NYC Landlord Lender Unloads Mtgs Backed By Crappy Collateral To Non-Profit Developer; Tenant Groups Hope For Similar Deals To Save Affordable Rentals

In New York City, Crain's New York Business reports:

• New York Community Bank, which has been targeted by housing advocates and city officials for selling off distressed mortgages to the highest bidders, has for the first time agreed to a discounted sale of notes to a nonprofit housing developer.



• The bank has sold the debt on a portfolio of four foreclosed residential buildings in Bedford-Stuyvesant to the Mutual Housing Association of New York Management, Inc., a Brooklyn nonprofit that is funding the purchase by tapping a new city loan fund designed to preserve affordable housing.



• The housing group got the $2.4 million worth of mortgages on the dilapidated buildings at a nearly 50% discount. The size of that price cut signals a big potential thawing in a protracted battle between housing advocates and the bank over how the institution is disposing of mortgages on properties in both physical and financial distress.

***

• New York Community Bank is by far the biggest lender to landlords in the city. In all, the bank provides financing for more than 3,000 buildings housing 85,000 apartments, twice as many as anyone else in town. A study by a housing group last year found that New York Community Bank finances the owners of nearly 9,000 distressed apartments, more than the next three banks combined.



• The lender has come under fire from activists and city officials for selling distressed mortgages on rundown properties at prices that would make it tough for new owners to repair the buildings. Last year, the city backed an $8 million bid by Mutual Housing for a portfolio of eight dilapidated buildings in the Bronx, but New York Community Bank sold the mortgage to investors for only a slight discount on the mortgage's $16 million face value.

***

• After battling each other on the streets and in court, the bank and advocates have finally reached a détente in which nonprofit developers will be given a first look at any distressed mortgages the bank is looking to sell. [...] Tenant advocates applauded the Mutual Housing deal and hoped it could serve as a model for the growing number of buildings in financial and physical distress across the city.(1)

For more, see NYC's biggest landlord lender cuts mortgage deal (New York Community Bank's sale of distressed mortgages on four residential properties in Brooklyn at a 50% discount will leave the buyer with enough cash for much-needed rehabs).

(1) In this story, the following excerpt provides some insight as to why New York Community Bancorp head Joseph Ficalora decided it best to reach a deal with his critics:

• He wouldn't say what moved him to lay down arms, but the FDIC's decision to cut his bank's community-lending rating may well have been a factor. Starting two years ago, Mr. Ficalora has been expanding nationally, snapping up failed banks in Ohio, Florida and Arizona.
  
  The seller? None other than the FDIC. If he wants more busted banks sent his way, he needs good relations with his regulator.
  
  As Mr. Ficalora sees it, his decision to forge a deal with his critics was just a matter of simple logic. “When a baby is howling, you eventually figure out that you have to change the diaper,” he said.

Fort Lauderdale Couple Victimized By City Wrecking Ball Scores $182K Jury Award; Say It's Not Enough, File Request For New Trial

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

• The city demolished a family's house in a deal to build them a new one — but then walked away. Now, a jury says the city owes $182,000 for breaking its promise.



• But the lawyer for Andrea and Henry Bonner says that's not enough, given the pain and hardship the Bonners endured. "I'm extremely disappointed," said attorney Scott Leeds of Miami. The Bonners, who now make their home in the Oakland Park warehouse where Henry Bonner runs a business, declined to discuss the case. The city's lawyers also declined comment.

***

• After a five-day trial and nearly three hours of deliberation, a jury on Feb. 13 determined the city breached its contract with the Bonners and awarded them $192,000 to buy a new house. The jury then subtracted $10,000 from its award because the Bonners "knowingly made a false statement" about their interest in [a] second property.



• No damages for pain and suffering were awarded by the jury, and Leeds has filed requests for a new trial, damages, court costs and the living expenses the Bonners incurred.

For the details, see Fort Lauderdale wrongly demolished home, owes family $182,000, jury says.

Beaumont Residents Sue City To Save Subpar Homes From Wrecking Ball

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

• A Beaumont man claims he faces the prospect of losing his home because it is scheduled for demolition. He is pinning his restoration hopes on a requested court order.



• Frank Flores filed a lawsuit Feb. 23 in Jefferson County District Court against the city of Beaumont. In his complaint, Flores alleges he purchased property at 2694 Houston St. in Beaumont on Feb. 8 with the intention of remodeling it. However, when Flores went to Beaumont's building permit department in an attempt to secure the necessary permits for his planned work, he learned of the city's intent to demolish the house, according to the complaint.



• "The city permit officials do not have the discretion or authority to override the city's prior decision to demolish the house," the suit states. The only way Flores will be able to perform his sought-after repairs is if the court prohibits the city from demolishing his property, the complaint says.



• In his complaint, Flores seeks a temporary restraining order that would prevent the city from demolishing his property, plus costs and other relief the court deems just.

Source: Beaumont man seeks TRO to stop demolition of house.

In an unrelated case, The Southeast Texas Record reports:

• Nancy Robbins has filed an application for injunction, seeking to stop the city of Beaumont from demolishing her condemned home.



• The injunction and restraining order petition was filed Feb. 21 in Jefferson County District Court.According to the petition, Robbins owns a home located at 4630 Hartel St. in Beaumont, which has been declared to be a dilapidated structure and is scheduled to be demolished by the city.



• Robbins maintains she purchased the home in order to save it from demolition and to remodel and renovate the home. She maintains she will suffer immediate and irreparable injury, loss or damage unless the city is enjoined.

Source: Beaumont woman seeks TRO to stop city from demolishing home.

Los Angeles Feds Step Up, Lend Assist In 86-Year Old Woman's Effort To Regain Ownership Of Home Of 40+ Years After Home Title Ripoff

In Los Angeles, California, NBC Los Angeles Channel 4 reports:

• An alleged con who swindled a senior out of her house has local and federal agencies working to solve the case, which involves a former LAPD officer and the bishop of a local church.



• In an attempt to block the foreclosure scheduled for Wednesday, Keta Davis filed bankruptcy on behalf of her mother, Vistula Graham, who is in a nursing home and unaware of what’s happening with her home.



• The tangled web of fraud begins with Leroy Dowd, a 74-year-old, self-proclaimed charismatic leader of a now-defunct South LA church called Triumph Church of God. Dowd conned Graham into giving him money and signing over her house – a three-bedroom ranch in Lynwood that she bought more than 40 years ago and paid off in the late nineties, Davis said.



• “He called himself a bishop, he called himself a prophet,” she said. Profit off her mother is more like it, she said.



• Davis said no one could believe the story until an exclusive NBC 4 investigation exposed the plot that investigators have been trying to untangle for years. “You did what you had to do and you investigated it,” Davis said.



• After the NBC 4 report aired, the FBI took notice and did something the agency said it rarely does: the FBI gave Davis a letter to use in her fight to save her mother’s house. The letter identifies her mother, 86-year-old Vistula Graham, is a potential victim of real estate fraud scheme and that the case remains under investigation by the federal agency.



• Detectives from three law enforcement agencies said Bishop LeRoy Dowd, who allegedly co-signed on more than $800,000 dollars in loans and bank accounts using Graham’s house as collateral. Police uncovered a fellow officer who apparently benefitted from at least one of the fraudulent loans.



• “I don’t know how that occurred, I never met this woman,” Davis said, referring to Darcy Greenfield, who was an LAPD officer at the time of the suspected con. Greenfield had the house put in her company’s name and received $261,000 as the beneficiary of a loan, according to records obtained by NBC 4.



• Greenfield is no longer on the LAPD and is facing ten felony counts in an unrelated real estate fraud case in San Bernardino. Greenfield has pleaded not guilty, but in public statements has blamed Dowd for ripping her off.

For more, see Investigation: Daughter Files Bankruptcy for Mom Swindled Out of Her Home (In a rare move, the FBI intervened on the family's behalf following NBC 4's initial investigation).

Oil & Gas Exploration Outfits Scrambling For Landowners' Mineral Rights A Modern Day 'Gold Rush' As 100s Flood Land Recorders' Offices

In Guernsey County, Ohio, the Zanesville Times Recorder reports:

• It's standing-room only in the Guernsey County Recorder's Office. Hundreds of people have flooded the office for several months, researching land deeds and leases all the way back to 1803 to make sure mineral rights are clear for Utica shale leasing,(1) said Guernsey County Recorder Colleen Wheatley.



• The rush got so bad that as of Nov. 1, the recorder's office expanded its hours. Normally open weekdays from 8 a.m. to 4 p.m., the office is open until midnight Monday, Tuesday and Thursday and from 9 a.m. to 2 p.m. Saturday.



• "There's just so many people, the demand for the space and the records, you have to see it to believe it," Wheatley said. "It's just a different feel, almost like the gold rush."



• In the past, the recorder's office would see maybe a dozen people per day, usually looking up foreclosure or bankruptcy information, Wheatley said. Now, the office sees about 150 title researchers each day, she said.



• Muskingum County Recorder Karen Vincent visited Guernsey County this week to check out the buzz. Her office sees a few local landowners doing title research each day, but the office keeps all of its deed and lease information online, Vincent said. She thinks the Muskingum recorder's office will see some increase in the coming months, but she doesn't know whether it will hit the level Guernsey has, she said.



• Title researcher Lori Ross, from Pennsylvania, spent Tuesday afternoon -- and Tuesday morning and most likely Tuesday evening -- in the Guernsey recorder's office, poring over records. Ross is a crew leader for Brighton Resources, based in Pittsburgh.



• Ross and her crew essentially are subcontractors for oil and gas companies, she said. When a company wants to lease the rights to a plot of land, it's her job to go back through the title to make sure the mineral rights aren't already leased to someone else.



• Ross got to Guernsey about a month ago, she said. She could be there another six months or a year, or she could get a call tomorrow, telling her she's moving to a different project, she said.



• It's the same for Hugh Carroll, a crew leader from Virginia. Carroll has been in Guernsey County about a month and a half, he said, but he's been doing the same type of research work for five years, in 60 different counties in five different states: Virginia, West Virginia, Pennsylvania, Ohio and Kentucky.



• Carroll and his crew start work about 8 a.m., he said, and work until 8 p.m. or later. A separate group works at night, he said. Overnight, Carroll tries to stay at the Hampton Inn in Cambridge, he said, although sometimes it's full of other title researches.



• Ross, Carroll and their crews are working long hours, but both said the recorder's office and the entire Guernsey community have been accommodating. It's not always that way, they said, but it makes it a lot easier to get their job done.



• Karie McCauley, a part-time employee in the recorder's office, grew up in Guernsey County, and she never has seen the community as excited as it is about the coming gas boom, she said. McCauley is excited because she just got her first bonus check: On Oct. 24 and 25th, McCauley signed over the mineral rights to about 10 acres in Cumberland, she said. She signed as part of a landowner group, nabbing a $5,000 per acre bonus plus 18 percent royalty payments.



• It isn't just landowners who are excited about Utica, McCauley said -- everyone, including owners of stores, restaurants and other businesses, wants in. "The energy is just so exciting," she said. "There's never a dull moment. I always have something to do."

Source: Mineral rights title researchers flock to recorder's office.

(1) The Utica Shale is a rock unit that is believed to be developing into another incredible source of natural gas. It underlies portions of Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia and Virginia. It is also present beneath parts of Lake Ontario, Lake Erie and part of Ontario, Canada, and is located a few thousand feet below the Marcellus Shale.

For more on the Utica Shale, see Utica Shale - The Natural Gas Giant Below the Marcellus? (Stacked plays in the Appalachian Basin produce multiple natural gas pay zones).

See, generally, Bloomberg News: U.S. Shale Bubble Inflates After Near-Record Prices for Untested Fields:

• Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc.

For ways how landowners can get screwed over by entering into these leases with drilling outfits, see:

• The New York Times: Learning Too Late of the Perils in Gas Well Leases (go here for links to the "Drilling Down" articles, a series of other New York Times articles examining the risks of natural-gas drilling and efforts to regulate this rapidly growing industry),
• NY AG Warns Consumers On Entering Natural Gas Exploration Leases,
• Lawsuits: National Natural Gas Company Behind Effort That Bilked 92-Year Old Widow & Many Other Northern Michigan Landowners On Drilling Leases.

Upstate NY Trial Judge: OK For Municipality To Ban 'Fracking' For Natural Gas; Stripped Of Mineral Rights, Landowners Plan Appeal

In Otsego County, New York, The Ithacan reports:

• The Town of Middlefield in nearby Otsego County has the right to prohibit natural gas drilling within its limits, according to a recent New York state court ruling.



• Otsego County Acting Supreme Court judge Donald F. Cerio Jr. ruled the Town of Middlefield, located almost 115 miles northeast of Ithaca, can ban hydraulic fracturing within its jurisdiction. The Feb. 24 ruling came after Cerio decided local officials have the right to regulate drilling methods and manners within the town.



• The Middlefield ruling closely followed a Feb. 21 court decision in the Town of Dryden to permit local authorities to decide whether to allow fracking within their town borders. According to the Dryden ruling, the judge has determined New York state law should not impede a town from changing its zoning laws.



• Cerio denied the claim made by Jennifer Huntington, president of the Cooperstown Holstein Corporation, a local dairy farm. Huntington argued the town does not have the power to regulate natural gas more than how it affects road use and taxation.



• Huntington is a dairy farmer who leased her 377 acres worth of mineral rights to gas drilling companies. She and her company filed against the Town of Middlefield on Oct. 28. In June, town officials had adopted legislation to prohibit constituents from leasing their land to gas drilling companies.



• Deborah Goldberg, an attorney for the town, said she believes the Dryden and Middlefield cases will set a precedent to empower town law but not to prevent fracking throughout the state of New York. “What it very well may do is give communities who were on the fence the courage to go ahead and do what they need to do to help protect themselves,” Goldberg said.



• Thomas S. West, an attorney for Cooperstown Holstein Corp., said proponents of the court’s decision failed to consider the repercussions the leasing ban will have on landowners who depend on the gas companies financially. “This is really a stake in the heart of landowners in New York who were hoping to get some value for their mineral rights and avoid foreclosure or bankruptcy,” West said.



• Though Goldberg admits landowners should not expect money through leasing of their property, she said they should consider the potential negative long-term effects of fracking. "Anyone would hope that they are taking into account the needs of their own community members and not just their own pocketbook,” Goldberg said.



• West said the company plans to appeal the ruling. If the appeal is approved and the Middlefield ruling reversed, landowners will be able to continue leasing their mineral rights to gas companies for drilling.



• Cheryl Roberts, another attorney for the Town of Middlefield, said she is confident the appeal won’t be passed at the appellate court level. “I suspect there will be many communities in New York that will not allow fracking in their communities,” Roberts said. “Gas companies will obviously not be able to exploit the resources there and will be limited in their ability for gas.”



• Goldberg said that the farmers who elected to lease their land to fracking companies understood the risk prior to allowing those companies to purchase their mineral rights. But, in the long run, she said, the environment of the towns will be better off. “We think it was a very thorough, well received opinion, and we’re hopeful that it will hold up on appeal,” Goldberg said.

Source: Another NY fracking ban upheld (Middlefield follows Dryden's lead).

See also, Dryden fracking ban upheld by zoning lawsuit decision:

• A state judge ruled [] that the Town of Dryden was within its rights to ban hydraulic fracturing, a decision that stopped a lawsuit filed by a Denver-based oil and natural gas company against the town’s ban.

For the court ruling, see Cooperstown Holstein Corporation v. Town of Middlefield.

Texas Supreme Court: Land Ownership Includes Right To Pump Groundwater; 'Taking' By Gov't Without Coughing Up Adequate Cash Nixed

In Austin, Texas, The Southeast Texas Record reports:

• Texas landowners received a huge boost from the state's Supreme Court [...], when justices ruled land ownership includes an interest in groundwater that cannot be taken for public use without adequate compensation.



• In 1994, R. Burrell Day and Joel McDaniel bought 381.40 acres to grow oats and peanuts and graze cattle. The land overlies the Edwards Aquifer, an underground layer of porous, water-bearing rock, 300-700 feet thick, and five to 40 miles wide at the surface, that stretches in an arced curve from Brackettville, 120 miles west of San Antonio, to Austin, court records show.



• In 1996, Day, who is now deceased, and McDaniel sought a permit to pump from the Edwards Aquifer. However, they were unable to establish "historical use" -- the method the authority uses to allocate water -- and were granted a permit for only 14 acre-feet, court papers say.



• Demanding compensation for the loss of the right to pump water on their own land, the two men filed suit against the Edwards Aquifer Authority, arguing that the entity's limiting of water use violated their constitutional rights.



• The authority maintained that it should not have to pay for reasonable restrictions on how much a landowner can pump from the aquifer. Following several years of litigation, on Feb. 24 the Supreme Court affirmed the judgment of the Fourth District of Appeals and remanded the case to the district court for further proceedings.



• The justices found that the taking of water below a property owner's land without compensation, even for public use, was a violation of the Texas Constitution.



• "Whether groundwater can be owned in place is an issue we have never decided," states the court's opinion. "But we held long ago that oil and gas are owned in place, and we find no reason to treat groundwater differently."



• While Texas property owners might consider the ruling a victory, some environmental groups have publicly stated that without proper water regulation, the surrounding environment and wildlife will suffer.

Source: Landowners have constitutional right to be compensated for water, Supreme Court opines.

For the court ruling, see Edwards Aquifer Authority v. Day, No. 08-0964 (Tex. February 24, 2012).

'Head-In-The-Sand' Approach Prevails With Title Insurers, Agents When Dealing With Foreclosed Properties

The San Francisco Chronicle reports:

• Chain of title - proof of who really owns a house - underpins the entire U.S. system of real estate. Broken chain of title due to slipshod paperwork was a serious issue uncovered in the nationwide robosigning scandal and again last month in a city report that found San Francisco foreclosure paperwork riddled with errors. Those revelations draw new attention to title companies, which insure a home's clear title for both buyers and lenders.

***

• When the robosigning issue first exploded on the scene in October 2010, major title insurers briefly stopped writing policies for some foreclosed properties. That could have stopped foreclosure sales cold: Without title insurance, a bank will not issue a mortgage.

***

• But the title insurance industry said its concerns have been addressed and it's not worried about the latest disclosures undercutting the assurances it provides people who buy foreclosed houses from banks.



• "When robosigning first came to light publicly, it caused the industry to pause, almost hiccup for a second, in that would we be able to meet our obligations and protect homeowners who purchased homes out of foreclosure if these irregularities had occurred in the process," said Steve Gottheim, legislative and regulatory counsel for the American Land Title Association, the industry's trade group. "The whole goal of that small period was to get more information. When we had more information, the industry was able to get back to what it does best, insuring title."



• That additional information consisted of finding that some of the paperwork defects were not that egregious and of reviewing legal statutes, he said. "Folks who buy (property) and have no knowledge that there may be some defect in the chain of title are protected very strongly by state law," he said. "Every state provides protection to bona fide purchasers of real property for value."(1)



• It's a high bar for the purchaser to know about a title defect. Media reports, or even government reports like the one produced by Ting, would not be sufficient, he said. Suppose the previous homeowner camps out in front of the house with a sign saying the foreclosure was unjust? "It would take a lot more than picketing the property," he said. "It would take really good evidence and a court order that says it was an illegal foreclosure."



• Gottheim said title insurers are prepared to step up when issues arise. "At the end of the day we are the folks who are going to be on the front lines protecting the new homeowner," he said. "If a homeowner has purchased a title insurance policy and a defect in the foreclosure comes up after the fact, we will stand there and protect them."



• However, he said there has not been a wave of lawsuits by foreclosed-upon people seeking to take back their properties. "They don't have the money to bring these lawsuits," he said. "Even if they have a valid lawsuit and a chance to win, which state law would make very difficult for them, if they did win, they get the house back, but also get back the mortgage which they were unable to pay."

For more, see Robosigning focuses attention on title companies.

(1) What this title insurance industry flack fails to mention (either intentionally, or merely ignorantly) is whether or not one qualifies for protection as a bona fide purchaser does not turn merely on the purchaser's lack of knowledge. It turns on the purchaser's lack of notice, which could be actual notice, constructive notice, or implied notice (in some states, implied notice is considered to be a sub-category of actual notice).

In effect, protection as a bona fide purchaser turns on whether the purchaser either knew or should have known about the defects in the title. And there is at least a school of thought that finds great support in the case law that posits that any defect in a foreclosure action that could have been discerned by a purchaser by a careful review of a foreclosure file (in judicial states) and the recorded documents at the county land title registry (in all jurisdictions) that would have either:

• revealed irregularities in the process, or
• revealed facts that would lead any reasonably prudent person, using ordinary diligence, to make further inquiries concerning possible irregularities. Such a failure to make further inquiries would leave the negiligent purchaser chargeable with notice of what such inquiries and the exercise of ordinary caution would have disclosed. If all the inquiry which due diligence requires is made, and the irregualrity remains undiscovered, the purchaser is excused and is not deemed to be on notice. But a failure to use due diligence leaves the purchaser chargeable, as a matter of law, with notice of every fact (ie. irregularity) which the inquiry would have disclosed.

See, for example, Kordecki v. Rizzo, 106 Wis.2d 713, 317 NW 2d 479 (Wis. 1982), in which the court stated that had the party claiming bona fide purchaser status at a foreclosure sale examined the record prior to purchase, which he did not, the purchaser would have found the lis pendens recorded against the property being foreclosed. The lis pendens, in turn, would have led the purchaser to the county circuit court file on the foreclosure proceedings (the foreclosure court file number is typically noted on the lis pendens), and more specifically to the documents contained in said foreclosure file that, had they been examined, would have placed the purchaser on notice of defects in the process. Accordingly, the court ruled that the purchaser was not entitled to protection as a bona fide purchaser.

See also, Carnation Co. v. Midstates Marketers, Inc., 2 Kan. App. 2d 236, 577 P. 2d 827 (Kan. Ct. of App. 1978), supporting the proposition that an adequate title search of land requires the inspection/examination of a court file which is referred to in a recorded instrument affecting title to land:

• [I]t is apparent that the appellant's argument that he had no notice of the lien is without foundation. The entry on the judgment docket is intended to serve as an index which alerts an interested party that judgment has been rendered. Specific and detailed information regarding the action is located in the appearance docket and the court file.
  
  A reasonably diligent search of the records available to the appellant would have revealed that judgment was entered on September 20, 1973, for that was the date reflected in the appearance docket and the court file containing the journal entry of judgment.

Brooklyn Judge Voids Home Transfer Where Son Duped Elderly, Blind, Wheelchair-Bound Mom To Sign POA Used To Deed Property For Pennies On The Dollar

In Brooklyn, New York, the New York Post reports:

• A shady Brooklyn real-estate deal that stripped a blind, elderly woman of the deed to her home has been undone by a judge who said the transaction “reeked of fraud.”



• A lawyer for wheelchair-bound Evelyn Popalardo, 84, filed suit in 2010 after discovering that her two-story home — which a bank appraiser valued at about $600,000 in 2007 — had been sold out from under her for a mere $6,000 by her own son.



• Brooklyn Supreme Court Justice Martin Solomon voided the deal after a civil trial in which the elderly widow testified that she couldn’t even read the document in which she signed over power of attorney to her son, Andrew, The Post has learned.



• “So the entire foundation of this transaction failed,” Solomon said, according to a transcript of his verdict. “It is as if you are building a house on a river.”



• Popalardo’s suit charged that her son, 53-year-old Andrew — an unemployed Army vet who shared the Sunset Park home with her — persuaded her to sign over power of attorney so he could deed the property for one one-hundredth of its value to Queens real-estate investor Yuval Golan, the owner of Bapaz Adaret Properties Corp. But Andrew Popalardo insists he was as much a victim as his mom. Andrew claims that a Bapaz Adaret representative convinced him the family could lose the house if his mother ended up in a nursing home.

Source: ‘Sold out’ his blind mother (Took 6G for home).

For earlier story, see Mom gets '$onburn'.

WV AG: Zombie Debt Buyer Used Crappy Paperwork To Score Court Judgments In Groundless Lawsuits Seeking To Collect Stale, Bogus Debts From Consumers

In Charleston, West Virginia, The West Virginia Record reports:

• West Virginia Attorney General Darrell McGraw said Thursday his office is suing Midland Funding LLC, one of the country's largest debt buyers. McGraw said he is going after Midland Funding, a Delaware corporation, and its sister corporation, Midland Credit Management, a Kansas corporation, for using false affidavits to obtain default judgments against state consumers.



• In addition, the attorney general said he is suing the two corporations for failing to include information required by law when suing a consumer in magistrate or circuit court for an alleged debt.



• Midland is considered one of the nation's largest "debt buyers," having bought about $54.7 billion in old consumer debt in recent years.The company typically buys debt that has been charged-off by the original creditor -- usually old credit card debt -- for about three cents on the dollar.



• In other words, Midland pays about $3 for every $100 of debt it buys, McGraw's office explained. The attorney general said because debt buyers like Midland usually only acquire an electronic file about the debt and not actual copies of the underlying charge slips, account statements, etc., consumers are hounded regularly by the companies for payments of bills they do not owe.



• In fact, in some cases, debt buyers sue people solely because they have the same or similar name or address as the real debtor. In other cases, they pursue people for bills repaid years ago, McGraw said.



• According to the Attorney General's Office, Midland frequently uses "false" and "unreliable" mass-produced affidavits as supposed "proof" of consumer debts in lawsuits against individual citizens. The company does this in order to obtain judgments against or extract payments from mostly unrepresented consumers, some of whom had no knowledge of any alleged debt, McGraw's office alleges.



• The National Consumer Law Center has estimated that one out of 10 lawsuits filed by debt buyers are premised on bad or incorrect information. "Unfortunately, many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved. Companies such as Midland rely upon this fear and typically drop their lawsuits if consumers know their rights," McGraw said Thursday.



• The Attorney General's Office began its investigation into Midland's business practices after receiving complaints from consumers that they had received repeated telephone calls from the company, trying to collect debts they did not owe. Some consumers also complained they had been sued for debts they did not owe on credit cards they never had.

Source: McGraw suing debt-buying company.

Shift In Loan Servicers, Mortgage Payment Confusion Leads To Foreclosure, Pending Eviction For South Florida Man

In Pompano Beach, Florida, WSVN-TV Channel 7 reports:

• A South Florida man is facing foreclosure after having life-saving heart surgery. Paul Crowley loves the view from his Pompano Beach condo, but how much longer he will be able to enjoy that view now hangs in jeopardy.



• Crowley now faces eviction. His problems began when he tried to remodify his nearly $750 a month loan to be able to pay for mounting medical costs. "A couple years ago, I had some very serious medical problems, including a quintuple bypass operation," said Crowley.



• Crowley said, when his mortgage got shifted to a different servicer he was told to stop paying to the original bank but never told who to write the checks out to next. "They told me they were going to tell me where they were going to send the new payments," said Crowley, "who the mortgage server was. They never did. It was to a collection agency, not a mortgage server."



• Crowley's foreclosure attorney calls this case extreme and is now fighting to save the condo. "Never communicated with Mr. Crowley regarding making new payments, and they moved immediately into foreclosure," said Johnny Gaspard.



• After years of arguing back and forth with several different entities, the bank officially foreclosed the unit [...]. "At this point, our next step is to file an objection to the foreclosure sale based upon the circumstances, based upon Mr. Crowley's case," said Gaspard. "We believe we'll be successful with it."



• Crowley is not sure what step he will take next if his home is foreclosed. "I don't know where I would go. I have no place to go, really. I just don't know what I would do," he said. Crowley and his attorney hopes to have a hearing. For now, Crowley lives in his condo, just like he has for the past 11 years.

Source: Man's home foreclosed after heart surgery.

Whistleblowers Score Million$ In Seperate Suits Targeting Duibious Bankster Mortgage Lending, Foreclosure Practices

ProPublica reports:

• Buried in the sweeping mortgage settlement with banks, for which final documents were filed this week, are five whistleblower cases that shed light on the litany of foreclosure abuses by the banks.



• According to one suit, Bank of America allegedly passed bad loans on to the Federal Housing Administration. According to another, the bank allegedly denied qualified homeowners access to HAMP, the government's loan modification program.



• The suits were all settled as part of the overall $25 billion mortgage deal. They were filed under the False Claims Act, which provides incentives for whistleblowers to come forward in cases in which someone has defrauded the government. Whistleblowers can net up to 25 percent of the total settlement from False Claims suits, and in some of these cases, the reward is in the millions.



• Details are available for four of the cases; documents in a fifth, against JPMorgan Chase, have not yet been filed in Massachusetts. While the cases were settled as part of the overarching agreement, they still have to be accepted by the courts in which they were originally filed. In reaching the settlements, none of the banks admits or denies the lawsuits' allegations. We've laid out the details of each case.

***

• [Kyle] Lagow's suit was settled for $75 million, and was a component of the FHA's $1 billion settlement with Bank of America over FHA insurance. Documents detailing his cut of the $75 million haven't yet been filed. [... Lynn Szymoniak's] suit was settled for $95 million, and she will receive $18 million. [...] [A] JPMorgan [lawsuit] settled for $45 million. The two whistleblowers, Victor Bibby and Brian Donnelly, told Reuters that together they would receive $11 million. They also said they would continue their case against the other banks. [...] [A Bank of America] suit was settled for $6.5 million, and [whistleblower Gregory] Mackler's cut has not been finalized.

For more, see Four Whistleblowers Who Sounded the Alarm on Banks’ Mortgage Shenanigans.

See also, Reuters: Whistleblowers reap millions in U.S. mortgage suits.

Bank Of America: Like The World's Worst-Behaved Teenager?

Rolling Stone columnist Matt Taibbi opines:

• At least Bank of America got its name right. The ultimate Too Big to Fail bank really is America, a hypergluttonous ward of the state whose limitless fraud and criminal conspiracies we'll all be paying for until the end of time.



• Did you hear about the plot to rig global interest rates? The $137 million fine for bilking needy schools and cities? The ingenious plan to suck multiple fees out of the unemployment checks of jobless workers?



• Take your eyes off them for 10 seconds and guaranteed, they'll be into some shit again: This bank is like the world's worst-behaved teenager, taking your car and running over kittens and fire hydrants on the way to Vegas for the weekend, maxing out your credit cards in the three days you spend at your aunt's funeral.



• They're out of control, yet they'll never do time or go out of business, because the government remains creepily committed to their survival, like overindulgent parents who refuse to believe their 40-year-old live-at-home son could possibly be responsible for those dead hookers in the backyard.

For more, see Bank of America: Too Crooked to Fail (The bank has defrauded everyone from investors and insurers to homeowners and the unemployed. So why does the government keep bailing it out?)

In a related story, see J.P. Morgan Chase's Ugly Family Secrets Revealed.

Scrutiny Increases On Suspected Foreclosure Rescue Racket Allegedly Duping Financially Stressed, Confused Homeowners Into Signing Over Deeds To Homes

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

• Complaints are mounting against a Palm Beach County foreclosure­ rescue company accused in lawsuits and letters to state officials of defrauding desperate homeowners. The 3-year-old Nationwide Investment Firm promises to conduct short sales, obtain loan modifications or "negotiate with lenders to stall foreclosure," according to a contract attached to a Feb. 15 lawsuit filed in Palm Beach County.



• But clients allege in complaints to the Florida Attorney General's Office and court actions in Broward and Palm Beach counties that instead of getting the help they sought, they unwittingly signed over the deeds to their homes. Some claim they were then threatened with eviction and left with mortgage debt on properties to which they no longer have title.



• The Palm Beach Post first reported on Nationwide Investment Firm in November when five lawsuits within a year's time accused the company of fraud. Since then, at least two more lawsuits have been filed against it, two Broward residents are fighting eviction from the homes they deeded to the company, and a Port St. Lucie couple say they sought a refinance from Nationwide but ended up giving away their home in a flurry of paperwork they didn't understand.



• Property records show Nationwide has title to 65 homes in Palm Beach, Broward, Miami­-Dade, St. Lucie and Lee counties. "Imagine - we keep paying on the house and the house is not even ours," said Antoine Jean Francois of Port St. Lucie, who said he learned about the company from a commercial on a Haitian radio station.



• Nationwide's attorney, Kevin Fabrikant, said the clients knew what they were doing. "I believe they are lying," he said, adding that Nationwide has voluminous short-sale files on homes that prove it is working with banks to erase home­owner debt. "They knew they were signing away title to their property."



• Attached to two of the complaints sent to the attorney general are contracts, written in both English and Creole, that the homeowners signed saying that no one had induced them to sign a quit claim deed or sell the property.



• But West Palm Beach attorney Pierre St. Jean, who is representing a homeowner who filed suit last month, said people don't understand the consequences and are given nothing of value in return for their deed. "They (Nationwide) are looking for people who are inexperienced, confused, and in a frightened state of mind," he said.



• The Florida Office of Financial Regulation confirmed last week it was investigating the company's practices, but wouldn't comment further. Still, the firm continues to collect deeds. Two Palm Beach County homeowners signed over their properties in the first two months of 2012, according to records.



• Claims in the two most recent lawsuits filed in Palm Beach and Broward counties include fraud, unjust enrichment and violation of Florida loan modification regulations.



• In one attorney general complaint, a Margate woman said she was asked to pay Nationwide $1,400 per month after she sought short-sale help and signed over her deed. She moved, fearing eviction. Nationwide has since sold the home, which is in foreclosure, in a lease-to-own deal to another couple who gave the company $13,000 down on a $65,000 purchase price with an interest rate of 9.6 percent, according to a contract for deed filed with the Broward County clerk of court.



• Francois, the Port St. Lucie homeowner, wrote a letter in late November to the attorney general that he and his wife were told Nationwide has investors who would buy their home in a short sale and sell it back to them for its current value.



• It's a similar situation described in other complaints, including from one woman who filed a Boca Raton Police Department incident report in October. In that case, the homeowner said she remained in the house after deeding it to Nationwide and gave the firm $27,000 to buy the home back after a short sale. She said she made monthly payments to the company of between $1,170 and $1,300. That was two years ago, she said in the police report, and the homeowner believes a short sale was never initiated.

For more, see Complaints mount against Palm Beach County foreclosure rescue company accused of defrauding desperate homeowners.

Title Agent Gets 6 Years For Illegally Pocketing $4.9M+ In Real Estate Closing Cash Meant For Existing Lienholder Payoffs On Home Sales, Refinancings

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

• U.S. District Judge Catherine C. Blake sentenced Gary Pierce, age 44, of Edgewater, Maryland, [] to six years in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a five year scheme to divert or hold mortgage payoff funds from clients’ closings on 17 Maryland properties. Judge Blake also ordered Pierce to pay restitution of $4,174,044.41. Co-defendant Todd R. Bettin, age 42, of Crofton, Maryland, pleaded [] today to wire fraud in connection with the same scheme.

***

• Beginning in 2007, Pierce and Bettin diverted or held mortgage payoff funds from clients’ closings for a matter of days, weeks and sometimes years. Pierce falsely represented on HUD-1 forms sent to the borrower’s lender that the payoff was made, when in fact Pierce intended to divert the funds.



• Pierce and Bettin fabricated wire confirmation reports, which purported to be a bank record of the transfer, to include in loan files. These were created in advance of audits in order to deceive the title insurers.



• Additionally, to forestall discovery by the lenders, Pierce and Bettin contacted the mortgage lender who should have been paid off and posed as the borrower/homeowner. Bettin would either create an on-line profile for the borrower and stop any mail from being sent to the borrower, or he would tell the lender that his, the borrower’s, address had changed and he would re-direct the lender to send all correspondence to a post office box owned by Pierce. Bettin would then make monthly mortgage payments to the existing lender.



• Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. With no delinquency in the account, the scheme went undetected.



• Because the existing mortgages were not paid off, the liens against the property were not removed and clear title could not be passed to the new lender and borrower. The total amount of diverted or otherwise improperly obtained funds totals $4,971,380.

For the U.S. Attorney press release, see Owner of Gambrills Title Agency Sentenced to 6 Years in Prison in $4.9 Million Mortgage Fraud Scheme (Employee Pleads Guilty To The Same Scheme).

Co-Owner Of Racket That Ran 'Contract For Deed' Scam Cops Guilty Pleas To Multiple Charges Of Securities Fraud, Unlawful Merchandising Practices

In Sprinfield, Missouri, the Springfield News Leader reports:

• A former part owner of Greenleaf Companies has pleaded guilty to 10 counts of securities fraud and nine counts of unlawful merchandising practices.(1) Eric Christian Gagnepain, 39, of Springfield pleaded guilty Feb. 29 in Greene County Circuit Court to the charges for his role in running the Greenleaf Companies and The Real Estate Company in Springfield, said Attorney General Chris Koster. Gagnepain was indicted in February 2011.



• Gagnepain is the second officer of the company to plead guilty. Lane Sanders, former president of Greenleaf Companies, pleaded guilty to securities fraud and unlawful merchandising fraud charges in February 2011. Sanders’ sentence is pending. Gagnepain faces between seven and 10 years in prison, Koster said. His sentencing is set for Aug. 3.(1)

***

• Gagnepain solicited investors to enter into investment contracts under which investors would buy one or more new homes designated by Greenleaf, Koster said. Greenleaf Companies was responsible for the down payment, the closing costs and reselling the homes.



• Under the terms of the investment contracts, Greenleaf would pay the investor $10,000. Prosecutors say Gagnepain failed to advise investors of Greenleaf’s weak financial condition and failed to advise them that financial institutions were being misled about the true source of down payments.



• When Greenleaf and The Real Estate Company resold the homes, Gagnepain failed to advise the purchasers that the title to the homes were held by the investors and failed to advise the consumers when the homes were in danger of foreclosure, according to Koster

For more, see Greenleaf investigation leads to a second guilty plea (Eric Gagnepain is the second officer of real estate company to admit role in securities fraud, unlawful merchandising).

(1) For earlier posts on this contract for deed, home-flipping racket which describe the nature of the scam, see:

• Missouri AG Obtains $338K+ Judgment In Suit Against Alleged Contract For Deed, Payment Skimming Racket That Left Would-Be Homebuyers In Foreclosure,
• Straw Buyer Scheme Coupled With Subsequent Sale Using Contract For Deed Constitutes Sale Of Unregistered Security, Says Arkansas Securities Regulator,
• 21 Missouri Homebuyers File Suit Against Springfield Firm In Failed Contract For Deed Home-Buying Program,
• Missouri "Contract For Deed" Operator Hit With C&D Order By Securities Regulator, Preliminary Injunction By State AG,
• Missouri Feds, State AG, Local Cops Raid "Contract For Deed" Operator; Firm Subject To Numerous Complaints; Company Issues Public Statement,
• More Trouble For Missouri "Contract For Deed" Operator As Homeowners File Federal Suit Seeking $60M In Damages,
• Missouri Couple Sues "Contract For Deed" Operator For Allowing Home To Fall Into Foreclosure.

(2) According to the story, the cases for four other individuals indicted along with Gagnepain last February are pending. Those individuals are:

• Scott Allen Dasal, former president of The Real Estate Company;
• Misty May Perkins, former director of investor relations for Greenleaf;
• William David Strong, former director of finance for Greenleaf; and
• Robert Lee Batchman, former real estate broker for The Real Estate Company.

B'klyn-Based Duo Who Ran Equity Stripping Ripoffs Get Multi-Year Prison Stays After Guilty Pleas; Pair Pinched For Peddling Predatory Sale Leasebacks

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

• Two Brooklyn, N.Y., men were sentenced [] for conspiring with each other and others in a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, U.S. Attorney Paul J. Fishman announced.



• Phil A. Simon, 35, and Garth Celestine, 46, were sentenced to 66 months and 36 months in prison, respectively. Both defendants previously pleaded guilty before U.S. District Judge Dennis M. Cavanaugh to conspiracy to commit wire fraud. Judge Cavanaugh also imposed the sentence [] in Newark federal court.



• According to documents filed in this case and statements made in court:
  
  From 2004 to 2007, Simon and Celestine owned and operated Home Savers Consulting Corp., which held itself out as a foreclosure rescue company with two locations in New York. Simon and Celestine conspired with each other and others to defraud both homeowners facing foreclosure and mortgage lenders by making false statements and promises. Simon and Celestine defrauded more than 40 homeowners and mortgage lenders, causing losses to the victims of more than $3.3 million.
  
  Home Savers advertised to homeowners and promised to help them avoid foreclosure, keep their homes and repair their damaged credit. Simon and Celestine told the homeowners they could avoid foreclosure by signing contracts of sale and transferring title to their homes to individuals who would act as “straw buyers” of the properties.
  
  Simon and Celestine promised the homeowners that after they transferred their title to these straw buyers, Home Savers would help them improve their credit ratings, help them obtain more favorable mortgages on their homes, and ultimately direct the straw buyers to transfer the title to their homes back to the homeowners within six months to one year.
  
  Simon and Celestine typically told the homeowners the equity withdrawn from their properties would be kept in a separate account and used to pay the mortgages and expenses on their homes.
  
  After the homeowners were signed up, Simon and Celestine recruited individuals with good credit scores to act as straw buyers and paid them about $10,000 per property. Using the homeowners’ properties and the good credit ratings of the straw buyers, Simon and Celestine applied for mortgages in the names of the straw buyers to extract the maximum available equity from the homes.(1)

For the U.S. Attorney press release, see Co-Owners of Home Savers Consulting Corp. sentenced to prison for orchestrating mortgage foreclosure rescue scheme.

(1) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Virginia Foreclosure Rescue Operator Wastes No Time (2 Months) Copping Guilty Plea In Sale Leaseback-Peddling Racket Targeting High-Equity Homeowners

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

• Philip Villasis, 41, of Chesapeake, Va., pleaded guilty [] in Norfolk federal court to conspiracy to commit wire fraud. Villasis faces a maximum penalty of 30 years in prison when he is sentenced on June 18, 2012. [...] A federal grand jury previously indicted Villasis on January 19, 2012. Villasis’ co-defendant, Ray D. Gata, previously pled guilty to the same charge on February 28, 2012.



• According to court documents, from November 2006 until February 2011, Villasis and Gata engaged in a foreclosure rescue scheme that defrauded homeowners and mortgage lenders.



• Villasis promised homeowners that he could save them from foreclosure by arranging a sale of their homes to Gata and other straw borrowers. To further entice the homeowners, Villasis promised that they could remain in their homes after the sale, pay rent, and he would resell the homes back to them once they were more financially secure.



• Villasis and Gata profited from this scheme by taking all of the proceeds from the home sales. To complete the scheme, Villasis and Gata executed false closing documents that showed the proceeds of the sale going back to the homeowners when, in fact, the proceeds were going to Villasis, Gata and the other straw borrowers.



• The homeowners received nothing from the sale of their homes while Villasis, Gata and others received in excess of $170,000. In almost every case, Villasis required the homeowners to pay more in rent to cover a larger mortgage, and ultimately evicted these homeowners from their homes.(1)

For the U.S. Attorney press release, see Chesapeake Man Pleads Guilty to Mortgage Fraud Scheme.

(1) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Non-Profit Group Targets Another Suspected Foreclosure Rescue Racket In Civil Suit; Accuses Long Island Law Firm With Peddling Faulty Loan Mod Help

The Lawyers' Committee for Civil Rights Under Law(1) recently announced:

• The Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) and pro bono counsel Davis Polk & Wardwell LLP (Davis Polk) have filed their fourth lawsuit against a network of for-profit loan modification companies.



• The suit, Masheyeva v. Law Offices of David M. Green, was filed in New York Supreme Court in Nassau County, on behalf of 18 homeowners from New York and six other states. It alleges that the loan modification scam, operated by multiple corporate and individual defendants centered around David M. Green and his Nassau County-based firm, Law Offices of David M. Green, defrauded vulnerable homeowners out of tens of thousands of dollars by falsely promising—for substantial upfront fees—to obtain much-needed mortgage modifications on their behalf, but then consistently failing to deliver results.



• The case seeks to recover monetary damages, including the illegal upfront fees paid by plaintiffs, and injunctive relief to put an end to the deceptive practices of the named defendants. The Lawyers’ Committee and Davis Polk are representing the plaintiffs free of charge. (Click here to view Complaint)



• The scheme at issue in this case is alleged in the complaint to have operated as follows:
  
  1) In exchange for sizable advance fees of up to $5,000, collected in violation of New York law, defendants promised to work directly with plaintiffs’ lenders to renegotiate their home loans and to secure lower monthly payments and interest rates, and, in some instances, avoid impending foreclosure.
  
  2) They lured plaintiffs by touting their specialized experience in the industry, offering the services and expertise of seasoned attorneys, and claiming to have personal connections with key employees of plaintiffs’ lenders.
  
  3) Ultimately, defendants performed little to no work on plaintiffs’ loan modification applications, typically failing to make any contact with their lenders.

For more, see Lawyers' Committee & Davis Polk File Fourth Suit Targeting Loan Modification Scam in Nassau County.

(1) The Lawyers' Committee for Civil Rights Under Law, a nonpartisan, nonprofit organization, was formed in 1963 at the request of President John F. Kennedy to involve the private bar in providing legal services to address racial discrimination.

Chase's Credit Card Litigation Operation: Shoddy Back-Office Procedures, Flawed Legal Work Extends Well Beyond Mortgage Servicing

From a recent story from American Banker:

• JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.



• The process flaws sparked a regulatory probe by the Office of the Comptroller of the Currency and forced the bank to stop suing delinquent borrowers altogether last year.



• The bank's errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say.



• For the banking industry at large, the situation at Chase highlights the risk that shoddy back-office procedures and flawed legal work extends well beyond mortgage servicing.



• "We did not verify a single one" of the affidavits attesting to the amounts Chase was seeking to collect, says Howard Hardin, who oversaw a team handling tens of thousands of Chase debt files in San Antonio. "We were told [by superiors] 'We're in a hurry. Go ahead and sign them.'" Hardin left the bank in 2010 to work in a different industry. Chase declined repeated requests to discuss details of its consumer debt collection activities.



• Company documents, court filings, and interviews with seven current and former employees reveal that Chase's credit card litigation operation was allegedly plagued by unreliable external attorneys, management's disregard for accuracy, and patchy technology. The bank's computer systems frequently disagreed about how much debtors actually owed, several of the Chase sources say.



• The employees' stories corroborate allegations made by Linda Almonte, a former mid-level business process executive in Chase's San Antonio-based Credit Card Litigation Support Group. Dismissed in November 2009 after six months on the job, Almonte filed whistleblower complaints and a wrongful termination suit claiming that she was fired for objecting to the sale of credit card debts with erroneous balances.



• Almonte's complaints drew the attention of the OCC, former Chase employees say, and led to the April 2011 shutdown of a formidable collections operation that generated several billion dollars of legal judgments every year.



• Few details of the OCC's investigation are available, but current and former Chase employees confirm that staffers from the agency's enforcement division spent two months gathering information in the San Antonio facility late last year. A person familiar with the OCC's review says that the regulator is taking the situation very seriously.



• This is the first article in a series that will look at what allegedly went wrong in Chase's credit card litigation operation — and how those missteps could roil the banking and debt collection industries.

For more, see OCC Probing JPMorgan Chase Credit Card Collections.

Guilford County Register Of Deeds Files Robosigner Suit; Seeks To Clean Up Bankster-Created Mess In Land Records Registry

From the Office of the Guilford County, North Carolina Register of Deeds:

• Guilford County, ex rel. Jeff L. Thigpen, Guilford County Register of Deeds, filed suit today against LPS/DocX, MERSCORP, MERS, Inc., and numerous banks, loan servicers, and foreclosure specialists seeking to clean up the “mess” Defendants created in the County’s property records registry.



• “Our office uncovered an abundance of falsified, forged, and fraudulently executed mortgage documents,” said Thigpen. “But our investigation only found the tip of the iceberg. We need the banks to clean up their mess.”



• The suit cites as evidence Thigpen’s identification of over 4,519 mortgage documents that were filed by DocX with the Register of Deeds and signed in the names of known robo-signer aliases: “Linda Green,” “Christie Baldwin,” “Pat Kingston,” “Korell Harp,” “Jessica Ohde,” “Rita Knowles,” “Linda Thoresen,” and “Brent Bagley.”



• “How can we maintain accurate records of title with fraudulent documents? The banks are also maintaining their own private registry called ‘MERS’ that prevents the public from discovering who owns what loans. Because there is no accountability for MERS, its records are also a mess,” said Thigpen.



• “The system is broken and it needs to be fixed. We’re telling MERS and the banks: you broke it, you fix it.” In an April 6, 2011 letter, Thigpen and Southern Essex (MA) District Registry of Deeds John O’Brien urged Iowa Attorney General Tom Miller to investigate MERS and its impact on Registers of Deeds as part of the national attorneys general robo-signing investigation.



• The suit cites numerous reasons why MERS fails to keep reliable chains of title, and notes that the recent attorneys general settlement did not address MERS’s and robo-signing’s impact on Registers of Deeds. “When you combine the fraudulent documents with MERS, it is difficult if not impossible to trace title for property. Potential title defects hurt Guilford County homeowners and businesses by impacting property values,” said Thigpen.



• “We need to clean up chains of title to ensure certainty in the land records system.”

For the Guilford County Register of Deeds press release, see Guilford County Sues To Clean Up Banks’ “Mess” at the Register of Deeds.

Banksters' Foreclosure Attorney Comes Clean; Says 1000s Of Colorado Foreclosures Were Probably Bogus

In Denver, Colorado, The Denver Post reports:

• Thousands of Colorado homes were taken in foreclosure in recent years by banks that probably never had the right to do so because no one bothered to challenge the process, said a lawyer who worked for the state's biggest foreclosure law firm.



• Lawyers often blindly sign a document attesting that the bank they represent has the right to foreclose — allowable under Colorado law — without ever actually seeing the original loan documents, attorney Keith Gantenbein said. He worked at Castle Stawiarski, where more foreclosure cases originate than any other law firm statewide.



• Gantenbein said he and other lawyers signed "tens of thousands" of documents known as statements of qualified holder. The papers certify lenders' right to foreclose, generally with little more than an e-mail from a bank or loan servicer telling the lawyers to file the case.



• "The discomfort was you had no way to verify the information they provided, and we found many bank errors, and you're not 100 percent sure you had the right to foreclose," Gantenbein said Monday. "It happened so frequently that there has to be a large percentage of homeowners who lost their homes to the wrong people."



• Gantenbein, 31, is expected to appear today before a state House committee taking testimony on a bill designed to end the practice and require banks to provide original loan papers before they can foreclose.

For more, see Honor system for foreclosure paperwork has led to illegal Colorado seizures, lawyer surmises.

Minnesota Appeals Court: Foreclosure By Advertisement Is Void Unless Strict Statutory Compliance Is Met

In a recent ruling by the Minnesota Court of Appeals, the court issued a reminder that, for a foreclosure by advertisement to be valid in Minnesota, strict compliance with statutory requirements is met. Accordingly, it reversed a lower court ruling adverse to a foreclosed homeowner.(1)

For the court ruling, see Ruiz v. 1st Fidelity Loan Servicing, LLC, No. A11-1081 (Mn. Ct. of App., March 12, 2012) (unpublished).

(1) From the appeals court ruling (bold text is my emphasis, not in the original text):

• In 1910, the Minnesota Supreme Court adopted a strict-compliance standard in foreclosure-by-advertisement proceedings, stating:
  
  Foreclosure by advertisement is purely a statutory creation. One who avails himself of its provisions must show an exact and literal compliance with its terms; otherwise he is bound to profess without authority of law. If what he does failed to comply with the requirements of the statute, it is void.
  
  Moore v. Carlson, 112 Minn. 433, 434, 128 N.W. 578, 579 (1910). The supreme court has recently reiterated this strict-compliance requirement, citing Moore for the principle that "[u]nder Minnesota law, a foreclosure by advertisement—non-judicial mortgage foreclosure—is only valid if the party seeking to foreclose the mortgage meets certain statutory requirements." Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 492 (Minn. 2009).
  
  The legal question in Jackson was "what constitutes an assignment of a mortgage within the meaning of Minnesota's foreclosure by advertisement statutory scheme." Id. at 489. In resolving this question, the supreme court reviewed the history of Minnesota's foreclosure-by-advertisement statutes and explained that:
  
  Foreclosure by advertisement was developed as a non-judicial form of foreclosure designed to avoid the delay and expense of judicial proceedings. Because foreclosure by advertisement is a purely statutory creation, the statutes are strictly construed. We require a foreclosing party to show exact compliance with the terms of the statutes. If the foreclosing party fails to strictly comply with the statutory requirements, the foreclosure proceeding is void.
  
  Id. at 494 (emphasis added) (quotations and citations omitted).
  
  Jackson concluded with a statement that "[a]s a court that reviews and interprets the laws of this state, we must apply the foreclosure by advertisement statutes as they have been written by the legislature and as they have been applied and interpreted in the past." Id. at 502-03.
  
  The supreme court's statements regarding the strict-compliance standard, although dicta, are entitled to "great weight." In re Wylde, 454 N.W.2d 423, 425 (Minn. 1990); see Simons v. Shiltz, 741 N.W.2d 907, 910 (Minn. App. 2007) (relying on dicta in a supreme court opinion), review denied (Minn. Feb. 19, 2008). Moreover, the statements provide no indication that the court is willing to depart from the standard that it adopted in 1910.
  
  Despite the supreme court's recent reiteration of the strict-compliance requirement, the district court accepted respondent's arguments that substantial compliance with foreclosure-by-advertisement statutory requirements is nonetheless sufficient. The district court reasoned: "Although [appellant]'s reading of Jackson is technically correct, [appellant] does not take into account the entire context of decisions concerning foreclosure and real property, and that minor errors should not and do not invalidate a foreclosure."
  
  In concluding that substantial compliance is sufficient, the district court relied on Hudson v. Upper Mich. Land Co., 165 Minn. 172, 206 N.W. 44 (1925), Sieve v. Rosar, 613 N.W.2d 789 (Minn. App. 2000), and State by Spannaus v. Dangers, 368 N.W.2d 384 (Minn. App. 1985), review denied (Minn. Aug. 20, 1985). This reliance was misplaced.
  
  Although language in Hudson is inconsistent with the strict-compliance standard, see Hudson, 165 Minn. at 174, 206 N.W. at 45 ("Whether a sale on the foreclosure of a mortgage pursuant to a power of sale is void or voidable by reason of an irregularity in the proceedings depends upon the nature of the irregularity."), Hudson does not provide a basis to reject the supreme court's much more recent reiteration of the strict-compliance standard in Jackson.
  
  And Rosar and Dangers are factually distinguishable and therefore not on point. See Rosar, 613 N.W.2d at 793 (requiring only substantial compliance to effect a valid redemption after a foreclosure sale); Dangers, 368 N.W.2d at 386 (requiring only substantial compliance in condemnation proceedings).
  
  The district court also reasoned that "[i]n the foreclosure and real property context, [appellant]'s reliance on Jackson and the standard of strict compliance is inflexible and does not correspond to the reality of the foreclosure process."
  
  But the supreme court clearly requires strict compliance with the foreclosure-by-advertisement statutes, and "[t]he district court, like this court, is bound by supreme court precedent." State v. M.L.A., 785 N.W.2d 763, 767 (Minn. App. 2010), review denied (Minn. Sept. 21, 2010).

Michigan AG Issues 2nd Subpoena In Criminal Probe Involving Now-Defunct Suspected Racket That Allegedly Manufactured Bogus Foreclosure Documents

From the Office of the Michigan Attorney General:

• Michigan Attorney General Bill Schuette today announced that he has issued a second criminal investigative subpoena against national mortgage servicing support provider DocX as his office continues to investigate questionable mortgage documentation filed with Michigan's Register of Deeds offices during the current foreclosure crisis.



• "We are moving forward with our investigative efforts to find answers on behalf of Michigan homeowners," said Schuette.



• The Attorney General is empowered to pursue criminal investigative subpoenas under the Code of Criminal Procedure (MCL 767A.2(2)). Schuette's office has requested documents and information regarding DocX operations in relation to foreclosure and/or bankruptcy-related document processing. The subpoena was approved by the 54B District Court in Ingham County, and the information must be provided to the Attorney General's Office on or before April 4, 2012.



• This is the second criminal subpoena filed during the course of Schuette's investigation. Schuette previously filed a criminal subpoena against DocX on June 12, 2011.

For the Michigan AG press release, see Schuette Issues Second Subpoena in Criminal Probe of Mortgage Processors.

Emerging Details Of Foreclosure Fraud Settlement Point To A Lousy Deal

CNNMoney reports:

• As more details emerge about the massive $26 billion foreclosure settlement between the five biggest mortgage lenders and the states' attorneys general, a growing number of borrowers are realizing that the deal will do little, if anything, to help them out.



• Proponents of the settlement deal tout that roughly 1 million homeowners who owe more on their homes than their homes are worth are expected to have their mortgage balances lowered through principal reductions and another 750,000 would be able to refinance into loans with lower interest rates.



• However, that's only a fraction of the 11 million homeowners who are currently underwater on their homes, according CoreLogic. And it's also a mere sliver of the 3.5 million people who lost their homes to foreclosure over the past four years.



• "The impact [of this settlement] will be small," said Mark Zandi, chief economist for Moody's Analytics. "It's not a home run; it's a single."

For more, see Rage grows over mortgage deal.

HUD IG Reports: Bankster Managers Knew Of Problems, Did Nothing To Correct Them; Directed Shortcuts In Some Cases

The New York Times reports:

• Managers at major banks ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections, according to a wide-ranging review by federal investigators.(1)



• The banks have largely focused the blame for mistakes on low-level employees, attributing many of the problems to the surge in the volume of foreclosures after the housing market collapsed and the economy weakened in 2008.



• But the report concludes that managers were aware of the problems and did nothing to correct them. The shortcuts were directed by managers in some cases, according to the report, which is by the inspector general of the Department of Housing and Urban Development.



• The examination is among the most extensive to date of the banks’ foreclosure practices, which caused a national uproar and prompted a $25 billion settlement between the banks and the government that was filed in federal court Monday.

For more, see Bank Officials Cited in Churn of Foreclosures.

(1) For the HUD IG reports, see:

• CitiMortgage, Inc. Foreclosure and Claims Process Review;
• Ally Financial, Incorporated Foreclosure and Claims Process Review;
• JPMorgan Chase Bank N.A. Foreclosure and Claims Process;
• Bank of America Corporation Foreclosure and Claims Process Review;
• Wells Fargo Bank Foreclosure and Claims Process Review.

$25B Nationwide Foreclosure Fraud Settlement Filed

Bloomberg reports:

• The $25 billion agreement with five banks to end federal and state probes into abusive foreclosure practices was filed in U.S. court in Washington, capping negotiations over claims of misconduct after the housing bust.



• The agreement subjects the lenders to monitoring by officials plus penalties of as much as $1 million for each violation, the U.S. Justice Department said. The consent judgments will be in effect for 3 1/2 years, according to the settlement terms.



• The Justice Department today filed in federal court the proposed settlements along with a civil complaint against Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM) and three other banks. The agreement needs approval from a federal judge.

For more, see Foreclosure Settlement With Banks Filed in Federal Court.

See also, Firedoglake: HUD IG Report Released With Settlement Details Servicer Abuse Directed From the Top.

Whistleblower Lawsuits Recently Made Public Shed New Light On Bankster Industry Abuses

The Center for Public Integrity's iWatch News reports:

• Whistleblower lawsuits made public in recent weeks shed new light on abuses in the mortgage industry that led to — and continued well after — the housing crash in 2007.



• The cases suggest that fraud inside the banking industry continued years after the meltdown, some as late as 2011. They have been made public as federal officials put the finishing touches on the $25 billion mortgage fraud settlement with five major lenders.

***

• These cases highlight issues that have been explored by recent Center for Public Integrity investigations. One piece documented evidence that Countrywide worked to silence whistleblowers who tried to report forged documents, inflated income documentation and other misconduct. One of the highest-level employees to complain about fraud inside Countrywide was Mark Zachary, a former vice president who alleged appraisal problems similar to those described in Lagow’s lawsuit. Zachary and Bank of America reached a confidential settlement in 2009.



• Another Center story looked at how homeowners are still struggling to deal with a faulty mortgage modification process.



• The $25 billion mortgage fraud settlement by 49 state attorneys general and several federal agencies included Bank of America and Citibank, as well as JP Morgan Chase, Wells Fargo, and Ally Financial Inc. Although the formal papers have yet to be filed in court, the U.S. Department of Justice announced that under settlement, the majority of the funds would go to principal reductions and loan modifications to borrowers under water. And roughly 750,000 borrowers who lost their homes to foreclosure will receive $2,000.

For more, see New whistleblower cases allege continued bank fraud (Mortgage modifications and appraisal processes in question).