because it is a national bank is wrong,” McKenna added.


  • The complaint states that homeowners facing foreclosure are “captive to ReconTrust’s services” and that the company’s failures to abide by the law have concealed material information needed by homeowners to assert rights and defenses, negotiate a loan modification, cure defaults, and postpone or stop a foreclosure sale.

  • Sugarman said, “It is particularly important right now for trustees to understand and strictly comply with Washington foreclosure law.(1) There have been several changes including a new right for homeowners to request mediation to discuss a possible loan modification or forbearance before the bank pursues foreclosure.”


  • Private lawsuits against ReconTrust have been filed in Utah, Nevada, California, Oregon and Arizona concerning its role in foreclosures in those states, as well as by private attorneys in Washington. The Attorney General of Utah sent a public letter to Bank of America threatening suit if ReconTrust continued to violate Utah foreclosure law.

For the Washington State AG press release, see Washington Attorney General sues ReconTrust for illegal foreclosures (McKenna raps trustee’s claim that it doesn’t have to abide with state law).

For the lawsuit, see State of Washington v. ReconTrust Company, N.A. (King County Superior Court No. 11-2-26867-5).

(1) See Albice v. Premier Mortgage Services Of Washington, Inc., 157 Wn. App. 912; 239 P.3d 1148 (Wn. Ct. of App., Div. 2, September 28, 2010) for a recent Washington State intermediate appeals court ruling that suggests that a failure to strictly comply with foreclosure procedure could result in a sale that could later be found to be absolutely void, and that any subsequent purchasers of the foreclosed title acquire nothing, notwithstanding any protected status they may otherwise qualify for as bona fide purchasers.

Albice has been accepted for review by the Washington State Supreme Court. Albice v. Premier Mortgage Services Of Washington, Inc., 170 Wash.2d 1024, 249 P.3d 623 (2011).

For the briefs filed with the state high court, see 85260-0 - Christa Albice, et al. v. Ron Dickinson, et al. Hearing Date - 09/22/2011:

For the lower appellate court briefs filed in Albice, see:

For rulings by the Washington State Supreme Court that are consistent with the proposition that procedural irregularities (as opposed to substantive irregularities) that defeat a trustee's authority to sell property at a foreclosure sale may render the sale void, see:

NYC Firms Team Up, Tag Notorious Buffalo-Based Sweatshop For Failure To Meet Recently Mandated Requirements In State Foreclosure Actions

In New York City, non-profit law firm MFY Legal Services, Inc. has issued the following press release:

  • MFY Legal Services, Inc. and Harwood Feffer LLP(1) filed suit on August 4, 2011 against Steven J. Baum PC, a law firm that files 40% of the foreclosure actions in New York State, charging unfair debt collection and deceptive practices in filing thousands of foreclosure lawsuits.

  • Justice Deceived, a study of a representative sample of foreclosure filings in Brooklyn and Queens before and after the New York State Court's October 2010 rule requiring foreclosure law firms to attest to the accuracy of every foreclosure summons and complaint (the "Due Diligence Affirmation"), showed that four large law firms filed hundreds of foreclosure cases, but failed to file the documents that cause the case to be assigned to a judge and trigger a state-mandated settlement conference.

  • In 82% of foreclosure cases filed in November 2010, lawyers failed to file the required Request for Judicial Intervention (RJI) and Due Diligence Affirmation seven months after the case was filed.

  • "This is the biggest scandal since robo-signing," said Elizabeth Lynch, an attorney at MFY Legal Services, a non-profit organization, and author of the new report. "Homeowners are left in limbo while they wait for the bank's law firm to file the documents that will trigger a settlement conference, which is their best chance of saving their home. Instead, the banks reject their mortgage payments and charge additional fees and interest that undercut homeowners' chances for a successful loan modification."

For more, see Law Firm Firm Sued For Undermining New York State's Protections For Homeowners In Foreclosure (New MFY Study Shows that Large Firms Withhold Legal Documents from Judicial Filings, Leaving Cases in Limbo while Fees and Arrears Accumulate for Distressed Homeowners).

For the lawsuit, see Cole v. Steven J. Baum, P.C.

See Justice Deceived: How Large Foreclosure Firms Subvert State Regulations Protecting Homeowners for a study of a representative sample of foreclosure filings in Brooklyn and Queens before and after the New York State Court's October 2010 rule requiring foreclosure law firms to attest to the accuracy of every foreclosure summons and complaint.

(1) MFY Legal Services, Inc. is a non-profit provider of civil legal assistance to New Yorkers who cannot afford attorneys. Harwood Feffer LLP is a firm that specializes in complex, multi-party litigation with an emphasis on securities and shareholder class and derivative actions, ERISA and civil rights litigation, antitrust matters and consumer litigation.

'Stagecoach To Hell' Stands Accused Of Ignoring Buy-Out Rights Of Estates, Surviving Spouses Involving Reverse Mortgages; Suit Seeks 'Class' Status

In San Francisco, California, Bloomberg reports:

  • Wells Fargo & Co. was accused in a group lawsuit of ignoring federal rules on reverse mortgages and forcing homes into foreclosure instead of giving heirs a chance to buy them.

  • Estates and surviving spouses have the right to purchase properties at 95 percent of appraised value after the death of a borrower who took out a federally insured reverse mortgage, lawyers for a California man said in the complaint filed Aug. 3 in federal court in San Francisco.

  • Wells Fargo hasn’t been notifying heirs of this right and has been starting foreclosures if demands aren’t met for repayment of the full mortgage balance, according to the complaint filed by the son of a California homeowner. The plaintiff, Robert Chandler, also sued the Federal National Mortgage Association, or Fannie Mae.

  • Wells Fargo’s actions are not just wrong, they are economically irrational,” Michael Ng, Chandler’s attorney, said yesterday in a statement. “Even though elderly borrowers paid for insurance that protects the bank against the downturn in the housing market, Wells Fargo insists on evicting family members from homes that will go unsold and unoccupied.”

  • The lawsuit, brought as a class action by Chandler on behalf of himself and other heirs, seeks a court order stopping foreclosures and evictions in affected homes and damages for breach of contract.

For more, see Wells Fargo Suit Says Bank Failing to Obey Federal Reverse Mortgage Rules.

Questions Raised On Cozy Relationship Between Colorado Foreclosure Mill, Local Public Officials Charged With Overseeing 'Forced Sale' Auctions

In Denver, Colorado, The Denver Post reports:

  • Colorado's most prolific foreclosure attorney has for years given thousands of dollars to a group representing the public officials charged with impartially overseeing his industry.

  • Shortly after the money started flowing to the Public Trustees' Association of Colorado, trustees began awarding lucrative no-bid contracts to a computer software company in which the attorney, Lawrence Castle, holds an interest. That company, Government Technology Systems, has since donated tens of thousands of dollars more to the trustees' association — $20,000 last year alone — funds used in part to pay for dozens of hotel rooms for trustees attending their convention at a Black Hawk casino in June.


  • Though the trustees say there is no connection between the payments to their association — which last year amounted to four times the money raised through membership dues — and the no-bid contracts given to GTS, some say ethical questions could be raised by the relationship.


  • "I'm not so sure his involvement with CPTA is a great idea, and the perception of his being a foreclosure attorney working so closely with us could be a bad one," Pueblo County public trustee Nick Gradisar said. "The idea is we're an impartial third party and not in favor of the borrower or the lender."

  • The contracts awarded to GTS are to manage a county's entire foreclosure system, a document- driven process worth millions of dollars to the software company that handles it. GTS is paid $45 for every foreclosure case filed in a county, and totals have reached record numbers in recent years. GTS is contracted to run eight of the state's 12 biggest counties, where the bulk of the foreclosures are filed.

For more, see Attorney's ties to county trustees in Colorado raise questions (Board's patron is also a partner).

Report Profiles Suspected 'Paper Terrorist' Accused Of Claiming 'Sovereign Citizen' Status To Snatch Homes As Cops Fiddle; FBI Says 'Please Stop'

In Central Florida, the Sarasota Herald Tribune reports:

  • On paper, Jacob-Franz Dyck is one of the largest property owners in Florida. More than 600 deeds have been filed in the name of trusts he controls in 17 counties, including eight in Sarasota and Manatee.

  • But Dyck never paid a penny for those properties. A self-proclaimed "sovereign citizen" who believes that U.S. laws don't apply to him, the 72-year-old Dyck filed some deeds with the purported goal of helping people facing foreclosure remain in their homes. Others were to help evicted owners reclaim their property.


  • But Dyck -- a man stripped of his dental license in 1988 and imprisoned for six years for grand theft a decade later -- has alarmed law enforcement officials. They say he and members of his anti-government group are committing "paper terrorism" by clogging courts with an avalanche of almost unintelligible lawsuits and "wild deeds" that purport to protect property by placing it into "pure trusts" defended by "land patents."

  • There is nothing illegal about the suits and deeds, lawyers and real estate experts say, but at least two title agencies have already sent out statewide warnings about Dyck's activities.

  • Dyck himself acknowledges that he has been visited by an FBI agent, who warned him to stop attempting to mass-produce his activities.

For more, see Anti-government activist takes on foreclosures.

In a related story, see Economy boosts sovereign-citizen movement:

  • Paper terrorism. That is what the FBI believes sovereign citizens like Jacob-Franz Dyck are committing when they file lengthy lawsuits loaded with non sequiturs and so-called wild deeds backed by supposedly all-powerful land patents on behalf of people facing foreclosure.

Monday, August 8, 2011

'Fat Chance!' Says NY AG To BofA On $8.5B 'Crappy MBS' Settlement; Uses Martin Act In Effort To Jam Banksters Over Securitization Screw-Ups

The Huffington Post reports:

  • New York Attorney General Eric Schneiderman asked a state judge to reject a proposed $8.5 billion settlement agreement over soured loans between Bank of America and a group of investors, claiming in court documents that a separate bank representing the investors committed fraud for failing to ensure that the mortgage securities were created in accordance with state law and for failing to act in the investors' best interest.

  • Bank of New York Mellon, the trustee representing the investors, "knowingly, repeatedly, and consistently" misled investors into thinking that the mortgage bonds were created properly, Schneiderman said in court documents. BNY Mellon also put its own interests before those of the investors it's supposed to represent, he said.

  • BNY Mellon, the 11th-largest U.S. bank by assets and one of the nation's largest trustees, stands accused of "repeated fraud and illegality," according to court filings, which alleges that the abuses "were repeated literally hundreds of times."


  • "If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever," Adam J. Levitin, a bankruptcy expert and professor at Georgetown University Law Center, told a congressional panel last November. Levitin said the problem could "cloud title to nearly every property in the United States" and could lead to trillions of dollars in losses.

  • In a New Jersey bankruptcy case last year, a Bank of America executive, Linda DeMartini, testified that Countrywide routinely did not convey crucial documents for loans sold to investors.


  • In court documents, Schneiderman is demanding that his agency be allowed to further examine loan documents to ensure the securities were properly created. New York's top law enforcement officer is using the Martin Act, a powerful state law that gives prosecutors broad powers to investigate fraud.

For more, see New York Attorney General Accuses Bank Of New York Mellon Of Fraud, Moves To Block Bank Of America's Mortgage Deal.

Go here for the New York AG's Pleading In Intervention.

See NYS Martin Act May Provide Manhattan DA With Noose Feds Lack To Be Fitted Around Banksters' Necks for an earlier post on the potency of the New York State Martin Act.

Thanks to Deontos for a copy of the NY AG's pleading.

California AG Slaps Citi With Subpoena In Probe Into Bankster's MBS-Peddling Activities

The Los Angeles Times reports:

  • California Atty. Gen. Kamala D. Harris has subpoenaed Citigroup Inc. and its banking subsidiary, Citibank, ordering the two entities to answer questions regarding the selling and marketing of mortgage-backed securities in the Golden State, a person familiar with the investigation said.

  • The person, who was not authorized to speak publicly about the matter and spoke on condition of anonymity, would not further characterize the nature of the investigation. Spokespeople for the attorney general's office and Citi declined to comment.

  • In May, Harris announced the creation of a Mortgage Fraud Strike Force that would target mortgage fraud of any size. Harris said then that she would tackle corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses.

  • To prosecute some of the cases, Harris said she would use California's False Claims Act, which makes it a crime to defraud the state.

For more, see California subpoenas Citigroup about mortgage-backed securities (The state attorney general orders the bank to answer questions about how it sold and marketed the securities in the Golden State).

Mass. AG Gets Green Light In Probe Into Rights-Trampling Allegations Against Notorious Bay State Sweatshop By Ex-Owners, Tenants In Foreclosed Homes

The Boston Globe reports:

  • State Attorney General Martha Coakley can continue her investigation into the practices of a Newton law firm that specializes in home foreclosures, a Suffolk Superior Court justice has ruled.

  • Justice Bonnie H. MacLeod denied a motion by Harmon Law Offices to set aside or alter a request for documents in the state’s investigation into allegations of “unfair and deceptive acts’’ related to the firm’s foreclosure and eviction work.

  • Coakley said the decision confirms her authority to investigate law firms of wrongdoing. “We are investigating this case to ensure that tenants were not unlawfully evicted and that Harmon followed proper procedures before foreclosing on certain homeowners,’’ she said.(1)

For more, see Probe of law firm can continue (Judge rules Coakley can investigate office in home foreclosures).

(1) This probe takes on additional significance for Bay State residents in light of a recent ruling of the Massachusetts Supreme Judicial Court ruling allowing post-sale challenges of faulty foreclosures. See Massachusetts Homeowners, Tenants Score Big Win As State High Court OKs Foreclosure Challenge In Post-Sale, Housing Court Eviction Process.

For more on the Harmon foreclosure mill, see The Boston Globe: Building an empire, one home at a time (He operates the largest foreclosure law firm in the state, and these hard times have made Mark P. Harmon a very busy man. Some critics assail his tactics, but Harmon is unapologetic: Lenders, after all, need zealous lawyers, too).

Massachusetts Homeowners, Tenants Score Big Win As State High Court OKs Foreclosure Challenge In Post-Sale, Housing Court Eviction Process

In Boston, Massachusetts, The Boston Globe reports:

  • The state’s highest court has ruled that people fighting eviction from homes they lost to foreclosure can challenge the validity of a property seizure in housing court after the fact, a decision that housing rights advocates are calling a major victory.

  • The Massachusetts Supreme Judicial Court’s unanimous ruling, released yesterday, involved KC Bailey of Mattapan, whose home was taken back by his lender through foreclosure in 2007. Two years later, Bailey, 65, contested his impending eviction during a housing court proceeding, saying the foreclosure process was flawed.

  • Bailey claimed he learned of the foreclosure only after finding an eviction notice taped to a fence surrounding his three-bedroom Colonial, which had been in his family since 1979. The Vietnam veteran said he refused to leave because he was not given proper notice of the sale and is still living there.

  • Bank of New York, which set out to evict Bailey, argued that the housing court didn’t have the authority to consider a challenge to a foreclosure already finalized, and the judge agreed. Bailey appealed and the Supreme Judicial Court decided to take the case. It now goes back to housing court.

  • The decision was hailed by local housing rights advocates, who said it will force lenders to prove they legally own a property before evicting occupants, and will lead to more negotiations with financially-distressed borrowers seeking to save their homes.
  • Because Massachusetts doesn’t require courts to sign off on foreclosures, the eviction process can be the first opportunity for a former homeowner to contest a property seizure in court.

  • The ruling also will provide a new legal tool to tenants fighting evictions from foreclosed homes, housing attorneys said.

  • This decision ensures that if a bank is going to walk into court and try to evict a homeowner, it has to prove there has been a valid foreclosure,’’ said Esme Caramello, deputy director of the Harvard Legal Aid Bureau, a branch of Harvard Law School that provides free representation to low-income clients and represented Bailey.
  • Pamela S. Kogut, an attorney who filed a brief in support of Bailey’s appeal for a group of nonprofits, said yesterday’s ruling will give former homeowners a place to contest the validity of a foreclosure during the eviction process, without having to file an additional lawsuit in state Superior Court. “The burden shifts to the bank to establish that it does have title,’’ she said.
For the story, see SJC expands right to challenge bank seizures (Mattapan man’s objection that he wasn’t told of sale goes back to housing court).

For the ruling, see Bank of New York v. Baliey, SJC-10801 (Mass. August 4, 2011)..

Go here for the case docket and links to the various legal briefs filed in this case.

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

Insurance Underwriter Lawsuit: Million$ Mi$$ing From Title Agent's Escrow Accounts; Existing Liens Left Unpaid, Homeowners Now Stuck With 2 Mortgages

In Mineola, New York, Courthouse News Service reports:

  • TitleServ, one of the largest title agencies in the country, swiped $7.9 million from customers' escrow funds, the underwriter WFG National Title Insurance Co. claims in Nassau County Court.(1)

  • New Jersey Title Insurance Co.(2) has filed a similar complaint against TitleServ, which "was authorized to write title insurance policies in at least 26 states, including New York, on behalf of plaintiff," according to the complaint.

  • WFG says that "TitleServ was one of the nation's largest title insurance agencies and was authorized to write title insurance policies on behalf of other title insurance underwriters in 47 states." It also "engaged in escrow and settlement services on its own behalf."


  • WFG says TitleServ was "evasive" when it tried to schedule an audit of the company in early March. By the end of the month, TitleServ had refused to set a date, and WFG says it "became uncomfortable" and terminated their contract. WFG says that on April 3, Citibank and Chase told their mortgage managers to stop using TitleServ, which closed up shop five days later.


  • TitleServ refused to grant the auditors access, then "relented" four days later, after negotiations with its president James Conway III's attorney, WFG says. TitleServ's President Conway and Chief Financial Officer Rocco Abbondandolo are co-defendants, along with 20 John Does. WFG claims that TitleServ never gave its auditors "complete access to TitleServ's books and records" to which WFG was entitled, but the partial review gave indications of "suspicious activity."


  • In an April 15 phone call with WFG representatives, "defendant Conway acknowledged that approximately $6 million was missing from the TitleServ trust accounts. Conway was unable or unwilling to declare who or what was responsible for the missing trust funds," the complaint states. "Additional documents and information reveal that approximately $7.9 million is actually missing from TitleServ trust accounts related to WFG insured closings."

  • The FBI raided TitleServ's offices in Woodbury, N.Y., on April 27, and carried away boxes of documents.

For the story, see Underwriter Says Title Insurer Swiped Millions.

See also, Newsday: Suits allege $18M missing from Titleserv escrow:

  • Three lawsuits filed against Woodbury-based title insurance agent Titleserv since its abrupt closing April 8 allege that more than $18 million slated for paying off mortgages, taxes and other costs is missing.

For the lawsuit, see WFG National Title Insurance Company v. Titleserv, Inc., et al.

(1) For more on Titleserv, see:

(2) New Jersey Title Insurance Company has recently issued a statement that, at present, it is not writing new title insurance policies. It apparently has taken a big hit as a result of certain defalcations that have recently belted the company, and is reportedly focusing on the resolution of said defalcations and claims received on issued policies. See Financial Stability Rating® of New Jersey Title Insurance Company Withdrawn.

Crappy Titles From Foreclosure Fallout, Uncleared Issues Purportedly Covered By Letters Of Indemnity Pose Big Challenges For Title Insurance Industry

In New York City, The Real Deal reports:

  • Late one Thursday afternoon last month, title insurance agent Rafael Castellanos got an urgent call from an attorney whose client needed a title search on a Brooklyn home that was selling three days later in a foreclosure auction. [...] Castellanos, a managing partner at Expert Title Insurance Agency in Manhattan, got cracking on the search first thing the next morning.


  • For Castellanos's part, the Monday after he received that urgent call, his research had already uncovered a property file in complete disarray. Among other flaws, the property's tax lot and block were misindexed, and the prior owner had not been personally served with a notice of foreclosure.

  • Given these facts, Castellanos rated the property uninsurable -- a conclusion he's reaching all too often these days. "Right now, 60 to 70 percent of the foreclosures have problems," said Castellanos, who does just over 30 percent of his business in Manhattan and nearly 25 percent of his business in the city's other boroughs. "We find all these problems, and we have to tell the client, 'I'm sorry, we can't insure this.'"

  • Heading into the second half of 2011, Castellanos and other title insurance executives can add intensifying foreclosure-related woes to a lengthy and growing list of challenges in their industry. Those challenges range from increasing financial losses to widespread consolidation through the industry -- there were just 54 operating underwriters nationally last year, a 43 percent drop from 2008. That has a direct impact on both how many title insurance agents the industry can support, and how the remaining agents have to split up the pie of available business.


  • Title insurers must also deal with another troubled legacy of the housing boom: letters of indemnity. Such letters were often issued in New York during the boom and remain common.

  • For example, if the seller's title insurance company couldn't produce a necessary document in time for a closing date, it would issue a letter taking responsibility for legal claims that might arise from omitting that document, so the new title insurance policy for the buyer could be issued without delay. The practice helped deals get done.

  • Now, however, it's unclear how many of these letters were issued, and how many of those cases actually had legal issues that are still not cleared up. "There's a web of indemnity out there, and some of it will shake out, and create a financial impact on some title agents and, more specifically, the underwriters," said [one title agency executive].


  • [C]astellanos is worried that other proposed legislation intended to help homeowners avoid wrongful foreclosure will backfire, leading to widespread ownership challenges on purchases of foreclosed homes in New York. That, in turn, would lead to huge costs for underwriters and even greater difficulties writing new title insurance policies than Castellanos is seeing now.

For the story, see Title's battles (Insurance industry, hurt by slump in home sales, struggles with foreclosure woes).

Sunday, August 7, 2011

Use Of 'Chapter 20' Bankruptcy In 2nd Mortgage Lien-Stripping Case To Circumvent Unsecured Debt Limitation Under Chapter 13 To Unload $390K Loan?

The following facts have been roughly adapted from a recent ruling of a U.S. Bankruptcy Court:

  • The homeowners in this case owned a primary residence that was valued at $967,500, and subject to a first mortgage of $1,264,327.41, and which left the homeowners completely underwater.

  • On top of that, they owed additional money on a second mortgage in the amount of $392,927.

  • Under the applicable rules of a Chapter 13 bankruptcy, a lien for a claim that is entirely unsecured, based upon the value of their primary residence and the amount of the first priority lien against the residence, can generally be avoided as an encumbrance against the home, leaving the debt itself subject to discharge just as any other unsecured debt.

  • However, bankruptcy law limits the use of a chapter 13 filing to those debtors with unsecured debts of less than $360,475.

  • Because the amount of the homeowners' 2nd mortgage ($392,927) exceeded the maximum Chapter 13 limit (less than $360,475), the homeowners were precluded from filing under Chapter 13, right?

Apparently, in the view of U.S. Bankruptcy Judge Edward D. Jellen, not really. What the homeowner appears to have done is the following:

  • Debtors first filed a chapter 7 petition, and received a discharge on March 16, 2010.

  • The discharged eliminated all personal liability the homeowners had in connection with the promissory note secured by the 2nd mortgage, but left the lien of the mortgage itself in tact.

  • Less than 11 months later, on February 7, 2011, Debtors filed a chapter 13 petition (a situation where a debtor files a Chapter 7 bankruptcy petition in which a discharge is obtained, followed by a Chapter 13 petition shortly thereafter, is sometimes informally referred to as a 'Chapter 20' bankruptcy - '7+13=20').

  • The homeowners then asked the court to remove the lien of the mortgage because, based on the value of the home ($967,500) and the amount on the 1st mortgage ($1,264,327.41), the 2nd mortgage was completely unsecured and, therefore, was subject to the Ch.13 lien-stripping provisions of Chapter 13.

  • The 2nd mortgage holder objected, citing the $360,475 unsecured debt limitation under Chapter 13.

  • In making their argument, the homeowners asserted that, because they are no longer personally liable for $392,927 debt secured by the 2nd mortgage, that debt should not be included in the calculation for applying the unsecured debt limitation.

Based on his analysis of the applicable statute and case law, Judge Jellen agreed with the homeowners, and accordingly, overruled the objection of the 2nd mortgage holder.(1)

For the ruling, see In Re Shenas, Case No. 11-41332 EDJ (Bankr. N.D. Cal. July 28, 2011).

(1) Judge Jellen's analysis follows (bold text is my emphasis):

  • On February 7, 2011, Debtors filed the current chapter 13 petition. The chapter 13 plan proposed by the Debtors provides for the avoidance of Green Tree's lien because it is wholly unsecured. Chapter 13 Plan, doc. no. 15; In re Zimmer 313 F. 3d 1220, 1226-27 (9th Cir. 2002).

    Scovis v. Henrichsen, the Ninth Circuit held that eligibility for chapter 13 should be determined by the debtor's originally filed schedules, and that the undersecured portion of a secured debt is to be counted as unsecured debt for purposes of the § 109(e) calculation.[2] Scovis v. Henrichsen, 249 F.3d 975, 982-84 (9th Cir. 2001).

    Debtors herein scheduled Green Tree's claim as entirely unsecured, based upon the value of their primary residence and the amount of the first priority lien against the residence.
    [3] See Schedules A and D, doc. no. 16. As Green Tree applies the Scovis holding, its $392,927 claim should be characterized as unsecured, rendering Debtors ineligible for relief under chapter 13.

    The court disagrees. The debtors received a chapter 7 discharge before they filed the current chapter 13 case. That discharge operated to render their debt to Green Tree unenforceable as a personal liability of the Debtors. Section 524(a).

    Being unenforceable as a personal liability, the debt is not allowable as an unsecured claim in this case. Sections 502(b) and 506(a). It follows that the Debtors do not owe any unsecured debt to Green Tree for purposes of the unsecured debt limitation of § 109(e).
    Cavaliere v. Sapir, 208 B.R. 784, 787 (D. Conn. 1997) (holding that a secured claim discharged in a prior chapter 7 case, and unenforceable under § 502(b)(1) in the current chapter 13 case, should not be included in the § 109(e) eligibility calculation); In re Osborne, 323 B.R. 489 (Bankr. D. Or. 2005)(holding similarly in the context of a chapter 12 petition).

    Quintana v. IRS, 915 F.2d 513 (9th Cir. 1990), is not to the contrary. In that case, the Ninth Circuit held that the entire amount of a creditor's claim must be included in the eligibility determination, despite the creditor's waiver of a deficiency judgment in an upcoming foreclosure action, and the potential for offset by damages alleged by the debtor. Id. at 517. However, Quintana is readily distinguished from the present case because the chapter 7 discharge that rendered the Green Tree claim unenforceable as a personal liability against the Debtors was entirely consummated prior to the filing of the petition herein. See In re Osborne, 323 B.R. at 492.

    At the July 21, 2011 hearing, counsel for Green Tree argued that because the Debtors have not yet filed their motion to avoid its lien through their chapter 13 plan, Green Tree held an extant lien on the petition date, and its lien must be included in the § 109(e) calculation under Scovis.

    The court is not persuaded. Bankruptcy Code § 502(b)(1) provides that a claim shall not be allowed if it is unenforceable "under any agreement or applicable law". The legal bases for avoiding a wholly unsecured lien against real property are well-established. Green Tree does not have an enforceable claim in this case, and did not have one at the petition date. See, e.g.,
    Scovis, 249 F.3d at 983 ("a claim secured only by a lien which is avoidable by a declared exemption is unsecured for § 109(e) eligibility purposes.").

    The court holds that the $392,927 claim asserted by Green Tree is not properly included in the unsecured debt calculation for purposes of § 109(e) eligibility because it is not enforceable against the debtors. See
    Cavaliere v. Sapir, 208 B.R. at 787.

    The objection to eligibility raised by Green Tree is therefore OVERRULED. The court will issue its order accordingly.