Saturday, July 7, 2012

Brothers Get 21 Months In $500K+ Housing Authority Construction Program Ripoff; Cash Intended For ADA-Compliant Improvements For Low-Income Renters

From the Office of the U.S. Attorney (Los Angeles, California):

  • Two brothers each were sentenced today to nearly two years in federal prison for conspiring to steal more than $500,000 from the Housing Authority of the City of Los Angeles (HACLA).

  • Diego L. Taracena, 36, and Bennett A. Taracena, 31, both of Burbank, each were each sentenced to 21 months imprisonment and ordered to pay $526,727 in restitution to HACLA.

  • A third brother charged in this case, Victor Taracena, managed HACLA’s construction program for public housing units occupied by disabled residents, and the money his brothers stole was intended to build accommodations that complied with the American with Disabilities Act. Victor Taracena is currently a fugitive being sought by federal authorities.

  • Diego Taracena and Bennett Taracena each pleaded guilty earlier this year to conspiracy charges. As part of the scheme, Diego and Bennett Taracena established four sham companies to get contracts from HACLA.

  • After establishing bank accounts for those sham companies, Diego and Bennet Taracena accepted $526,727 from HACLA over the course of 3½ years. Despite receiving the payments, the companies did not perform any actual work.

NH Property Owners Reach $110K Settlement With State AG Over Allegations Of Unlawful Asbestos Removal In Connection With Demolition Work

In Concord, New Hampshire, Legal Newsline reports:

  • New Hampshire Attorney General Michael Delaney and Department of Environmental Services Commissioner Thomas Burack have announced a $110,000 settlement with a group of landowners to resolve allegations of unlawful asbestos removal.

  • M&E Jespersen Realty LLC, Holgate Limited Partnership, Harrington Irrevocable Trust and William Hopkins, Jr., were named as defendants in the settlement, which was announced Thursday. Michael J. Davis, an additional party, is subject to a final default judgment.

  • M&E Jespersen Realty bought a Dover property from the Holgate Limited Partnership that was run by Hopkins and the Harrington Irrevocable Trust.

  • Michael J. Davis, doing business as Do It All Davis, is the contractor who did the demolition work on the Dover property and was responsible for the disposal of the asbestos-containing materials.

  • Delaney's office alleged that the state received no prior notice before the former commercial building was destroyed. Notice is required in New Hampshire regardless of whether or not asbestos is thought to be present as such notice gives the state an opportunity to determine if asbestos or asbestos abatement testing should be done.

  • The defendants allegedly knew or should have known that the building contained significant quantities of asbestos because they previously obtained an environmental report on the property. The report said that the building contained approximately 10,000 square feet of asbestos, mostly in mastic floor tiles and roofing material.

Smokin' Joe's Former Boxing Gym Makes Annual List Of Country's Most Endangered Places; Group Seeks To Save N. Broad Street Landmark From Wrecking Ball

In Philadelphia, Pennsylvania, the Philadelphia Inquirer reports:

  • Like a boxer who remains standing after a bruising bout, the old gym where Smokin' Joe Frazier trained for his 1971 heavyweight title fight against Muhammad Ali has managed to withstand the ravages that have taken so many of North Broad Street's landmarks. Its fading marquee, reading "Joe Frazier's Gym," still is visible above the garish signs of the current occupant, a furniture store.

  • But the National Trust for Historic Preservation warned Wednesday that the 19th-century building may not be able to hold out much longer. It was just put up for sale and its future is uncertain. Fearing that Philadelphia could lose a touchstone of American boxing history, the trust put Frazier's gym on its annual roster of the country's most endangered places, one of 11 listed this year. It is the first Philadelphia building to make the list since the Boyd Theater on Chestnut Street was singled out in 2008.

  • The Boyd's inclusion on the list proved crucial in getting it on Philadelphia's historic register and staving off demolition, although it has yet to be redeveloped.

  • The trust hopes this year's citation could do the same for Frazier's gym, which is opposite Amtrak's renovated North Philadelphia station. Besides a gas station, the gym is the sole remaining structure on the block, which sits hard by the railroad viaduct. The gym was not chosen for its architectural merit, said John Gallery, who heads Philadelphia's Preservation Alliance, but because of the role it played in African American and sports history.

  • Frazier was a larger-than-life presence in Philadelphia who went on to mentor generations of young fighters at his gym. "We'd like to see the building preserved because it embodies the qualities of the man," Gallery said.
  • Frazier, who died last year at 67, was a dominant force in boxing for years, from the time he won an Olympic gold medal in 1964 until his retirement after his defeat by George Foreman in 1976. His long-standing rivalry with Ali also reflected the turbulent civil rights debates of the '60's and '70s. In an effort to prove his superiority over Ali, Frazier trained relentlessly in his gym's first-floor ring, and defeated him in the "Fight of the Century" at New York's Madison Square Garden in 1971.
  • The building, thought to have been built between 1888 and 1895, was acquired in 1966 by a syndicate of Philadelphia leaders interested in supporting Frazier's boxing career after he won the Olympic medal. He paid them back with his winnings. The gym's precarious condition came to the attention of the National Trust after a group of Temple University students was assigned to prepare mock nominations of endangered buildings by instructor Dennis Playdon.

Friday, July 6, 2012

CFPB: Most Reverse Mortgage Borrowers Prefer Upfront Cash To Monthly Payments, Leaving Them More Vulnerable To Foreclosure Over Unpaid Property Taxes

The Associated Press reports:

  • The government’s consumer finance watchdog says the growing market for reverse mortgages is getting confusing, and that could cost some seniors extra cash or even their homes. The Consumer Financial Protection Bureau said in a report released Thursday that reverse mortgages are not being used as Congress intended.

  • Reverse mortgages allow elderly homeowners to withdraw equity from their homes. The CFPB says the purpose was to provide income for borrowers during retirement. The agency’s study found that consumers are getting reverse mortgages at younger ages, increasing the risk that they will go broke later in life.

  • It says 70 percent of reverse mortgage borrowers receive lump-sum payments, which can be squandered quickly. Borrowers are more likely to face foreclosure because they run out of money to pay property taxes.
For the CFPB press release, see Understanding reverse mortgages.

Judge Orders Temporary Halt To HOA's Collection Of $15K+ Repair Assessment; Unit Owners' Suit Claims Fix-Up Charge Violates Condo Master Deed

In Myrtle Beach, South Carolina, The Sun News reports:

  • Judge Benjamin Culbertson has placed a temporary injunction on the homeowners association of the Ocean Forest Villas in Myrtle Beach to stop it from collecting payment from residents to repair the 30-year-old building.

  • Well it means that they are allowed to do the assessment but they have to hold off on collecting the money,” said the homeowners’ association’s attorney Mark Neill. Culbertson issued the injunction Monday.

  • Some residents sued the homeowners’ association over a letter it sent in May saying that each owner needs to pay $15,500 within three weeks to repair the building. About 81 people are plaintiffs in the lawsuit, which represents about 50 of the 243 units at Ocean Forest. The repairs include rebuilding each balcony, supporting pilings, and fixing water leaks.

  • The homeowners’ association gave the residents the option of paying off the debt in installments during the next two years, if they couldn’t come up with the money immediately.

  • If they couldn’t pay, the homeowners’ association will add 8 percent annual interest and a $50 per month late fee to the total. If it goes unpaid beyond 60 days, the HOA will shut off the owner’s cable television service and add a $100 disconnect/reconnect fee.

  • The owners’ key point in their lawsuit is that these charges violate the master deed of the condos. The plaintiffs’ attorney Mark Nappier said the homeowners requested the injunction seeking immediate relief while the lawsuit works its way through the system.

Despite Defendant's Answer & Counterclaim, Judge OKs Foreclosure Judgment In Only Six Weeks Against Boca Temple, Religious School

In West Palm Beach, Florida, the South Florida Business Journal reports:

  • Only six weeks after filing a foreclosure lawsuit against Chabad of Boca Raton, Wells Fargo Bank won a judgment that has set the temple and Jewish school up for auction.

  • The bank (NYSE: WFC) filed a foreclosure lawsuit on May 4 against the nonprofit Friends of Chabad of Boca Raton and Torah Tots Academy. On June 14, Palm Beach County Circuit Judge David J. Crow awarded the bank a $2.2 million foreclosure judgment after finding that Chabad was in default on a $2 million mortgage, plus interest.

  • Six weeks is incredibly fast for a court system that often takes years to decide a contested foreclosure. It only usually happens that fast if it is an uncontested case, but Chabad filed an answer and counterclaim. Aventura attorney Phyllis Malinski, who represents Chabad of Boca Raton in the case, could not be reached for comment.

  • The 23,112-square-foot building on 3.1 acres at 17950 Military Trail is set for online auction July 26. Chabad of Boca Raton holds religious services there. It also hosts its Hebrew school, its Torah Tots pre-school and its Camp Gan Israel summer program. The building was constructed in 1999.

Thursday, July 5, 2012

Homebuyer/Couple: Seller Pocketed Our Monthly Payments On Property She Lacked Clear Title To, Undisclosed Lienholder Now Seeks Foreclosure

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

  • Two Jefferson County residents have filed suit against the person who sold them their home, [alleging] she is wrongly attempting to foreclose on them even though they have made all required payments.

  • Caleb and Kristal Infante Spinks allege defendant Maria Infante Brown sold them a piece of Jefferson County property for $19,350. In turn, the Spinks made their monthly payments of $252.61, according to the complaint filed June 12 in Jefferson County District Court.

  • Suddenly, however, Brown stopped accepting their payments, the suit states. The plaintiffs later learned that Brown did not own a clear title to the property, the complaint says.

  • "Plaintiffs would show they have made considerable improvements to said property and defendant is urging the lienholder on said property to foreclose on plaintiffs, or convey title to the property back to defendant," the suit states.

Couple Seeks To Undo Land Lease w/ Gas Drillers; Say They Were Duped Into Accepting Rent So Low "As To Shock The Conscience"

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

  • Two gas drilling companies being sued by a Brooke County couple over a land lease asked this week to have the lawsuit moved to federal court.

  • Defendants Chesapeake Appalachia LLC, based in Oklahoma, and Statoil USA Onshore Properties Inc., based in Texas, filed their notice of removal in the U.S. District Court for the Northern District of West Virginia Monday. The plaintiffs, Ramon and Lois Bowen, sued Chesapeake, Statoil and Range Resources-Appalachia LLC, which is based in Pennsylvania, in May in Brooke County Circuit Court.

  • The Bowens are seeking declaratory relief and unspecified amount of compensatory damages and punitive damages for alleged "economic loss, slander of title, loss of use of their land, lost opportunity, lost profits, aggravation and inconvenience, along with all available interest, costs, attorney fees, fines and penalties."

  • The Bowens, [...] are claiming a breach of implied covenants, the West Virginia Consumer Credit and Protection Act, unjust enrichment, unlawful holding-over, slander of title, trespass, tort of outrage and civil conspiracy.

  • According to the Bowens' complaint, they entered into an oil and gas lease with Great Lakes Energy Partners LLC, now known as Range Resources, leasing their oil and gas interests to 53.10 acres of land. The lease subsequently was assigned to Chesapeake -- 73.12 percent -- and Statoil -- 26.88 percent.

  • Under the deal the Bowens signed in 2007, they received $50 per acre, rental payments of $7 per year and a 14 percent interest in royalties.

  • Now, the couple -- who claim the amounts are so low "as to shock the conscience" -- want a judge to declare the lease expired and punish the companies they allege took advantage of them.

  • In their notice of removal, Chesapeake and Statoil argue that federal court is the more appropriate venue since the matter in controversy exceeds $75,000 and the cases arises between citizens of different states.

City OKs Slapping Landlords With Liens For Money Owed By Trash Bill-Stiffing Tenants

In Gilroy, California, the Gilroy Dispatch reports:

  • A motion to place liens on 127 Gilroy properties with tenants who haven’t paid their trash bills for a minimum of 120 days reluctantly received a passing vote by the City Council Monday. Council members said they are legally bound to approve it because of city health codes.

  • Recology South Valley, the company that holds an exclusive trash collecting contract with the city, claims the total of outstanding bills from Gilroy homes is $35,131. Recology sent letters to homeowners with outstanding bills in April, giving them a June 15 payment deadline.

  • There’s got to be a better way," Mayor Al Pinheiro said. “It doesn’t make any sense at all.” Pinheiro, a landlord himself, doesn’t understand why a homeowner is punished for a bill the tenant does not pay, questioning why Recology can’t just stop service to the tenants who don’t pay – or take some other credit action against the tenants, not the homeowner.

  • Recology provided Council with a list of those who haven’t paid their trash bill – about half of whom also own of the property – and how much each of them owes.

Wednesday, July 4, 2012

Homeowner Loan Mod 'Jerk-Around' To Cost BofA $300K; Amount To Grow To $900K Upon Bankster's Failure To Timely Cough Up The Cash, Fix Victim's Credit

In Beaumont, Texas, The Beaumont Enterprise reports:

  • A Jefferson County judge has sanctioned Bank of America $300,000 because of how it the company handled a Fannett woman's mortgage.

  • Trudie Crutchfield entered into several agreements with the mortgage company to catch up on her payments after Hurricane Rita. The company, though, did not hold up its end of the deals, her attorney, Wyatt Snider said, and started foreclosure proceedings against her home. The company also allowed the information to go on her credit report.

  • After three lawsuits against Bank of America to stop the foreclosure, Judge Bob Wortham of the 58th District Court ordered the company to pay Crutchfield $300,000.

  • The company must pay within 30 days or the amount doubles. Also, if the company does not fix Crutchfield's credit within 90 days, the company must pay an additional $300,000.

Seller-Finance Scammer Gets 5 Yrs. In Fraud That Duped Homesellers Into Holding 'Silent 2nds' While Financing Out & Pocketing Equity w/ 1st Mortgages

In Mobile, Alabama, the Press Register reports:

  • A federal judge in Mobile [...] sentenced the ringleader of a fraudulent Baldwin County real estate scheme to 5 years in prison and hit him in the wallet, ordering the Georgia man pay more than $5 million to his victims.

  • Lance A. Collins pleaded guilty in August to conspiracy to commit mail and wire fraud. His written plea agreement listed 7 condominium sales in Gulf Shores in 2006 and 2007 in which Collins or other members of the conspiracy submitted false information to mortgage companies.
  • There were indications that the damage was more extensive. At least 16 homeowners have filed suit in Jefferson and Baldwin counties over soured real estate deals involving Collins, and the plaintiffs’ attorney estimated that the defendant and others engineered at least 50 similar transactions.

  • According to court records, it worked like this: Collins founded and ran a company called Tradestone Industries, which also did business as Alabama Coastal Renovations. His plan was to buy older condos, renovate them and quickly resell them at a profit. He used creative financing that he picked up from watching late-night infomercials of gurus like Carleton Sheets.

  • Collins and others would persuade sellers to hold a "silent second mortgage" on their property, meaning that the buyer promised to make monthly mortgage payments directly to the seller. Meanwhile, the buyers would obtain a traditional mortgage without informing the lender about the seller-financed second mortgage.

  • When Collins or "straw purchasers," which he set up as buyers, defaulted, the commercial lenders foreclosed and the sellers ended up with no money and no property.
For related stories, see:

State Bar's Public Repository Of Attorneys' Names, Bar Numbers A Handy Source Of Personal Info For Identity Thieves

In Los Angeles, California, The Recorder reports:

  • "You're not Jerry Garcia." It was a strange thing for Max Gerald "Jerry" Garcia to hear. For that is indeed the Lewis Brisbois Bisgaard & Smith partner's name. But on this March day, neither Garcia nor this confused man standing in the Los Angeles firm's 12th floor reception area recognized each other.

  • The man explained that he and his mother had met an attorney at another site across town. The attorney, who identified himself as Jerry Garcia of Lewis Brisbois, said he could help with an insurance matter. And he offered the family a deal: work with him alone — keep Lewis Brisbois out of it — and he'd only collect $1,000 from them.

  • The mother and son agreed. But then the son couldn't reach the attorney; the address on his business card turned out to be a mail drop in La Habra. So he turned to the State Bar's website and tracked down the man he thought was his lawyer at the Lewis Brisbois office. That's when both men discovered they were the victims of an identity thief. "I don't know why someone would do something like that," the real Garcia said. "It seems like you're doomed to get caught."

  • Garcia that day unwittingly joined a small but growing number of California lawyers whose names and bar numbers have been co-opted by scam artists. Though their methods and motives differ, the thieves adopt real attorneys' personas and professional stature to prey on victims who may speak little English and often have no familiarity with the law.

  • A common scheme involves debt collection. Someone using the name of a lawyer will call or send letters to victims warning them to pay up or face criminal charges. There may or may not be a real debt. But some recipients will pay without questioning. Others get angry and track down the "attorney's" name on the bar's website. That's often the first time a lawyer learns someone has swiped his or her identity.

  • "It just seems to be another scam to get money," said Cecilia Horton-Billard, senior trial counsel in the State Bar's office of intake.
  • State law makes attorneys' names and bar numbers public information. The State Bar's website provides an easily accessible repository for that data — a consumer-protection measure that also provides easy identity shopping for troublemakers.

Tuesday, July 3, 2012

Another Fully Underwater 2nd Mortgage Holder Gets Wiped Out As Federal Appeals Court OKs Lien Stripping Of Subordinate Loan In Ch. 7 Bankruptcy

From a post from the National Consumer Bankruptcy Rights Center:

  • The Eleventh Circuit has come through for consumer debtors on the issue of stripping off wholly unsecured liens in chapter 7.

  • In In re McNeal, No. 11-11352 (11th Cir., May 11, 2012), the court found that once a lien is determined to be wholly unsecured under section 506(a) it may be stripped off under section 506(d), which provides “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.”

  • In so holding, the Eleventh Circuit joined the minority view that the decision in Dewsnup v. Timm, 502 U.S. 410 (1992), does not extend to wholly unsecured liens. After listing the cases that have found such lien strips to be prohibited under Dewsnup, the court turned to its own precedent for guidance.

  • In Folendore v. United States Small Bus. Admin., 862 F.2d 1537 (11th Cir. 1989), the court found that section 506(d) permits strip-off of an allowed claim that is wholly unsecured. The court found that Dewsnup did not abrogate this decision because Dewsnup dealt with a partially secured claim while Folendore was precisely on point, dealing with a wholly unsecured lien.

  • The McNeal court noted that some of the reasoning used in Dewsnup did not support its decision, but it did not find that discrepancy to be determinative for two reasons.

  • First, the holding in Dewsnup was not directly on point, and the reasoning that would seem to abrogate Folendore was not essential to its holding. Second, the Court in Dewsnup was careful to limit its holding to the issue before it, thereby discouraging extrapolation of its holding to cases beyond its four corners.(1)

  • This is the first circuit level court to reach this holding. Courts finding that Dewsnup does not permit the strip-off include: Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th Cir. 2001); Talbert v. City Mortg. Serv., 344 F.3d 555 (6th Cir. 2003); Laskin v. First Nat’l Bank of Keystone, 222 B.R. 872 (B.A.P. 9th Cir. 1998).

  • The Bankruptcy Court for the Eastern District of New York has found that such strip-offs are permitted by the Code. In re Lavelle, 2009 WL 4043089 (Bankr. E.D.N.Y. 2009); In re Howard, 184 B.R. 644 (Bankr. E.D. N.Y. 1995).

  • NACBA submitted an amicus brief in support of the debtor in the district court.

(1) In its ruling, the three-judge panel makes the following observation on the application of the Supreme Court's Dewsnup decision in connection with the earlier, seemingly conflicting 11th Circuit's ruling in Folendore:

  • A few bankruptcy court decisions within our circuit — including the decision underlying this appeal — have treated Folendore as abrogated by Dewsnup. See, e.g., In re McNeal, No. A09-78173, 2010 Bankr. LEXIS 1350, at *9-12 (Bankr. N.D. Ga. Apr. 9, 2010); In re Swafford, 160 B.R. 246, 249 (Bankr. N.D. Ga. 1993); In re Windham, 136 B.R. 878, 882 n.6 (Bankr. M.D. Fla. 1992). But Folendore — not Dewsnup — controls in this case.

    "Under our prior panel precedent rule, a later panel may depart from an earlier panel's decision only when the intervening Supreme Court decision is `clearly on point.'" Atl. Sounding Co., Inc. v. Townsend, 496 F.3d 1282, 1284 (11th Cir. 2007). Because Dewsnup disallowed only a "strip down" of a partially secured mortgage lien and did not address a "strip off" of a wholly unsecured lien, it is not "clearly on point" with the facts in Folendore or with the facts at issue in this appeal.

    Although the Supreme Court's reasoning in Dewsnup seems to reject the plain language analysis that we used in Folendore, "`[t]here is, of course, an important difference between the holding in a case and the reasoning that supports that holding.'" Atl. Sounding Co., Inc., 496 F.3d at 1284 (citing Crawford-El v. Britton, 118 S. Ct. 1584, 1590 (1998)).

    "[T]hat the reasoning of an intervening high court decision is at odds with that of our prior decision is no basis for a panel to depart from our prior decision." Id. "As we have stated, `[o]bedience to a Supreme Court decision is one thing, extrapolating from its implications a holding on an issue that was not before that Court in order to upend settled circuit law is another thing." Id.

    In fact, the Supreme Court — noting the ambiguities in the bankruptcy code and the "the difficulty of interpreting the statute in a single opinion that would apply to all possible fact situations" — limited its Dewsnup decision expressly to the precise issue raised by the facts of the case. 112 S. Ct. at 778.

    Because — under Folendore — GMAC's lien is voidable under section 506(d), we reverse and remand for additional proceedings consistent with this decision.

Feds Pinch Two More Alabama Real Estate Operators For Roles In Alleged Foreclosure Sale Bid Rigging Ripoffs

From the U.S. Department of Justice:

  • A federal grand jury in Mobile, Ala., returned an indictment [] against two real estate investors and their company, charging them with participating in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions held in southern Alabama, the Department of Justice announced [].

  • The department said the father and son real estate investors, Robert M. Brannon of Laurel, Miss., and Jason R. Brannon of Mobile, respectively, and their Mobile-based company, J & R Properties LLC, conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama.

  • The indictment, returned in the U.S. District Court for the Southern District of Alabama, charges that after a designated bidder bought a property at a public auction, which typically takes place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.

  • The Brannons and J & R Properties were also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties.

  • Jason Brannon, Robert Brannon and J & R Properties are charged with participating in the bid-rigging and mail fraud schemes from as early as October 2004 until at least August 2007.

Probation Violation, Noncompliance w/ Jail Buyout Deal Lands Pair In Prison; Duo Used Worthless Stock To Dupe Victims Into Handing Over Title To Farms

In Fillmore, Utah, KSL-TV Channel 5 reports:

  • Two men were ordered to go back to prison after prosecutors say they swindled dairy farmers in Fillmore out of hundreds of thousands of dollars, and failed to follow the rules of their probation.

  • Back in 2007, Jamis Johnson was convicted of securities fraud, along with co-defendant Paul Schwenke. Prosecutors say they sold worthless stock for Some of their victims even handed over control of their land as payment.

  • "To take advantage of poor, rural farmers who work their lives to keep their farms going… to have two men with bad intentions take advantage of them is unbelievable," Utah Attorney General spokesman Paul Murphy said.

  • Johnson and Schwenke took in hundreds of thousands of dollars. But the judge let them stay out of prison if they worked to pay back their alleged victims and they agreed to stay away from each other.

  • "Instead, they went back to work with each other and didn't pay the victims anything," Murphy said. Murphy said some of the land the farmers handed over to Johnson and Schwenke went into foreclosure.

  • "The men took the property that they got in exchange for the stock, went to the banks, used the property as collateral and then spent all the money." Johnson will serve one to 15 years in prison. Schwenke won't be considered for release until at least 2017.

Disbarred Attorney To Spend Next 13+ Years In Forced 'Retirement' In Federal Prison After Convictions In Loan Mod, Counterfeit Check Scams

In Alexandria, Virginia, The Virginian Pilot reports:

  • A Virginia Beach man was sentenced to more than 13 years in federal prison after admitting that he ran a mortgage-rescue scheme in Northern Virginia and, in a separate case, after being found guilty of counterfeiting checks.

  • Howard R. Shmuckler, 68, was sentenced Monday at the federal court in Alexandria to 90 months in prison, according to the U.S. attorney's office. He previously pleaded guilty to six counts of wire fraud.

  • Shmuckler, a convicted felon and disbarred attorney, operated a Vienna mortgage-rescue business known as The Shmuckler Group. From June 2008 through March 2009, the company took in nearly $2.8 million from about 865 clients whose mortgages were in distress and who came to Shmuckler looking for relief, according to court filings.

  • Shmuckler pocketed most of that money, obtaining mortgage relief for only 4.5 percent of those clients, the records say. Most lost their homes to foreclosure anyway. Shmuckler also was sentenced earlier this year to 75 months in prison after a jury in Washington, D.C., found him guilty of bank fraud and passing counterfeit checks.
For the U.S. Attorney press release, see Mortgage Rescue Business Owner Sentenced To 90 Months For Fraud.

Monday, July 2, 2012

Missouri High Court Kiboshes Clause Waiving Class Action Arbitration In Auto Loans; Ruling Helps Borrowers Duped Into Debt-Based Car Title Ripoffs

An excerpt from Rebecca Tushnet's 43(B)log:

  • The state supreme court found that a class arbitration waiver in its contract was unconscionable and held that the remedy was to strike the entire arbitration agreement. The Supreme Court vacated that opinion and remanded in light of Concepcion.

  • On remand, the court found that the presence and enforcement of the class arbitration waiver didn’t make the arbitration clause unconscionable, but, applying traditional Missouri contract law and looking at the agreement as a whole, the court found that Brewer demonstrated unconscionability in the formation of the agreement, appropriately remedied by revoking the arbitration clause.

  • Brewer borrowed $2215, secured by the title to her car, at an APR of 300%. The contract, whose terms no consumer had ever successfully renegotiated, provided for resolution of any claim against the title company through binding individual arbitration.

  • The title company, however, reserved the right to go to court to repossess the car, or to use self-help. Unlike the agreement in Concepcion, the agreement barred fee-shifting and didn’t provide a fee multiplier or guaranteed minimum recovery if the consumer were awarded more than the title company’s last offer.

  • The cumulative real-world effect of the arbitration provisions in this case is that a consumer's minimum and maximum recovery from the title company are identical—$0.00—for no consumer ever has filed an individual claim for arbitration against the title company.”

  • Brewer made two payments of more than $1000, which reduced her loan principal by 6 cents. She filed suit alleging violations of numerous statutes, including the state merchandising practices act. The case then made its way through the courts solely on the class arbitration issue.
For the recent ruling of the Missouri Supreme Court, see Brewer v. Missouri Title Loans, --- S.W.3d ----, 2012 WL 716878 (Mo. March 6, 2012) (en banc).

Grand Theft Auto Loans - Car Title Loans That Never Die! Another Consumer Debt Racket Targeting The Unwitting Borrower

The following excerpt is the abstract of a recent article on the auto title loan racket co-authored by University of New Mexico Law School Professor Nathalie Martin and recent UNM Law School graduate Ozymandias Adams:

  • This Article analyzes empirical data on one of America’s fastest growing credit products, the title loan. A title loan is a high-interest, deeply over-secured, consumer loan, in which the consumer uses an unencumbered auto-mobile as collateral for a non-purchase money loan.

  • Title loans are made based solely on equity in a car. If a customer has insufficient income to pay the payments under the loan, typically interest-only payments at 300% per annum or more, the lender repossesses the vehicle, many of which have GPS trackers installed for this purpose.

  • Not surprisingly, the repossession rates for title loans are higher than regular auto repossession rates, as well as home foreclosure rates. Prior to repossession, lenders recover their principal many times over.

  • For example, one customer paid over $10,000 on her $4000 loan. Another paid over $11,000 on a loan of $1500. Despite these realities, title loans have garnered little interest in the scholarly world.

  • While legislatures around the nation struggle with how to regulate home loans, credit cards, and other middle class products, title loans go largely unnoticed and unregulated. This Article reports on data about who uses these loans and how often, as well as on repossession rates. It concludes that, given the protections we have provided to middle class consumer credit users, we also should regulate the consumer credit products used primarily by the lower and working classes.
For the abstract and the link to the full article, see Grand Theft Auto Loans: Repossession and Demographic Realities in Title Lending.
In a related blog post, see Is it Literally Impossible to Pay Off a Title Loan? (posted on Credit Slips by Professor Martin):
  • I recently published a law review article entitled Grand Theft Auto Loans with Ozy Adams. It discusses title lending based upon data collected by the State of New Mexico. This article cover a tremendous amount of ground, but as these things tend to go, I have now heard of two critical topics we should have discussed but didn't.
  • Here are two important things we missed. First, it seems that the process of repossessing and then having a customer redeem the vehicle is extremely profitable for the lender and very expensive for the client. Having asked around bit this past week, I am hearing regular stories about this from legal aid offices around the state. I don’t think I quite realized what a profit center repossession followed by redemption really was. This also means that in states that report only vehicles ultimately lost to repossession, this added expense/loss is never accounted for and is thus not in the reported repossession numbers. This deserves further study.

  • Second, above I say the loans can only be paid off in one lump sum. But I kid you not, folks, that is so wrong! Reality check: You can’t pay them off at all! I do not mean that the customer cannot come up with the money.

  • What I mean is that the lenders find ways to keep you in the loans even if you show up with the total amount of funds owed. They will not take checks from banks. Even if you seemingly pay it off in full, they come up with charges they missed and keep asking for more. They refuse to release titles.

  • They try to confuse customers, do not listen to customers, by hook or by crook, they simply will not take the principal to pay off the loan. One friend of mine who runs a CDC has documented these practices over and over again. He has found that unless they feel the law might get involved, the loans never die.

WV AG Tags Car Title Loan Outfit In Suit Alleging Harassment Of Debtors, Their Families & Friends, False Threats Of Arrest, Criminal Prosecution, Etc.

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

  • West Virginia Attorney General Darrell McGraw said [] his office has filed a lawsuit against a "predatory" out-of-state title loan company in Jefferson County Circuit Court.

  • In a news release, McGraw said he filed the suit in an effort to protect residents from the "abusive and unlawful harassment and triple-digit interest rates" of Virginia-based Fast Auto Loans Inc., Georgia-based Community Loans of America Inc. and Robert I. Reich, the president and CEO of both corporations.

  • Their business consists of loaning money to people who own motor vehicles. The loan is secured by a lien on the borrower's vehicle. These types of loans are often referred to as "title loans" -- which are not authorized by state law, according to the Attorney General's Office.

  • In his lawsuit, McGraw is asking for a permanent injunction preventing FAL from making unlawful threats of criminal prosecution and halting the company's collection of excess charges, failure to follow the law in seizing consumers' vehicles, extreme methods of coercion and other deceptive, unfair and illegal debt collection practices.

  • The attorney general's suit charges that FAL violated several state consumer protection laws and asks for civil penalties as well as restitution and refunds for consumers.
  • In McGraw's newest action against the company, he alleges FAL charged 300 percent interest on loans made against car titles, "repeatedly harassed and abused" state consumers, their families and friends to try to collect debts, made false threats of arrests and criminal prosecution, and went as far as confiscating cars without court orders.

  • In fact, some victims' vehicles were seized even though the amount owed -- as little as $100 -- was a fraction of the car's value, the attorney general said.

Bill Collectors From Hell: Three Victims Recount Their Tales

A recent story at reports on three debt collection horror stories where the victims terrorized by debt collectors recount their tales. Some excerpts:

  • Tale No. 1: Terrorized by text

    The debt: Jessica Burke had bought a used Pontiac Grand Am and fell a few months behind on payments when she had trouble finding work after a move to California. She called the financing company, and they agreed to give her extra time to pay.


    The harassment: The bill collector got her address and other private information by calling her cell phone company, impersonating her father and asking to be added to her account. Then, he began a barrage of angry calls and texts. The messages upset Burke so much she called the police, who ordered the collector to stop contacting her.

    But the texts continued for weeks, coming from a disguised number and implying that he was watching her. In one, he called her "Porky Pig" and a "200-pound slob" and added, "I got picture messages of you today." Late one night, she says, he texted her, claiming he was outside her house. She says: "It was 11 o'clock at night, I lived in a very rural area and I was home by myself. I was terrified."


  • Tale No. 2: Get your gun

    The debt: A debt collector called West Virginia homemaker Diana Mey about an old debt, possibly a credit card debt, allegedly owed by her son, who had moved out eight years earlier.


    The harassment: The collectors continued to call, threatening to put a lien on Mey's house and to sue her son. She sent a letter telling the company to stop contacting her. Then she started getting hang-up calls that showed up on her caller ID as coming from the local sheriff's department.

    "I called the sheriff's department and said, 'Is somebody trying to get ahold of me?' They said 'No.'" One evening, the phone rang again, from the same number. The deep male voice on the other end asked for Diana, using a vulgar slur. He then went on to make graphic threats of sexual assault. Horrified, Mey told him she was recording the call. He responded: "Yay." After she hung up, Mey called 911 to report the incident. Home alone, she got her husband's gun and hung it on her bedpost that night. She says: "I was literally shaking I was so scared."

  • Tale No. 3: Followed on Facebook

    The debt: In Florida, Kathryn Haralson bought a used Jeep Grand Cherokee and made monthly payments for more than five years until she fell behind in February 2011. She thought she had only a few more payments left. However, the creditor, MarkOne Financial, claimed she still owed $7,400.


    The harassment: The bill collector called her work number and asked a coworker where Haralson usually parks her car, Haralson says. He also called her father, her brother, her husband and her daughter, who was away at college, according to her lawsuit. The collector dialed her husband's cell phone so much that he had to stop answering it and missed several business calls, she says.

    The collector called her brother at work enough to jeopardize his job and refused to stop, she says. Then he tracked Haralson down on Facebook and wrote: "Good day. Please contact Mr. Rice at MarkOne regarding a personal business matter," followed by his phone number. Haralson says: "When I started getting Facebook messages, that was very alarming."
For more, see True debt collection horror tales (3 people terrorized by debt collectors recount their stories).

Threat Of 'Baby Prison' As A Bill Collection Tactic Used On Moms & Their Newborns Seeking Hospital Discharge?

The following excerpt is taken from a Memorandum of Law filed by the Office of Minnesota Attorney General Lori Swanson in a lawsuit the state filed against Accretive Health, a hospital bill collector, based on allegations of conduct that violates state law. An excerpt (begins on page 16):

  • E. Baby Prison and Patient Overbilling.

    Accretive uses its own software program, known as AHtoAccess, or A2A, to get money from patients. A hospital registration employee using A2A cannot process a patient electronic record unless he or she first processes informational “balls” that pop up on the screen. SAC ¶ 96.

    The system is derisively referred to by hospital employees as the “Blue Balls” program. A2A purportedly determines the financial responsibility of insured patients for co-pays, deductibles, co-insurance, and for past balances, as well as the amount to be asked of uninsured patients for past balances and present bills. Id. Based on the information in A2A, patients are then told to pay money to the hospital. Id. The amount calculated by A2A for patients to pay often exceeded the amount owed by the patient. Id. As a result, Minnesota patients sometimes paid more than they owed.

    For instance, Amy Zumwalde works with disabled kids at Richfield Public Schools. She and her husband’s first child, Max, was born at Southdale Hospital in March of 2011. As Amy was proudly leaving the hospital to take her new baby home, a woman stopped her and said she must cough up a credit card to pay for the delivery.

    Amy replied that she had insurance and thought she had 30 days to pay any balance. The woman replied that Amy owed about $800 and that her newborn couldn’t be discharged unless she paid.

    Fearful that she wasn’t going to be allowed to take her new infant home, Amy gave the woman her credit card. As it turns out, Amy had already met her deductible and was overcharged about $800. Affidavit of Amelia Zumwalde.
See also, Minnesota AG: Hospital Bill Collector Used 'ASS' & 'Blue Balls' To Squeeze Emergency Room Patients With Bedside Collection Visits, Overbilled Charges for an earlier post describing some of the debt collection practices alleged by the Minnesota AG against Accretive Health.

BofA Tagged With Suit For Role In Alleged Force-Placed Insurance Racket; Plaintiffs Seek Class Action Status

In West Palm Beach, Florida, Bloomberg reports:

  • Bank of America Corp. (BAC) was sued in a Florida federal court by homeowners who allege the company overcharged them for so-called force-placed insurance.

  • Force-placed insurance, which mortgage companies can purchase for homeowners when their policies lapse, is a “financial windfall” for Bank of America, according to a complaint filed yesterday in West Palm Beach.

  • A substantial portion of the premiums are refunded to Bank of America or its affiliates and subsidiaries through various kickbacks, reinsurance and/or unwarranted commissions,” according to the homeowners, who seek to proceed on behalf of a U.S. borrowers who were charged for the insurance by Bank of America or an affiliate.
  • Joseph Gallagher, one of the Florida plaintiffs, was charged $4,491 annually for his force-placed policy even though he already had insurance, according to the complaint. The force- placed policy, which only covered wind and hail damage, was twice as expensive as Gallagher’s regular, comprehensive insurance policy, according to the complaint.

  • The premium payments for the force-placed policy were added to Gallagher’s monthly mortgage payment, which contributed to his home going into foreclosure, according to the suit.

Sunday, July 1, 2012

TX Appeals Court Nixes County Tax Collector's Attempt To Back Charge Homeowners For 5 Years Of R/E Assessments After Being Left Off Appraisal Records

In Parker County, Texas, the Star Telegram reports:

  • Parker County officials acted outside their legal authority by assessing five years of city taxes against properties mistakenly omitted from Aledo and Willow Park tax rolls, an appeals court has ruled.

  • The ruling potentially affects about 300 property owners who were assessed back taxes after the error was discovered. Plaintiffs asked for a class action case to be certified, but that issue has not been decided. Property owners who sued claimed they were not validly assessed taxes for the years in question.
  • The properties in question were properly appraised for the years in question, the appeals court noted, and property owners had paid all property taxes that had been assessed.

  • The problem, the court said, was that the city taxing units were not listed in the appraisal records, and state law does not allow the addition of taxing units mistakenly left off of appraisal records. The court also rejected the contention that the cities and county had government immunity from such lawsuits. Suits can be brought by private parties against government officials who allegedly act without legal authority, the court said.
  • After the chief appraiser discovered the error in 2008, the Parker County Appraisal District sent tax bills to approximately 300 households notifying them that their properties had been left off of city tax rolls for tax years 2003 to 2007.

  • Willow Park filed suit against some property owners and began foreclosure proceedings against Todd and Valerie Brennan for not paying the assessment. The Brennans countersued, and they were joined by some of the other affected property owners in both Willow Park and Aledo.

  • "What's giving this thing life more than anything else is the fact we're talking about a constitutional violation," said Trey Cobb, the defendants' property tax consultant with Kirkwood and Darby. Cobb added that it felt "fantastic knowing his clients won't be door-matted anymore by the city officials, appraisal district and review board personnel that are supposed to be serving them."
  • Cobb said he would like to see the matter return directly to district court, without further appeal, for trial or settlement. The district court would then rule on the property owners' claims for declaratory judgment, for injunctive relief and for a write of mandamus compelling the tax assessor and members of the Appraisal Review Board to void the assessments and refund all taxes paid to the cities for the years in question.
For the court ruling, see Brennan v. City of Willow Park, NO. 02-11-00265-CV (Tex. App. 2d Dist., Fort. Worth, June 21, 2012).

Feds To Cut Banksters More Breaks; Will Ease 'Putback' Squeeze Felt By Lenders Required To Buy Back Crappy Mortgages

Bloomberg reports:

  • The Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, plans to help banks avoid being forced to buy back mortgages as it becomes concerned that lenders are tightening standards even for the most creditworthy home buyers.

  • The FHFA will detail flaws that would trigger a putback request, Stefanie Johnson, a spokeswoman for FHFA, said in a statement. The regulator also is standardizing the data Fannie Mae and Freddie Mac collect on each loan so they have more information when buying mortgages from lenders, she said.
  • The lenders perceive the pendulum has swung too far, and they’re being held accountable for things beyond their control,” said Brian Chappelle, a partner at the bank consulting firm Potomac Partners. “Their reaction is going to be to tighten up.”
  • Fannie Mae and Freddie Mac, which own or guarantee more than half of U.S. mortgages, are currently demanding lenders repurchase faulty loans with unpaid principal balances totaling $15.3 billion, according to their earnings statements for the first quarter.

  • The two companies were taken over by the U.S. government in 2008 after investments in risky mortgages brought them to the brink of bankruptcy. They’ve received about $190 billion in aid since then and the battle with banks over repurchases is part of their efforts minimize losses.

89-Year Old WW II Vet Says He Was Forced To Waive Homestead Exemption Over Unwitting Failure To Disclose Assets In Bankruptcy; Now Faces Loss Of Home

In Helena, Montana, The Associated Press reports:

  • A World War II veteran who lists a $981 monthly Social Security check as his only income has had to move out of his western Montana home after his late wife's medical bills led him to file for bankruptcy.

  • Warren Bodeker, 89, was ordered by a bankruptcy judge to leave the home that he and his wife built in Plains. His case has gone viral on the Internet after the group Oathkeepers posted a YouTube video featuring him and wrote a sympathetic account of his story on its website.

  • Bodeker, who has prostate cancer and has been staying with friends, said he is tired from the months-long legal fight, but hopes that he can halt the sale of his home before it goes through at the end of the month.
  • Bodeker said the home and its 10-acre property is worth more than $300,000. The Bigfork attorney overseeing his bankruptcy case is selling it for $155,000.
  • The judge has ordered Bodeker to leave the home, noting that Bodeker had filed for bankruptcy relief, "which carries burdens as well as benefits;" that Bodeker had waived his homestead exemption; and that he had failed to disclose some of his assets. Those assets included a stuffed Dalls sheep head later sold by [bankruptcy trustee Christy] Brandon for $450 and gold and silver buried in his yard that Bodeker said was appraised at $66,000.

  • Bodeker said he did not consider the gold and silver to be an asset, because he buried it so that "we would have money to pay our property taxes and buy food and not depend on the government for welfare" if the economy soured.

  • He said he was threatened with charges of fraud for hiding them, so he agreed to waive his homestead exemption and allow the sale of his home. "I wanted to get the thing settled and get on with my life," he said. "I released my homestead, then they dropped the price they were selling the house for. I objected, but it didn't make any difference to (Brandon)."
  • Earlier this month, Bodeker himself was diagnosed with prostate cancer. He missed a June 12 court hearing because he was being treated for a kidney stone at a hospital in Helena, where he then found out about the cancer.

  • The legal and administrative fees in the bankruptcy proceedings are piling up, even after his attorney withdrew from the case this spring. Bodeker has been representing himself.

  • A friend who is housing Bodeker, Roxsanna Ryan, said the total cost of the creditors and fees is now estimated at $166,000. That would negate any of the proceeds he will see from the sale of the home.

  • Bodeker had been a paratrooper during World War II, making three combat jumps in the Philippines. He said he was part of a successful mission to free more than 2,100 prisoners at a Japanese camp. He left the Army in 1946. He said he hopes that he will be able to hire another attorney, but acknowledged that he does not know whether he will be successful in his attempts to get back his home — and if he fails, where he will go.