Saturday, April 21, 2012

Failure To Disclose To Client That Cash Borrowed Was For Strip Joint Nearing Foreclosure Among Issues Landing Pennsylvania Lawyer With Bar Boot

The ABA Journal reports:

  • A lawyer who obtained a $25,000 loan from a matrimonial client has been disbarred after the Pennsylvania Supreme Court determined that he failed to reveal a number of pertinent issues as required under attorney ethics rules.

  • Among them, Glenn D. McGogney didn't tell the client that the restaurant business for which he required the loan had accumulated a "staggering" amount of debt and was nearing foreclosure, explains a disciplinary board report and recommendation. It is attached to a Supreme Court order (PDF) on Wednesday that adopts the board's recommendation that he be disbarred.

  • McGogney also didn't reveal that the business was a strip club and had licensing issues, the disciplinary board says.

  • And his client, instead of being advised to seek independent counsel concerning the business transaction, thought McGogney was acting as his attorney in the loan matter.

  • Additionally, McGogney failed to diligently pursue another client's personal injury matter, resulting in the dismissal of her claim which is now likely barred by the statute of limitations, the disciplinary board found.

    Hat tip: Legal Profession Blog.

Source: Disbarred Lawyer Took Client’s $25K for Business Loan, Didn’t Reveal Debt or Say It Was a Strip Club.

Cops To Foreclosed Couple Facing Felonies For Filching Fixtures They Paid For From Former Home: 'You Should've Dealt With Ownership Issue In Court'

In Gwinnett County, Georgia, The Atlanta Journal Constitution reports:

  • A Gwinnett County couple has been charged with felonies after they allegedly stole more than $70,000 worth of appliances and cabinets from a foreclosed home one of them once owned, Channel 2 Action News reported.

  • The investigation began March 16, when a real estate agent interrupted Jeremy Brown and Dawn Nolan as they removed items from a vacant Walton County home once owned by Nolan and her former husband, Walton County Sheriff’s Capt. Chris Cannon told Channel 2.

  • In a phone interview with the AJC Wednesday, Cannon said, "They were going back and forth to the once-marital home," on Calumet Lane in unincorporated Walton County near Monroe, "and removing items from that home and taking it to their current marital home." "This happened on at least five occasions -- in October, December, January, February and March," Cannon said.

  • Authorities executed a search warrant at the couple's Gwinnett home on March 22 and recovered custom cabinets, high-end appliances, granite counter tops and wrought iron.

  • Brown was charged with five counts of burglary, and Nolan, with theft by receiving stolen property, Cannon said. Both initially were booked into Walton County jail and have since been released on bond.

  • When interviewed by Channel 2, the couple denied stealing and said the felony charges were overblown. "The police came over here and charged me with five counts of burglary for going to a house and stealing cabinets that was previously purchased by my wife," Brown said. Nolan said, “We did pay for those things out of our pocket. It was not wrapped up in the mortgage."

  • Cannon said the couple had no authority to go into the house and remove things. It had been foreclosed, it is now owned by a bank, and a real estate agent has been working to sell the property, he said.

  • Cannon said that while the case is still under investigation, the issue of who owned what in the dwelling "should have been dealt with in the courts during foreclosure, and I guess [the couple] opted not to. Our detectives are working to gather further information regarding that as well."

Source: Couple charged with stealing from woman's own former home.

Motor City Rebirth Slowed By Big Chunk Of Foreclosed Homes Succumbing To City Wrecking Ball As Soured Debt Leaves Motown Riddled With Reposessions

In Detroit, Michigan, The Associated Press reports:

  • An analysis finds more than a quarter of Detroit homes with loans that failed during the foreclosure crisis in 2006 and 2007 have been razed or are on the demolition list.

  • The Detroit News reported [] that foreclosures are a huge obstacle to the city's revitalization efforts, with properties being stripped of valuable metal and fixtures quickly after owners are evicted.

  • Amid its population decline, Detroit has struggled with an increasing number of vacant homes. The newspaper reports that foreclosures from 2006 and 2007 alone added 7,600 homes to the demolition list, and an estimated 38,000 homes currently are in some stage of demolition. Karla Henderson, Detroit's group executive of planning and facilities, said the city is working to find ways to keep people in their homes.

Source: Report: More than 25 percent of foreclosed Detroit homes now razed or on demolition list.

See also, The Detroit News: Foreclosures slow Detroit's rebirth (Detroit riddled with repossessions from height of housing meltdown).

Friday, April 20, 2012

Homeowner Barely Dodges Foreclosure Sale As Chase Fails To Remove Residence With Recently-Approved/Modified Mortgage Loan From Auction List

In Redwood City, California, The Daily Journal reports:

  • Redwood City resident Gloria Takla’s Easter Sunday turned sour when she got a call saying her home would be sold in an auction Monday. So, she spent all morning Monday, before the 1 p.m. auction time, on the phone with bank officials trying to figure out why the home would be sold considering JP Morgan Chase Bank just approved a trial modification on her $585,000 loan last month.


  • We’ve been in constant contact with her,” said Eileen Leveckis, spokeswoman for JPMorgan Chase. “We worked out a good deal for her.” The confusion about the sale of her home was because the trial loan modification was approved after the list of foreclosed properties that will be put up for auction was made, Leveckis said. The disconnect “had nothing to do with Chase,” Leveckis said.

  • Takla had real estate brokers knocking on her door before yesterday’s auction asking to see the property. “How can I stop people from coming over and asking to see my property?” she asked Jaime Gonzalez, a real estate broker with Re/Max in Redwood City. Gonzalez had a foreclosure profile report in his hand when he visited Takla’s C Street home early yesterday afternoon. He wanted to see if the home would be worth making a bid on.

  • The visit did not sit well with Takla, an artist by trade. “This has been two years of stress,” she said.

For more, see Home mistakenly put on auction list.

Cops Seek Suspect Accused Of Pocketing Upfront Rent Deposits From Unwitting Would-Be Tenants For Vacant Homes In Foreclosure

In Porterville, California, KGPE-TV Channel 47 reports:

  • Kerri Dunning is out of a thousand dollars and the house she thought she was moving her family into. "Gave him a thousand dollars, he gave us the keys," said Dunning.

  • She was excited about moving in to her new home, but delight turned to bitter disappointment when Dunning went to check on the house and the keys didn't work. "We were going to make it a home for a while and my daughter was like this is great, this is great," said Dunning.

  • Porterville Police are looking for 39-year-old Scott Crowder. Police know of one other victim who paid Crowder $3,000 to rent the same home and also got fake keys. Now they believe there may be more victims.

  • "He is posing as a homeowner/property manager and accepting cash to rent a home that is in foreclosure," said Sgt. Rick Carrillo with the Porterville Police Department. Police believe the home used to belong to Crowder's family and that's how he gains access, even though the bank is about to take possession.

  • Terry Fox, owner of Fox Property Management says sadly this is becoming a growing problem. "It's a combination of things with the internet it's somewhat easier to scam people, and the economy is down so people are looking for easy ways to make a buck," said Fox.

  • In both cases the victims found the house along with pictures on Craigslist, the same internet site Fox Property Management uses to post listings. Fox says it's important to always make sure the property manager is legit by checking references, business cards and never pay with cash.

  • "I would like to know where he is just so he doesn't scam anyone else, that's the basic thing," said Dunning. If you believe you're a victim call Porterville Police at 559-782-7400.

Source: House Rental Scam; May Be More Victims.

Section 8 Ripoff Leads To Jury Conviction For Local Housing Official Who Pocketed Rent Subsidies For Two Units In Her Home Leased To Hubby, Daughter

In Boston, Massachusetts, the Dorchester Reporter reports:

  • A federal jury this week convicted a Department of Neighborhood Development program manager of defrauding the government in two separate scams related to her house on Dix Street.

  • Celia Thomas, 49, of 10 Dix St., faces up to 30 years in prison when sentenced on July 11, the FBI reports. She was terminated from her city job last year. According to an affidavit by the FBI agent who investigated the case, Thomas made some money on the side by making up a fictitious identity and using that to get federal Section 8 payments from the BHA for two alleged rental units in her home [...], supposedly rented to her real husband and daughter.

  • Specifically: "To support this falsehood, in January, 2004, Thomas used the fax machine at her place of employment, The Department of Neighborhood Development, to fax a copy of a deed for 10 Dix St. to the BHA which purported to show that 'Fitzgeral Thomas' had acquired 10 Dix Street in May 2003. In fact, Thomas had acquired 10 Dix Street in May, 2003. The deed she sent to the BHA by fax had been fraudulently altered to substitute the name 'Fitzgeral' for 'Celia.' "

  • The FBI says Thomas made $69,704 over four years. In 2009, Thomas made nearly $67,000 as a DND program manager, according to the Boston Herald's municipal salary database for that year. Despite the extra income, however, Thomas spent nearly five years fending off foreclosure on 10 Dix St.

  • In 2008, the FBI discovered, she found a solution: Find some straw buyers who would pretend to buy the property, then secretly let her continue to live there. Thomas paid these buyers $8,000 for their trouble, the FBI agent said. She made payments for them for awhile, then just stopped sending money in and the property went into foreclosure proceedings again, according to the FBI.

Source: Former city program manager convicted of Section 8, mortgage scams.

Thursday, April 19, 2012

County Employees' 9-Year Screw-Up Over State Tax Exemption For Homesteads Leaves Couple Residing Part-Time In Florida With Big Bill For Unpaid Charges

In Lakeland, Florida, The Tampa Tribune reports:

  • Bethel and Rex Root have always paid their property taxes as soon as the bill arrived in their mailbox. For nine years, there has been no problem.

  • But now, the Hillsborough County Property Appraiser's Office says it miscalculated how much they owed all those years. The mistake means the Roots received exemptions they weren't entitled to of more than $367,000 in their home's value. "I was quite flabbergasted," Bethel Root said.

  • Making matters worse, the county placed a lien on the home, and the only way to remove it was to pay $5,000 in back taxes. So the Roots, retired and on a fixed income, sent in the money last month. But then, a few weeks later, the county called with another mistake. Now they owe $3,000 more. "They change the totals all the time," Root said. "It depends on what day it is there, I think."

  • How could this happen? Jim Glaros, assistant chief deputy for the Hillsborough County Property Appraiser's Office, said the Root's case is the perfect storm of a clerical error mixed with the homeowners' misunderstanding of the homestead exemption.

  • "We've tried so many times to educate homeowners, but many people just pay their bill without paying attention to the exemptions, and I do get that," Glaros said.

  • The Roots' situation is an extreme example, he said. Mistakes typically don't go nine years before they are discovered. Still, Glaros said he hopes this case will spur renewed diligence on the part of his office and homeowners in checking assessments.

  • It turns out there were actually two mistakes that led to the shortfall in taxes collected from the Roots. First, the property appraiser's office didn't assess the property correctly. And then the tax collector didn't charge enough.

  • When the Roots bought their home in 2001, the property appraiser's office failed to remove the $25,000 homestead exemption the previous owner had on the home. Florida law allows homeowners a break on their taxes for their primary home.

  • The Roots live here part of the year, but their primary residence is in Michigan, so they're not entitled to the exemption. But they didn't apply for it and say they didn't even know they had it.

  • The home at 5311 Sharon Trail is so close to the Polk County line it has a Lakeland postal address. What's more, garbage and other services are provided by Polk County under a commonly used intercounty arrangement.

  • Glaros said he doesn't know why it took so many years for his office to figure out the mistake. Now that's it's caught, though, the office can't just look the other way, he said. "We're only asking that they pay what they should have already paid. That's all we're asking."

  • The information was turned over to the Hillsborough County tax collector, where another mistake occurred. Dana Dove, from the tax office, said an employee who no longer is with the county, "for obvious reasons," estimated the taxes incorrectly and forgot to tally $3,100. That's why the couple were asked to pay just $5,000 at first, she said.

  • The $25,000 homestead exemption is only part of the problem. The exemption also caps the assessed value of a home at 3 percent a year no matter how much its market value increases.

For more, see Hillsborough errs on homestead exemption, wants couple to pay.

Criminal Interference With Another's Housing Rights Among Charges Landing Perpetrator 15-Year Jail Stay For Firebombing Interracial Couple's Residence

From the U.S. Department of Justice:

  • The Department of Justice announced [] that Gary Dodson, 33, of Waldron, Ark., was sentenced in Little Rock for his involvement in firebombing the residence of an interracial couple.

  • On Dec. 7, 2011, Dodson pleaded guilty to conspiring to violate the civil rights, criminal interference with housing rights due to race and possession of an unregistered firearm/destructive device. District Judge Billy Roy Wilson sentenced Dodson to 15 years in prison and 3 years of supervised release for the three counts of conviction.

  • During his plea, Dodson admitted that on the night of Jan. 14, 2011, he attended a party where he and three other men, Jake Murphy, Dustin Hammond and Jason Barnwell, devised a plan to firebomb the victims’ house. Dodson then drove the other men to purchase gas for the firebomb and then Dodson drove everyone to the victims’ house in Hardy, Ark. When they arrived, Barnwell, Murphy and Hammond constructed three Molotov cocktails and threw them at the house. They damaged the victims’ house; however, no one was injured.

  • Murphy and Hammond previously pleaded guilty to conspiring to and violating the civil rights of the victim. Both received sentences of 54 months incarceration and three years of supervised release.

  • In June 2011, Wendy Treybig, who co-hosted the party on Jan. 14, 2011, with Barnwell, pleaded guilty to obstructing justice. She was sentenced on Dec. 13, 2011, to 21 months incarceration and three years of supervised release. Jason Barnwell pleaded guilty on Aug. 26, 2011, and was sentenced on Jan. 27, 2012 to 20 years incarceration.

For the DOJ press release, see Arkansas Man Sentenced for His Role in Firebombing Residence of Interracial Couple.

Property Management Owners Head To Prison For $2M Ripoff From HOAs Affecting 700+ Condo Owners; Some Lost Homes To Foreclosure

In Chicago, Illinois, the Chicago Tribune reports:

  • The former co-owner of a Chicago property management company was sentenced Tuesday to three years in federal prison for stealing about $2 million from condominium associations.

  • Jay Strauss, 76, pleaded guilty to one count of fraud in November after his business partner, Donald Doering, 64, agreed to a 51-month sentence as part of a deal to cooperate with prosecutors. A date for Doering's sentencing hearing has yet to be scheduled.

  • The two men started Regent Realty Group Inc. in 1988, and it grew to manage 48 condo properties, mostly on Chicago's North Side. From 2005 until January 2008, when they closed the company, Strauss and Doering took assessment fees meant for the maintenance of the properties to pay off personal debt they had accumulated on a real estate project, according to the plea agreement.

  • They covered up their theft by creating false monthly financial reports for the accounts of each property managed, court papers said. The U.S. attorney's office in Chicago said in court documents that more than 700 condo owners were hurt and that some victims lost their homes to foreclosure.

For more, see Man gets 3 years for defrauding condo associations (Jay Strauss, who co-owned Regent Realty Group, will go to federal prison for stealing about $2 million from 48 condo associations, mostly on Chicago's North Side).

Feds Target Payday Lenders Claiming Affiliation With Tribes, Asserting Immunuity From Legal Action, Suing Borrowers In Local Tribal Courts

The Federal Trade Commission recently announced:

  • The Federal Trade Commission has taken action against a payday lending operation that allegedly piled on undisclosed and inflated fees, and collected on loans illegally by threatening borrowers with arrest and lawsuits. The FTC has asked a federal court to stop the allegedly illegal business tactics while the agency pursues its case against the defendants.

  • Like other payday lenders in recent years, this operation has claimed in state legal proceedings that it is affiliated with Native American tribes, and therefore immune from legal action. However, the FTC alleges that the defendants’ claims of tribal affiliation do not exempt them from complying with federal law.

  • This is the second time in seven months that the FTC has brought suit against a payday lender that has used a tribal affiliation defense against actions by state authorities. The FTC recently expanded its first such case, against Payday Financial, LLC, adding charges that the operation illegally sued debt-burdened consumers in a South Dakota tribal court that did not have jurisdiction over their cases.


  • According to documents filed by the FTC, over the last five years, the defendants’ deceptive and illegal tactics have generated more than 7,500 complaints to law enforcement authorities. In many cases, the defendants’ inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed. In one typical example, the defendants allegedly told consumer Eric Barboza that a $500 loan would cost him $650 to repay. But the defendants attempted to charge him $1,925 to pay off the $500 loan, and threatened him with arrest when he balked at paying that amount.

For the FTC press release, and links to available court documents, see FTC Charges Payday Lending Scheme with Piling Inflated Fees on Borrowers and Making Unlawful Threats when Collecting (Defendants Charged Many Consumers More than Three Times the Amount Borrowed).

Wednesday, April 18, 2012

'Gimme Back My Money!' Demands Building Buyer After Discovering Seller Didn't Own Land Underneath Purchased Premises

In Beaumont, Texas, The Southeast Texas Record reports:

  • A Travis County woman claims she bought a building and the land on which it was situated in Beaumont, but later discovered she only purchased the portable building. Andrea Williams and A Personal Touch filed a lawsuit March 21 in Jefferson County District Court against Charlton Pollard Neighborhood Association.

  • Williams claims she paid $21,500 to the Charlton Pollard Neighborhood Association in an attempt to purchase the property at 710 Lincoln St. in Beaumont. "Only after paying the $21,500 purchase price and after the execution of the warranty deed did Plaintiffs learn that Defendants did not, in fact, own the real property located at 710 Lincoln Street," the suit states.

  • "In actuality, Defendants only owned the portable building situated on the property. Title to the real property is in fact held by the City of Beaumont." Although Williams has demanded a refund of her money, Charlton Pollard Neighborhood Association has refused to repay her, the complaint says.

  • In her complaint, Williams alleges breach of contract, common law fraud, fraud in a real estate transaction and negligent misrepresentation against the association. Williams seeks economic and actual damages within the jurisdictional limits of Jefferson County District Court, plus treble damages, attorneys' fees, costs, pre-judgment interest at the maximum rate allowed by law, post-judgment interest at the legal rate, costs and other relief the court deems just.

Source: Woman says neighborhood association misled her about property purchase.

Florida Bar At Risk Of 'Drowning' By Complaints Against Attorneys Accused Of/Associated With Loan Modification Ripoffs?

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

  • The Florida Bar has fielded nearly 1,400 complaints against attorneys relating to the housing crisis, an unprecedented amount that has buried investigators and forced the group to rethink how it will handle widespread grievances in the future.

  • Beginning in the fall of 2010, as foreclosures receded because of robo-signing revelations, a wave of consumer complaints alleging attorney misconduct began to hit the Bar.

  • The complaint categories - mortgage fraud, foreclosure fraud, loan modification misconduct - didn't even exist three years ago, said Ken Marvin, director of lawyer regulation for the Florida Bar. His first recorded loan modification complaint was in November 2010. Today, 793 cases have been opened.

  • "They just started coming in and the numbers were incredible," Marvin said. "We never even had a loan modification category or mortgage fraud or foreclosure fraud, and we had to create all of this because we wanted to track these reliably."

For more, see 'Tsunami' of foreclosure complaints swamps Fla. Bar.

See ETHICS ALERT: Lawyers should be very wary of loan modifiers: for a Florida Bar Ethics Alert to its members providing guidance on the "do's & don'ts" when dealing with potentially fraudulent loan modifications rackets.

Feds Score $3.89M Judgment Against Loan Mod Scammer For Clipping Homeowners For Upfront Fees In Exchange For Phony Promises To Ease Mortgage Payments

From the Federal Trade Commission:

  • At the request of the Federal Trade Commission, a federal court has imposed a court order with a $3.89 million judgment against defendant Samuel Paul Bain and three of his companies for their role in an allegedly fraudulent mortgage modification and foreclosure relief scheme.

  • The court order also bans Bain and his firms from telemarketing, and from providing, or claiming to provide, debt relief and mortgage relief services to consumers. It also bars the defendants from making any unsupported claims about the benefits, performance, and efficacy of financial products, and from misrepresenting any relevant fact about a product or service, or about the terms and conditions of a sale.

  • This default judgment concludes the FTC’s case against the U.S. Homeowners Relief defendants, six of which have already agreed to settle FTC charges. The settlement orders against those defendants require the payment of millions of dollars in ill-gotten gains, and permanently ban all six from selling any mortgage assistance or debt relief products or services.

  • The action against the U.S. Homeowners Relief defendants is part of the agency’s ongoing crackdown on frauds targeting consumers in financial distress.

  • The scheme allegedly charged consumers up to $4,250 for a promise to reduce their mortgage payments, interest rates, and sometimes even their loan balances.

For the FTC press release, and links to court documents, see FTC Action Leads to Court Order Banning Final "U.S. Homeowners Relief" Defendants from Debt and Mortgage Relief Business.

Nevada Regulator Targets F'closure Rescue Operator w/ 'Cease & Desist' Order For Allegedly Clipping Homeowners For Upfront Fees, Unlicensed Activity

In Carson City, Nevada, the Las Vegas Sun reports:

  • The state has filed a complaint against an unlicensed company that provides mortgage advice and advertises it can “stop a foreclosure within 48-72 hours.”

  • The state Division of Mortgage Lending has issued an order against Sierra Foreclosure Solutions to “cease and desist” operating and to pay a maximum $25,000 fine. The complaint says the Sparks company and its officers Lawrence Day and Edmond M. Hodges conduct business as a covered service provider, which includes being consultants in foreclosures and loan modifications.

  • Division Commissioner James Westrin said an investigation shows the company and its principals have never been licensed by the state. The investigation, Westrin said, showed the company charged homeowners an initial fee of $5,000 for its help. The company advertises it can help stop a trustee sale of a home in foreclosure and it can cut mortgage payments in half.

  • A man who answered the phone at Sierra Foreclosure Solutions refused to identify himself and would not say if Day or Hodges were available to comment. Sierra Foreclosure, Day and Hodges have 20 days to contest the disciplinary action. Sierra is under Nationwide Lending LLC. The state also wants the company to pay $420 to cover the cost of its investigation.

Source: State orders company that advertises it can stop foreclosures to quit operating.

Tuesday, April 17, 2012

New State Law Slams Shut Loophole That Allowed Colorado Counties To 'Snatch' Unclaimed Proceeds From Public Auctions Belonging To F'closed Homeowners

In Denver, Colorado, The Denver Post reports:

  • Homeowners who are legally entitled to excess funds from the public auction of their foreclosed properties can now claim the money years after they learn of it, according to a new law signed by Gov. John Hickenlooper [].

  • Until now, counties were allowed to keep — and often did — excess funds known as "overbid proceeds" if no one claimed them within five years of the foreclosure auction.

  • The law, the result of SB-30 by Sen. Cheri Jahn, D-Wheat Ridge, requires county public trustees who oversee the foreclosure process to give the unclaimed funds to the state treasurer. The treasurer's fund, known as the Great Colorado Payback, is held in perpetuity for its rightful owner or heir to claim at any time.

  • The legislation comes as a result of Denver Post reporting that last year exposed how many counties did little or nothing to track homeowners who were due money after their houses were foreclosed and liens paid.(1)

  • In some cases, county treasuries pocketed hundreds of thousands of dollars in large part because homeowners due the money weren't notified or didn't know they had money coming to them.

  • "This is really a great thing you've done," Barry Gragert said to Jahn as he watched Hickenlooper sign the bill. "So many people who weren't as lucky as me will be helped so much."

  • Gragert had more than $50,000 coming to him but never knew it until The Post located him as part of its story. The retired veteran had lived in his car and was recovering from cataract surgery after his house was foreclosed.

  • The Denver resident was only a few months from never seeing the money. At the time, counties only had to advertise the availability of the funds once a week for five weeks, often in weekly newspapers that were in communities far from where the foreclosed property was located. In addition, counties were only required to mail a single notice to the homeowner at their last known address — usually the foreclosed home that they'd already left behind.

  • Under the new law, counties are required to make an effort to locate homeowners and notify them. If not located, the money is then turned over to the state treasurer for safe-keeping. The state payback fund advertises the names of people due money once a year.

  • It also requires counties to notify homeowners during the foreclosure process that they could be due money — which occurs when a home is auctioned for more money than is owed on it. Once all liens are paid, any money left over is due the homeowner.

  • Others read The Post and contacted county officials about the funds, many of whom were able to collect a piece of the more than $635,000 that remained uncollected.(2) The Post also found that public trustees in some counties skirted the law and never tried to contact homeowners or publish the existence of the money.(3) Provisions of the law kick-in Sept. 1.

Source: New law makes it easier for homeowners to collect foreclosure auction money due them.

(1) See Money owed to victims of foreclosure rarely gets to them.
(2) See Foreclosed homeowners get unexpected windfalls.
(3) See People foreclosed on in Arapahoe County might be owed money and not know it.

Junior Creditor Allowed To Snatch Surplus Sale Proceeds As Court Says Foreclosed Owner Not Entitled To Homestead Protection While Away In Jail

The following facts are taken from a recent ruling from a division of the Washington State Court of Appeals:

  1. Homeowner Susan cops guilty plea for embezzling $300K+ from employer and is incarcerated for 24 months;

  2. While incarcerated, Susan's home falls into foreclosure, is sold in a public sale, and yielded $57,381.30 in excess of what was necessary to satisfy the obligation owed to the primary lien holder;

  3. After a proper distribution of approximately $25,000 owed to a 2nd mortgage holder, the trial court awarded 50% of the remaining balance of the excess sale proceeds (ie. the 'overbid') to homeowner's ex-husband (a co-owner of the property who was not implicated in Susan's embezzlement), and the remaining 50% to Susan's (presumably now-former) employer, the victim of her embezzlement (presumably, the victimized employer was treated as a judgment creditor on account of a restitution lien that attached to her 50% share of the home after her conviction).

  4. Susan objected and appealed the trial court ruling, claiming that she was entitled to her 50% share of the proceeds by reason of the homestead protection against claims by lienholders holding non-consensual judgments, and unsecured creditors.(1)

In an unpublished ruling,(2) the state appeals court affirmed the ruling of the trial court, saying that because Susan:

  • had not filed a declaration of homestead, and

  • had not lived on the premises for more than six months before the foreclosure sale

RCW 6.13.050 of the Washington State statute established her abandonment of the homestead. Accordingly, the remaining proceeds from the sale of her home was not entitled to the homestead protection provided under state law.

For the ruling, see In re Trustee's Sale of the Real Prop. of Arrington, No. 66103-5-I (Wn. App. 1st Div. March 26, 2012).

(1) The appeals court points out that homestead protection extends to the surplus proceeds generated in a foreclosure sale:

  • RCW 61.24.080(3) provides, in relevant part: "Interests in, or liens or claims of liens against the property eliminated by sale under this section shall attach to the surplus in the order of priority that it had attached to the property."

    But, as this court held in Sweet, a home owner's interest attaches to the surplus proceeds from a nonjudicial foreclosure sale under a deed of trust such that a judgment creditor's claim is limited to funds in excess of the homestead, if any.
    In re Trustee's Sale of the Real Prop. of Sweet, 88 Wn. App. 199, 200, 944 P.2d 414 (1997); see also In re Trustee's Sale of the Real Prop. of Upton, 102 Wn. App. 220, 223, 6 P.3d 1231 (2000) ("Generally, a property owner's homestead interest in property takes priority over the interests of other creditors.").

(2) When an appeals court issues a ruling that it characterizes as unpublished, it typically does so because it has determined that the ruling is a narrow one, limited to the particular facts of the case, and consequently, is of no value as precedent and should therefore not be cited as such in future cases.

It may be that the court felt that had the facts been slightly different in this case, it would have reached a different outcome.

Alternatively, the court may have felt that one or more issues relating to this particular fact pattern either went unraised or were inadequately briefed by the parties which, had they been properly raised or more adequately briefed, the court would have been compelled to reach a different outcome, one more favorable to the homeowner. If such was the case, the court may not want this ruling to be viewed as binding precedent to be applied in all cases involving an incarcerated homeowner claiming the homestead protection afforded him/her under state law.

Note that it is not uncommon for the homestead laws of other states to treat a homeowner who has been incarcerated as not having abandoned his/her homestead rights, regardless of how long the homeowner is incarcerated for. See, for example:

  • Holden v. Cribb, 349 S.C. 132, 561 SE 2d 634 (S.C. App. 2002) (applying South Carolina law):

    Holden also argues Singleton is not entitled to the homestead exemption because he is currently in jail. We disagree. [...] We hold that Singleton, though incarcerated, is entitled to the protection of the homestead exemption.

    "The act and intent as to domicil, and not the duration of residence, are the determining factors." Miller at 129, 149 S.E.2d at 339. Clearly, Singleton had no intent to transfer his residence to the detention center and, in fact, was being involuntarily detained.

    "`To effect a change of residence or domicile, there must be an actual abandonment of the first domicile, coupled with an intention not to return to it, and there must be a new domicile acquired by actual residence in another place or jurisdiction, with the intention of making the last acquired residence a [permanent] home.'"
    Reynolds v. Lloyd Cotton Mills, 177 N.C. 412, 99 S.E. 240, 242 (1919) quoted with approval by and followed in Ferguson v. Employers Mut. Cas. Co., 254 S.C. 235, 239, 174 S.E.2d 768, 769 (1970) (alteration in original).

    We daresay Singleton has no intent to make the detention center his permanent residence. To hold otherwise would thwart the underlying policy of the homestead exemption.

  • Roberts v. Grisham, 493 So. 2d 940 (Ms. 1986) (applying Mississippi law):

    The question before us is whether the appellee, Wesley Grisham, was divested of his rights to claim homestead exemption by virtue of his conviction for murder and sentence of life imprisonment. The Circuit Court of Clay County held that such conviction and imprisonment did not deprive appellee of his right of homestead exemption. We affirm. [...] Under the law as it presently stands, absence occasioned by imprisonment — even a life sentence — does not defeat the claim of homestead. This Court therefore has no alternative but to affirm the holding of the trial court on all issues.

  • In re Gerholdt, No. 11-01321 (Bankr. N.D. Iowa. 2011) (applying Iowa law and collecting cases from other states):

    A removal from a homestead is an abandonment of the exemption, unless the move was intended to be temporary.
    Kimball v. Wilson, 13 N.W. 748, 748 (Iowa 1882). The homestead right "will continue during a temporary absence while the owner has a fixed and definite intention of returning." In re Powers, 286 B.R. 726, 728 (Bankr. N.D. Iowa 2002), citing In re McClain's Estate, 262 N.W. 666, 669 (Iowa 1935). When an absence from the homestead is prolonged, the intention to return to the premises as a home should be clear and unmistakable. Fyffe v. Beers, 18 Iowa 4, 1864 WL 266, at *4 (Iowa 1864). The owner may meet this burden by showing a continued and fixed purpose to return with the question resting primarily on the owner's actual intent. In re Roberts, 450 B.R. 159, 169 (N.D. Iowa 2011). The party objecting to a homestead exemption has the burden to prove the exemption is not properly claimed. Fed. R. Bankr. P. 4004; In re Stenzel, 301 F.3d 945, 947 (8th Cir. 2002); In re White, 293 B.R. 1, 4 (Bankr. N.D. Iowa 2003).

    The Iowa Supreme Court has found that the incarceration of a wife in an insane asylum after her husband's death does not affect her homestead rights. Floyd County v. Wolfe, 117 N.W. 32, 34 (Iowa 1908).

    Minnesota courts have found exception to the physical occupancy requirement for homesteads under Minnesota law in cases involving imprisonment or mental incapacity.
    In re Mueller, 215 B.R. 1018, 1025 (B.A.P. 8th Cir. 1998).

    Texas courts have held a homestead is not abandoned merely because a person does not occupy the home during a prison sentence.
    Driver v. Conley, 320 S.W.3d 516, 519 (Tex. App. 2010).

    Likewise, Kansas courts have concluded that the fact the owner was incarcerated did not result in voluntary abandonment of the homestead. See
    In re Hall, 395 B.R. 722, 734 (Bankr. D. Kan. 2008); see also In re Crabb, 2007 WL 7209436, at *3-4 (Bankr. S.D. Cal. Jun. 21, 2007) (finding incarcerated debtor was entitled to California homestead exemption).


    Based on the foregoing, and in light of the mandate that Iowa's exemption statutes be liberally construed, the Court concludes that Debtor is entitled to claim his real estate exempt as his homestead even though he is currently incarcerated. Testimony at trial establishes that Debtor lived at the homestead real estate prior to the time he was incarcerated and he intends to return after completing his sentence. AgVantage has the burden to prove Debtor's homestead is not properly claimed exempt. The only proof it has put forward is the fact that Debtor is incarcerated. This is insufficient to defeat Debtor's homestead exemption.

See also:

NY Courts Move To Address 'Shadow' Docket Of Foreclosure Cases Created By System-Gaming Lenders That Fail To File Required Paperwork

Reuters reports:

  • New York is launching a pilot program aimed at clearing the backlog of inactive residential foreclosure cases that have been stranded in legal limbo on state courts' so-called "shadow" docket.

  • On March 28, the Unified Court System proposed the creation of a special calendar to identify inactive residential mortgage foreclosure actions that have been filed with county clerks, but never officially activated on the court docket. The proposal gives judges the power to schedule a settlement conference or take other action to move the cases forward.

  • Under 22 NYCRR 202.12-a, lenders must file proof of service of the summons and complaint in a residential mortgage foreclosure action within 120 days of bringing the action. When they file proof of summons, they also must file a request for judicial intervention ["RJI"] and a lawyer's affirmation vouching for the accuracy of the documents. Once the paperwork is complete, courts can schedule a settlement conference.

  • But lenders increasingly are filing foreclosure actions without the accompanying proof of service, attorney affirmation, or RJI, according to a letter from the court announcing the proposal. Those cases wind up on the "shadow inventory," meaning they are not on the court's formal docket and judges can't take steps to resolve the case.

For more, see New York tests solution for 'shadow' foreclosure docket.

See also, New York Post: Judge bites banks (Prods lenders, attys to unclog foreclosure cases).

Foreclosing Lender's Failure To Serve Junior Lienholder Now OK In Indiana; New Law Reverses State High Court Ruling, Now Permits Lawsuit 'Do-Overs'

The effect of a 2011 ruling by the Indiana Supreme Court allowing for a junior lienholder to score a major windfall when it is omitted in a foreclosure action by a senior lienholder(1) has now been nullified for future similar cases by state lawmakers by their passage of a new law.

This new law (Senate Enrolled Act No. 298) will, in effect, permit the foreclosing lender to file another lawsuit, a "foreclosure do-over," to include the omitted junior lienholder in a lawsuit that gives said lienholder an opportunity to redeem the property interest before suffering a 'cut off' of its lienholder's interest therein.

It has been reported by the Northwest Indiana Times that retiring Indiana Supreme Court Justice Frank Sullivan, Jr.'s lone dissent in the case (a 4-1 ruling), Citizens State Bank of New Castle v. Countrywide Home Loans, Inc. 949 N.E.2d 1195 (2011), formed the basis of Senate Enrolled Act 298,(2) thereby illustrating another example that when appellate level judges write dissenting opinions, Beware! They do not do so simply for the intellectual exercise.

This story also serves as another illustration that, when foreclosing banksters (and, possibly in this case, the Indiana Land Title Association, which submitted a friend of the court brief in the case - presumably arguing against the position that ultimately prevailed in court) don't get favorable rulings in court, they can simply have their paid lackeys (ie. lobbyists, etc.) 'grease' lawmakers (through indirect means, of course, like stuffing their campaign coffers with cash, implicit promises of future employment for them and theirs, for two examples) to get the rules changed.

Source: Northwest Indiana Times: New laws overturning Ind. Supreme Court decisions demonstrate balance of power.

(1) See Foreclosing Lender's Failure To Serve Junior Lienholder Leaves Latter With Major Windfall.

(2) See Citizens State Bank of New Castle v. Countrywide Home Loans, Inc. 949 N.E.2d 1195 (2011) (Sullivan, J., dissenting with separate opinion) (bold text is my emphasis, not in the original text):

  • Unfortunately, the "junior lienholder" was not joined in the foreclosure proceeding and so also became an "omitted party." As such, its interest in the property was not foreclosed. Holmes v. Bybee, 34 Ind. 262, 270 (1870). What should happen here is that the senior lienholder and the omitted party get the practical equivalent of a "do-over" — a second foreclosure — in which the omitted party would be entitled to redeem its (subordinate) interest in the property and if it does not redeem, have its interest foreclosed.

    This was the result reached by the trial court. But instead, the Court allows the omitted party to maintain its lien on the property (now owned by Fannie Mae) but provides that the omitted party's lien is no longer subordinate to any senior lien. That is, the Court promotes the omitted party from a junior to the senior lienholder without having to pay anything to redeem its interest.

    The trial court correctly followed long-standing precedent in this regard and, furthermore, the Court's result produces an unconscionable windfall for the junior lienholder.

Monday, April 16, 2012

Mortgage Assignment That Fails To Transfer Promissory Note, Failure To Establish Its Physical Delivery Sink F'closing Lender; Trial Court Wrong Again

A New York intermediate appeals court recently found itself compelled to give the boot to another trial judge screw-up in a foreclosure case. The problem in this case (as is becoming quite common among sister appeals courts throughout the country): the bankster failed to establish that, at the time the action was filed, it had standing to initiate the foreclosure case.

In this case, the lender failed to establish either that it had possession of the promissory note at the time the case was filed, or that it had otherwise acquired said note by a proper assignment prior to filing the action.(1) (Based on the facts of the case and reasons set forth in the ruling, the lender's attempt to use a post-filing corrective assignment of mortgage (the foreclosing bankster claimed that an original assignment, purportedly dated two weeks before the filing of the suit, was sent to the appropriate county office for recording, but was somehow (mysteriously?) lost prior to recording) to establish that it had standing to initiate the action at the time it was commenced fell flat on its face).(2)

For the ruling, see U.S. Bank Natl. Assn. v Dellarmo, 2012 NY Slip Op 02481 (App. Div. 2nd Dept. April 3, 2012).

Representing the homeowner in this case was Schloss & Schloss, Airmont, N.Y. (Jonathan B. Schloss of counsel).

(1) The appellate court gives the following summary of the New York case law that applied in this case:

(2) The basis for the appellate court's ruling follows:

  • Here, as the plaintiff concedes, the complaint incorrectly asserts that the April 11, 2006, assignment of the mortgage to the plaintiff had been duly recorded.

    Further, there is no allegation that the note or mortgage was physically delivered to the plaintiff prior to commencement of the action (compare
    Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674).

    The record also suggests that in the order dated January 4, 2010, in which the Supreme Court held that the plaintiff had standing pursuant to the April 11, 2006, assignment, the court relied upon the incorrect assertion in the complaint that the April 11, 2006, assignment had been recorded. The Supreme Court referred only to the April 11, 2006, assignment and made no reference to the corrective assignment's purported replacement of the April 11, 2006, assignment.

    The plaintiff now relies on the corrective assignment, which was recorded with the Clerk of Rockland County on October 30, 2009, to demonstrate that it was a holder of the mortgage as of the April 25, 2006, commencement of this action. The corrective assignment recites, in pertinent part, that it "is meant to correct and replace the April 11, 2006 assignment by and between the parties herein which was sent for recording but was lost prior to being recorded" in Rockland County.

    However, inasmuch as the complaint does not allege that the note was physically delivered to the plaintiff, and nothing in the plaintiff's submission in opposition to Dellarmo's motion could support a finding that such physical delivery occurred, the corrective assignment cannot be given retroactive effect (see
    Countrywide Home Loans, Inc. v Gress, 68 AD3d at 710; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 210; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d at 912-913).

    Moreover, both the unrecorded April 11, 2006, assignment and the recorded corrective assignment indicate only that the mortgage was assigned to the plaintiff. Since an assignment of a mortgage without the underlying debt is a nullity (see
    Deutsche Bank Natl. Trust Co. v Barnett, 88 AD3d 636; Bank of N.Y. v Silverberg, 86 AD3d at 280), the plaintiff has failed to demonstrate that it had standing to commence this action (see Bank of N.Y. v Silverberg, 86 AD3d at 280; U.S. Bank, N.A. v Collymore, 68 AD3d at 754).

Fundamentals-Lacking Trial Judge's Grant Of Default Judgment To Standing-Lacking Lender In Oklahoma Foreclosure Action Lacked Rational Basis

The Oklahoma Supreme Court recently added to its growing list of lower court reversals in foreclosure cases(1) in another ruling finding that the foreclosing bankster lacked standing to foreclose. The court said that the bankster failed to establish that, at the time of the filing of the foreclosure action, it was in possession of the promissory note it was attempting to enforce, and was not otherwise able to establish that it was the proper entity entitled to enforce the note. Attempts by the bankster to cure its screw-up subsequent to the filing of the action were unavailing.

Among other things, the Oklahoma high court made the following observation regarding the apparently snoozing trial judge's granting of a default judgment in favor of the bankster:

  • The trial court's granting of a default judgment in favor of Appellee could not have been rationally based upon the evidence or Oklahoma law. Therefore, we find that the trial court abused its discretion by dismissing the Appellants Petition to Vacate the default judgment.
In concluding its opinion, the court makes the following statement summarizing, in a nutshell, what is expected from parties initiating foreclosure actions (and adds an admonition to homeowners reminding them that if they think they just won a free house because of a lender's procedural screw-up, they should think again!):
  • It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the Note, and to have the proper supporting documentation in hand when filing suit, showing the history of the Note, so that the defendant is duly apprised of the rights of the plaintiff.

    This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418.

    Likewise, for the homeowners, absent adjudication on the underlying indebtedness, today's decision to reverse the dismissal of the petition and motion to vacate cannot cancel their obligation arising from an authenticated Note, or insulate them from foreclosure proceedings based on proven delinquency. This Court's decision in no way releases or exonerates the debt owed by the defendants on this home. See,
    U.S. Bank National Association v. Kimball, 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

For the ruling, see U.S. Bank v. Moore, 2012 OK 32, __ P.3d __ (Ok. April 10, 2012).

(1) See Oklahoma High Court Means Business In Booting Back Foreclosure Judgments Based On Unindorsed Notes, Dubious Assignments, Lack Of Standing.

Virginia Feds Score Guilty Plea From Owner/Operator Of Loan Mod Racket That Ripped Off Hundreds Of Homeowners Out Of Thousand$ In Upfront Fees

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

  • Howard R. Shmuckler, 68, of Virginia Beach, Va., [] pled guilty to running a fraudulent mortgage-rescue business that received substantial fees but actually modified clients’ mortgages in only a few cases. [...] Shmuckler pled guilty [] to six counts of wire fraud, which each carry a maximum penalty of 20 years in prison. Sentencing has been scheduled for June 22, 2012.

  • According to the statement of facts filed in court, Shmuckler owned and operated a Vienna, Va. mortgage-rescue business known as The Shmuckler Group (TSG). According to TGS’s website, TSG had approximately 1,100 clients. Shmuckler misrepresented that TSG had a success rate of 97 percent and falsely portrayed himself as an attorney licensed in Virginia.

  • Based on these representations made by Shmuckler or client recruiters to induce potential clients to sign up for TSG services, TSG’s clients provided the company with fees ranging from $2,500 to $25,000 to help modify the terms of their mortgages.

  • Court records indicate that Shmuckler instructed clients to terminate contact with their mortgage companies and to stop making payments to their lenders. TSG never facilitated a modification of the mortgages referenced in the statement of facts.

For the U.S. Attorney press release, see Mortgage Rescue Business Owner Pleads Guilty to Fraud.

Lawmaker/Sale-Leaseback Peddler Slips Provision Into Pending Law Enabling Him To Recover R/E License w/out 1st Fully Paying Off Damages From Ripoffs

In Annapolis, Maryland, The Washington Post reports:

  • First, a Maryland senator was put on trial for helping a grocer who paid him consulting fees. Then, another co-sponsored a bill to fund a horse-racing track where his employer helped build a casino. Now, a Maryland delegate who sells homes in the District is close to making a law that could help him more than anyone else.

  • Even as ethics reform has been among the legislature’s bigger concerns this year, Del. Tony McConkey this week authored, voted for and saw passage by the House of Delegates of a measure that could help re­instate his Maryland real estate license, which he lost in 2010 after the state determined that he had preyed on homeowners in foreclosure.(1)

  • McConkey, an Anne Arundel County Republican, was ordered to pay $75,000 for what an administrative law judge called “fraudulent and unethical” behavior in real estate transactions. In one instance, the state found McConkey promised to help a woman keep her home, then didn’t return her calls, bought her property in foreclosure and sought to evict her.

  • Under a measure inserted into a bill this week by McConkey, he and others could enter long-term payment plans to replenish a state fund used to compensate consumers who suffer financial losses as a result of actions by Maryland real estate professionals.(2) Three of McConkey’s clients were paid a combined $75,000 from the fund in 2010, making his debt to the state fund the largest of any real estate licensee in the past five years.(3)

  • The Maryland Real Estate Commission says it has no evidence McConkey has paid any of the balance due. Under an agreement with the state, his license to sell homes in Maryland was suspended for one year. But commission officials said he would need to pay the entire amount due before seeking reinstatement of his license. McConkey is still a licensed real estate broker with Re/Max Supreme Properties in the District. He has a property listed for sale in Northeast.

  • In an interview Thursday — after the bill with McConkey’s little-noticed provision passed the House by a vote of 138-0 — the three-term lawmaker said he wasn’t sure if the measure would affect his case. “I don’t know if it’s retroactive or proactive or, I’m not sure,” McConkey said. “I’m not sure what the particulars are. . . . I’d have to look at it closer.”

  • Asked why he added the language to the bill, McConkey said it was to make the administration of the so-called Guaranty Fund clearer. “The code doesn’t really define the operation of the fund,” he said. He said the change also was intended to “encourage people to repay the fund.” He repeatedly declined to say whether he still owes the state.

  • In recent days, state lawyers testifying about other pending legislation have said that laws often apply retroactively unless stated otherwise. Given that, it is unclear if McCon­key should have voted for the measure, since it could affect how quickly he could seek to reinstate his license. “There is always an appearance of a conflict when lawmakers have dealings with legislation that affects their livelihoods,” said William G. Somerville, the legislature’s chief ethics counsel.

  • Somerville said he could not comment directly on McConkey’s amendment. In general, he said, the difference between the appearance of a conflict and an actual one often comes down to whether legislation could benefit a lawmaker’s employer, or a small group of people that includes the lawmaker.

  • In each of the past five years, fewer than 40 real estate professionals annually have been ordered to pay into the fund, and only three besides McConkey have been ordered to pay $25,000 or more.

  • With less than four days remaining in the General Assembly session, McConkey’s amendment has complicated the path of a bill that lawmakers say must pass. Without it, the RealEstate Commission, which licenses the state’s 41,000 real estate brokers and other industry professionals, would cease to exist July 1.

  • The commission opposed an earlier bill to let licensees set up repayment plans that was sponsored by one of McConkey’s Republican colleagues. Commission Executive Director Kathie Connelly said state regulators have viewed the requirement to pay debts in full before reapplying for a real estate license as a strong deterrent.

  • Those who have injured Maryland buyers and sellers and caused financial loss to them should bear the full burden of their misconduct,” she said. The bill must now go to a conference committee with the Senate. The legislature is scheduled to adjourn Monday night. The McConkey amendment came in a week when legislation that would tighten ethics requirements for lawmakers in Annapolis stagnated.(4)

Source: Delegate’s measure may help him get back real estate license.

(1) See The Annapolis Capital: Local delegate may have conflict of interest (McConkey amendment could help him pay penalty, restore real estate license).

  • In 2006 and 2007, according to Maryland Real Estate Commission records, McConkey contacted three women who lived in Annapolis, Baltimore and Pasadena, and offered to help them avoid foreclosure. He ended up taking their property or their money, according to the commission.

  • McConkey lost his license, which was the second time his real estate license had been revoked. He also was disbarred as an attorney in 1995.

For more specifics on the ripoffs of the three homeowners, see Maryland Real Estate Commission: Final Order - February 4, 2011.

(2) The Maryland Real Estate Commission Guaranty Fund is a special fund that, with limitations, compensates victims of ripoffs committed by Maryland-licensed real estate professionals.

(3) This is not the first time a state recovery fund covering the unscrupulous conduct of licensed real estate professionals was asked to cough up cash to compensate the victim of a sale leaseback foreclosure rescue ripoff perpetrated by a real estate agent. See: State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent, where an 87-year-old woman who was cheated out of her home of 50 years was granted $116,972 from the State of Minnesota, reportedly the largest pay-out in recent memory from a fund for victims of unscrupulous real estate professionals in that state. In this case, a real estate agent licensed by the state of Minnesota played a significant role in the sale leaseback ripoff.

(4) For more on McConkey, the reportedly twice-suspended real estate agent, once-disbarred lawyer, sale leaseback peddler and current member of the Maryland state legislature (presumably in good standing), see:

Sunday, April 15, 2012

Paperwork Submitted By Homeowners Seeking Loan Mods That Servicer Said Wasn't Sent Suspected To Be Floating Around Somewhere In India

Investigative reporter Paul Keil with ProPublica writes:

  • In 2009, during the first few months of its participation in the program, Litton put tens of thousands of homeowners into trial modifications. That was easy, because nothing had to be documented. Under the agreements, if the borrower made the lowered payments for the three-month trial period, they'd receive permanent modifications.

  • The hard part was for Litton to collect the borrowers' papers and crunch the numbers to verify the terms of the permanent modifications. That, he says, "turned out to be a total disaster."

  • Wyatt led Litton's "Executive Response Team," which was charged with handling customer complaints. Litton employees, overwhelmed and undertrained, frequently made basic errors when calculating a homeowner's income, he says. HAMP guidelines often weren't followed, because Litton was "way understaffed" and couldn't keep up, he recalls. But the worst part was the way Litton dealt with homeowners' documents, he says.

  • When homeowners faxed their documents, they didn't go to Litton, Wyatt says. They went to India, where a low-cost company scanned and filed the documents — but often misfiled or lost them.

  • Wyatt says Litton routinely denied modifications because homeowners had not sent their documents when, in fact, they had. In a process internally referred to as a "denial sweep," Litton's computers would automatically generate denial letters for every homeowner who, according to Litton's records, hadn't sent their documents.

  • But untold numbers of those documents had been lost on another continent. Wyatt complained about the practice in multiple meetings with senior management, he says, but managers were chiefly worried about reducing the overwhelming backlog.

For more, see At Goldman Sachs Servicer, ‘Total Disaster’

See also The Great American Foreclosure Story: The Struggle for Justice and a Place to Call Home.

Non-Profit Files Formal Fair Housing Complaint Accusing Wells Fargo Of Neglecting REOs In Minority Neighborhoods

The Baltimore Sun reports:

  • The National Fair Housing Alliance said Tuesday that it has filed a federal housing discrimination complaint against Wells Fargo, alleging that the bank is doing a better job maintaining foreclosed homes in white neighborhoods than foreclosures in minority neighborhoods.

  • The alliance said last week that it scored the condition of foreclosed homes in nine regions, including Baltimore, and found disparities based on the racial makeup of neighborhoods. (The Baltimore metro area was an outlier in the alliance's report: Though staffers found differences by neighborhood, the overall scores were basically equally lousy.)

  • That report didn't name names. But this week's complaint, filed with the U.S. Department of Housing and Urban Development, singles out Wells Fargo.


  • HUD said Tuesday that it had received the complaint and would review it. The agency's complaint process is outlined here. "Administrative complaints can lead to a formal civil rights investigation led by HUD or similar state agencies," Shantae Goodloe, a HUD spokeswoman, said in an email.

For more, see Fair housing group files foreclosure maintenance complaint against Wells Fargo.

NYC Feds Put Squeeze On Mortgage Banker In Civil Suit Alleging Fair Housing, ECOA Violations In Lending To Black, Hispanic Home Loan Borrowers

From the Office of the U.S. Attorney (Manhattan):

  • Preet Bharara, the United States Attorney for the Southern District of New York, [and others] announced [] that the United States has filed a civil rights lawsuit against GFI MORTGAGE BANKERS alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act.

  • The Complaint alleges that GFI engaged in a pattern or practice of discrimination on the basis of race and national origin in making hundreds of loans from 2005 through 2009. The Complaint, which was filed [] in Manhattan federal court, seeks a declaration that GFI’s practices were illegal, an injunction against further discrimination, compensatory damages to benefit the victims of GFI’s discrimination, and civil penalties.

  • Manhattan U.S. Attorney Preet Bharara said: “As the lawsuit we filed today alleges, discrimination still exists in certain quarters and it has profound consequences for the victims. At a time when so many American homeowners of all races and nationalities are struggling to make their mortgage payments, it is unacceptable that, as we allege, the impact of GFI Mortgage’s business practices resulted in its African-American and Hispanic customers paying higher fees and interest rates for their residential mortgages. As today’s suit demonstrates, this type of discriminatory action will not be tolerated. We will continue to work to ensure that fair lending laws are enforced throughout the district.”

For the U.S. Attorney press release, see Manhattan U.S. Attorney Sues Mortgage Banker For Engaging In Discriminatory Lending Practices Against African-American And Hispanic Borrowers.

State High Court Issues Order To Banksters On Document Requirements Needed When Initiating Foreclosure Actions In New Jersey

In Trenton, New Jersey, The Star Ledger reports:

  • The state’s chief justice has given financial institutions that are foreclosing on homeowners more direction about how to file proper foreclosure paperwork. The judicial order, signed [earlier this month] by New Jersey Supreme Court Chief Justice Stuart Rabner, comes six weeks after the high court ruled unanimously that a mortgage lender must list its own name and contact information, as well as that of the loan’s servicer, on the document that initiates the foreclosure process, known as the notice of intent to foreclose.

  • Because many loans have been bundled and sold to investors, financial institutions have often only listed the servicer, a third party that collects monthly payments.

  • Any filing that only lists the servicer is now considered deficient, and the court order said the loan holder must submit additional information for uncontested foreclosure filings so a judge can make a decision. Nearly 95 percent of foreclosures in New Jersey are uncontested, the court has said. The lender must also send a copy of the updated paperwork to the homeowner.

  • Thousands of cases pending in the court will be affected by this order in the so-called Guillaume case, a court spokesman said. The case involved Maryse and Emilio Guillaume, homeowners from East Orange, who charged that their lender, U.S. Bank National Association, did not supply sufficient information when it moved to foreclose on their house in 2008. Only the name of America’s Servicing Company, which serviced the loan, was provided.

Source: N.J. Supreme Court order clarifies foreclosure paperwork for mortgage lenders.