Saturday, July 14, 2012

More Cities Consider Bandwagon Jumping Onto Robocalling Movement Targeting Roadside 'Bandit Signs' Peddling Foreclosure Rescue Ripoffs, Other Come-Ons

In Broward County, Florida, the South Florida Sun Sentinel reports:

  • More Broward cities have found a new way to drive people crazy, but this time it's the scofflaws they're targeting.

    Following Hollywood's example, cities are going after businesses who scatter their advertising in the public right-of-way by starting a robocalling system — which is essentially serial calls.

    Now Tamarac has started the calls and says it sees a marked improvement. Pompano Beach has agreed to start soon, too.

    "We're hoping this will solve the problem by annoying them," said Pompano Beach Vice Mayor George Brummer. "That's the purpose, to upset them enough and to interrupt their business enough by making the phone calls."

    In Hollywood, where signs abound to buy gold and junk cars, fix your AC or rescue you from foreclosure, pre-recorded messages tell those businesses their signs were illegally placed in a public right of way and must be removed. And if they want the calls to stop, they must go to City Hall — where they'll receive a citation — and fill out paperwork confirming that the signs have been removed.

    Pompano Beach decided last week to jump on the robocall bandwagon. As soon as the city purchases the robocalling software, the snipe sign businesses can expect a few calls.
  • In Hollywood, the calls have worked, said city spokeswoman Raelin Storey. The city's removed 117 signs in March, when it first started the robocalling program; 24 were removed in April and 13 in May.

    "Our code enforcement unit reports an estimated decrease in the number of signs of 90 percent," Storey said. "We believe that as the companies that place these signs began getting the calls, they made the decision that putting up illegal snipe signs in Hollywood was not worth the trouble. The calls have had a deterrent effect."

    Cities and departments from all over the country have called about the program, Storey said. Among them are Las Vegas, Nev.; the Delaware Department of Transportation; Salisbury, Maryland; Chattanooga, Tenn.; and Florida cities Oakland Park, Plant City, Lauderhill, Miramar, and Leesburg.

Ex-Girlfriends, Neighbors Pitch In With Assist In Crackdown On Landlords, Other Property Owners Scoring Improper Tax Exemptions For Homestead Claims

In Sunrise, Florida, the South Florida Sun Sentinel reports:

  • City Hall is looking to crack down on tax cheats, with a little help from the Broward County Property Appraiser's Office.

    "It's an ongoing challenge," Property Appraiser Lori Parrish said. "Just when we think we have them all cleaned up, we get a batch of new ones."

    In 2009, fraud investigators nabbed 237 homeowners in Sunrise who were wrongly claiming homestead exemptions. The tax break, available only to Floridians on their primary residence, caps the annual increase in appraised value used to set tax bills.

    The crackdown put nearly $22 million in property value back on the tax rolls. The county was owed $726,000 in back taxes, with $181,000 going to Sunrise.

    The Property Appraiser's Office gets tips from neighbors who notice mail piling up, and even ex-girlfriends, Parrish said.
For the story, see Sunrise fishing for tax cheats.

Lawyer Hit With Disciplinary Action For Allegedly Filing Phony Pleadings Under Forged Signatures Of Opposing Counsel

In Galveston, Texas, The Southeast Texas Record reports:

  • The Commission For Lawyer Discipline has filed suit against Houston attorney Calvin C. Jackson over allegations he committed forgery.

    According to a lawsuit filed June 18, Jackson "deceitfully" filed pleadings in a June 2010 lawsuit in Galveston County Court at Law No. 3 under the forged signatures of the plaintiff's counsel. Jackson was representing one of the defendants in the litigation, which was consolidated into another case.

    Recent court documents claim Jackson falsely signed Houston attorney Cedrick Muhammad's name on a motion to retain case on June, 2, 2011, and fraudulently put attorney Kendric Ceaser's, also of Houston, name on a motion to reinstate after dismissal without prejudice a month later.

    The defendant did not have either counsel's permission to sign on their behalf, the suit contends.

Fla. Supremes Bench 'Touchy' Judge For Illegal Use Of Hands, Representing Mom In F'closure Case While Working As Jurist, Getting Illegal Campaign Loan

In Tallahassee, Florida, The Associated Press reports:

  • The state Supreme Court suspended the law license of a former central Florida judge who had been removed from office for unethical and illegal conduct. The justices [...] ordered that N. James Turner be immediately suspended for 90 days.

  • They removed him as a circuit judge in Osceola County in November for ethics violations that included hugging and kissing a female court worker without her permission.

  • The high court also found Turner violated judicial ethics by representing his mother in a foreclosure case while a sitting judge.

  • In addition, the justices ruled he violated the state's campaign finance law by accepting and failing to report a $30,000 campaign loan from her. The loan violated a limit of $500 per contribution.

Friday, July 13, 2012

SW Florida Cops Focus Heat On Scams Using Vacant F'closures To Peddle Bogus Rentals To Unwitting Tenants; Tips Sought From Public In Crackdown Effort

In Collier Coumty, Florida, WINK News reports:

  • Collier County Sheriff's Office's Organized Crime Bureau is investigating a rental scam ring, focusing on foreclosures. 21-year-old Yoandry Leiva was first arrested in April for allegedly breaking into a foreclosure, and renting it out to an unsuspecting tenant. Now, detectives say they've connected him to over a dozen more fraudulent rentals.

    Collier County detectives say Leiva acted as a middle-man to link tenants to foreclosed properties. He's accused of breaking into abandoned homes and listing himself as the landlord.

    "They were posting ads advertising homes for rent. When unsuspecting people called, thinking it was a legitimate ad, he would meet with these people," CCSO Detective David Spahl said Wednesday.

    Detectives say Emanoel Thermitus was one of Leiva's first victims. WINK News spoke to her in April, after deputies evicted the single-mom one week after she moved in. She was out thousands of dollars and left homeless. "It's a lot of money for me because I'm by myself and I've been by myself forever," Thermitus said back in April.

    Now, detectives say they've located more fraudulently-rented out foreclosures, linked back to Leiva. The majority of the properties are in East Naples. Tammy Daffron had no idea her home was being rented out. "I think he's trying to make money, just like we all are. Unfortunately, he's not doing it the right way, like 99% of us do," Daffron said Wednesday.

    Detectives suspect Leiva likely worked in a ring. They're now alerting anyone with a foreclosure to keep a protective eye on the property. "I don't think this is the only group that's doing it. We don't have direct evidence at this point but it would be reasonable to believe that this isn't the only person doing it," Spahl said.

    CCSO is still investigating the crime and looking for more leads on fraudulently rented out foreclosures. If you have any information, you're asked to call Collier County Sheriff's Office at 239-774-4434. You can also leave an anonymous tip with Southwest Florida CrimeStoppers at 1-800-780-TIPS.

Pair Accused Of Running Bogus 'Cash For Keys' Racket, 'Phantom' Home Fix-Up Scam That Screwed Employer Out Of Nearly $1.8M

In Los Angeles, California, Los Cerritos News reports:

  • Two Norwalk real estate agents have been arrested on 102-felony counts of grand theft and criminal fraud on Thursday afternoon.

  • John Wesley Martynec, 38, of Long Beach, is a licensed real estate broker. Elek Andrade, 27, of Downey, is a licensed real estate salesperson. In a case investigated by the Commercial Crimes Bureau of the Los Angeles County Sheriff’s Department.

  • Law enforcement officials, including the Los Angeles County District Attorney’s Office charged Martynec and Andrade with102 felony counts of Grand Theft and Identity Theft each, in connection with a complex and sophisticated fraud scheme resulting in the theft of nearly $1.8 million from their employer.
  • It is alleged that between November, 2003, and July, 2008, Martynec and Andrade were employed by JTR Real Estate and Results Mortgage. While employed there, it is alleged that Martynec and Andrade committed theft in the following ways:

  • JTR Real Estate purchased residential properties which were often occupied by renters. In order to avoid a lengthy eviction process, the company would offer cash pay outs to renters as incentive to move out voluntarily.

  • It is alleged that Martynec and Andrade submitted false “move out” invoices to the company, claiming that cash pay outs were offered to renters, when in fact they were not. The identities of actual persons were stolen and placed on the fraudulent “move out” invoices. The suspects then diverted the money to themselves.

  • It is alleged that Martynec and Andrade submitted false invoices to their employer for contractor costs associated with the rehabilitation of properties, when in fact the work was never done, and then diverted the funds to themselves.

  • It is alleged that Martynec embezzled funds by creating false entries in financial ledgers and diverting funds to a company he controlled named JWM Enterprises.
For the story, see Two Norwalk realtors slammed with 102 Felony Counts of Grand Theft, Identity Theft ($1.8M Grand Theft, ID Theft alleged. Suspects include Elek Andrade, and John Wesley Martynec).
Thanks to Deontos for the heads-up on the story.

Squatter Family Pinched For Hijacking Possession Of Vacant Home In Foreclosure & Turning It Into Mini Indoor Pot Farm

In Port Orange, Florida, The Daytona Beach News Journal reports:

  • A married couple found squatting in a Port Orange home were arrested and charged with growing marijuana in the house, police said [].

  • Sean Pichelman, 41, and Jessica Pichelman, 38, were each charged with cultivation of marijuana, possession of marijuana and the possession or use of narcotic paraphernalia, Port Orange police arrest reports show.

  • Jessica Pichelman got out of jail Saturday after posting $4,500 bail, court records show. Port Orange police said Sean Pichelman was taken to the Volusia County Branch Jail on $2,500 bail, but a booking officer had no record of him Monday.

  • Police said a Realtor was checking on the home under foreclosure at 5955 Broken bow Lane over the weekend when he discovered Sean Pichelman, his wife and a 5-year-old daughter living there. Sean Pichelman said he had rented the house from one of the owners but when police contacted the property owners, they said they had not rented the home to anyone.

  • Sean Pichelman came to the Port Orange Police department to be interviewed and after not being able to produce a lease agreement and proper documents, was arrested for trespassing. Jessica Pichelman said the family had only been living in the house for a week, police said.

  • Police checked Sean Pichelman's pickup and found 26 small marijuana plants in a planter on the passenger side floor. About the same time, the Realtor called police to report he had found marijuana in the home.

  • Inside the home, police found harvested marijuana in a pantry. In an attached mother-in-law suite, police found a grow operation in a closet complete with fans, power inverters and commercial lighting equipment.

  • Seventeen additional small plants and three large plants were found. In all, slightly more than 13 ounces of marijuana was seized, police said.

Thursday, July 12, 2012

Homeless Man Scores Temporary Stay In Daytona Beach Jail After Being Pinched For Allegedly Using Vacant Foreclosed Home In Craigslist Rent Scam Ripoff

In Ormond Beach, Florida, the Orlando Sentinel reports:

  • A homeless man used Craigslist to illegally collect more than $1,000 renting out a foreclosed home he didn't own in Ormond Beach, according to the Volusia County Sheriff's Office.

  • "The man's new income stream came to an abrupt end Sunday," agency spokesman Brandon Haught wrote. "Eric Sisson …now has a place to stay in the Volusia County Branch Jail in Daytona Beach where he faces seven criminal charges."

  • The case began last month when a 19-year-old Daytona Beach woman answered a Craigslist ad to rent the house on Arroyo Parkway. She toured the home and later met Sisson on June 25 and gave him a $400 cash deposit, followed the next day with $550 more in cash, records show.

  • Later, she became suspicious, requested the return of her money and was given a check by Sisson that bounced at the bank, records show. By then, a 29-year-old Ormond Beach woman already had moved into the house after giving Sisson a $425 deposit, records show.

  • When the women contacted authorities, deputies contacted the house's owner in Port Orange who said she didn't know Sisson and hadn't given anyone permission to rent the house that was in foreclosure, records show.

  • On Sunday, Sisson, 27, returned to the house to collect remaining rent and was arrested by deputies. At first, he claimed to own the three-bedroom home but then admitted "he had scammed the victims because ... he needed the money he took to get a place to live."

  • Sisson remains jailed on charges of obtaining property by fraud, uttering a worthless check, three counts of unarmed burglary and two counts of grand theft. Deputies also learned he had outstanding warrants in Brevard County for worthless checks and driving with a suspended license, as well as in Indiana for forgery and grand theft.

Foreclosing HOAs Peddling 'Temporary Titles' To Rent Skimming Landlords Create Confusion, Uncertainty For Unwitting Tenants

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • Two renters in Sarasota's Park View condo complex have gotten a rude surprise over the past few weeks. They discovered their landlord -- Michael Kell of Canton, Ohio -- does not have firm title to the units he has been renting them since September.

  • Kell bought the units from the Park View Condo Association, which had foreclosed on the former owners because they had not paid their association dues. Kell apparently made the purchases knowing the bank that provided loans for the former owners would some day foreclose and take possession of the units.

  • But his tenants say Kell did not say anything to them about a pending foreclosure.
  • An attorney representing the Park View Condominium Association said it is not uncommon for condo associations, which are owed condo dues, to take title to units through foreclosure.

    Some of those associations then rent them to cover their overhead expenses and a few sell their temporary title to private investors like Kell for a few thousand dollars, and the private landlords rent them out until the the banks that are owed money foreclose on former owners.

  • "Everyone is taking a chance," said Kevin Edwards, an attorney with Becker & Poliakoff in Sarasota whose firm represents Park View. "But it usually takes a long time for the bank to complete the foreclosures."

  • The problem [...] is that Kell never notified [the tenants] that their lives could be disrupted. "If he had approached me and explained the situation, I would have nothing to complain about," [tenant Lucia] Reid said. "My goal was to stay here and buy something down the road. But I can't live here with the uncertainty."

F'closed Landlord Faces Felony Charges For Continuing To Pocket Rent Payments From Former Tenants; One Victim Left Holding The Bag On Rent To Own Deal

In Delaware County, Pennsylvania, The Delco Daily Times reports:

  • A landlord who lost a majority of his nearly 200 rental properties to foreclosure is charged with stealing rent money from his former tenants.

  • Jeffrey S. Bobb, 44, of Cherry Hill, N.J., allegedly collected more than $10,000 in rent payments from several former tenants even though he no longer owned the properties, according to the affidavit of probable cause written by County Detective Matthew Cresta of the Economic Crimes Unit.

  • Bobb, owner of JSB Properties, Tross Associates and Chester Redevelopment Incorporate, owned and managed approximately 200 rental properties in Delaware County — the majority of which are now in foreclosure because of delinquent taxes or mortgage payments, the affidavit states.

  • One woman, who was represented by an attorney, entered into what she believed was a lease/purchase agreement with Bobb for a property on East 24th Street in Chester last October. She made several payments to Bobb totaling $5,920 before discovering the house was in foreclosure and he no longer had ownership of the property, according to the affidavit.

  • Bobb’s alleged scam came to light last July when a Marcus Hook police officer was called to investigate an incident in which the resident of a home on Yates Street made a rent payment to Bobb even though the property had been sold at a sheriff’s sale several months earlier.
  • Bobb was arraigned [] on charges including theft by unlawful taking, theft by deception, receiving stolen property, misuse of communication facilities, all felonies, and related offenses. He was released on $20,000 unsecured bail.

Wednesday, July 11, 2012

Family's Lawsuit: Bankster's Advice To Default On Loan Payments To Qualify For Loan Modification Only To Then Begin Foreclosure Led To Daddy's Death!

In Dallas, Texas, Courthouse News Service reports:

  • JP Morgan Chase killed a retired minister by giving him a stress-induced heart attack, seized the home days later and wrongfully evicted his widow - all because they accepted the bank's offer and followed its advice, the man's wife of 57 years claims in Dallas County Court.(1)

    Harry Engel, of Grand Prairie, died in July 2010. His widow, Wanda Jo Engel, and his adult children, Steve, Debra and Josh Engel, sued the bank, and EMC Mortgage and LPS Field Services on a host of charges, including wrongful death, wrongful foreclosure, trespass, gross negligence, and intentional infliction of emotional distress. The family also sued Chase alone for fraud, fraudulent inducement and deceptive trade.
  • "With regard to Chase, the Engels believed what any reasonable bank customer should believe-complying with a lender's advice should be safe and should not put them at risk from the lender. In contrast to how a lender should behave, however, Chase and the other defendants' subsequent conduct proximately caused Mr. Engel's untimely death and the loss of the Engel home," the family says.

(1) Expect Chase and its bankster-confederates to 'forum-shop' this case out of state court and into a Dallas Federal court.

BofA At Center Of Another Foreclosure Screw-Up; Boots Homeowner Despite Mortgage Having Already Been Paid Off Thru Refinance; Bankster: Not Our Fault!

In Conyers, Georgia, The Atlanta Journal Constitution reports:

  • A red scarf draped over a bannister is one of the few clues that Sidnetta Smith and her children lived in the sandy-gray, two-story Conyers home. It was taken by a bank, even though that bank didn't hold a valid mortgage on it.

    Bank of America has since tried to rescind its April 2010 foreclosure. But hitting the reset button can't undo uprooting her kids or replace family photos, jewelry and kids' honor roll certificates. "I miss it. I miss it a lot," a stoic Smith, 41, said of the still-vacant home on Wall Street.

    Smith's case highlights how few protections borrower advocates say Georgia offers during foreclosure. Georgia, like most states, has no "judicial review" in which a judge verifies basic facts before a bank can take a house. In the "non-judicial" system, bankruptcy or a lawsuit are the main means of disputing a foreclosure.

    Advocates for borrowers say it's impossible to know how many improper foreclosures have occurred because no one is monitoring the validity of the paperwork.
  • Smith's attorney, Charles Pekor, said a check of Rockdale County property records before her home was foreclosed should have shown that she already had a new mortgage by then.

    Proper documentation had not been filed to cancel her first loan, but a second security deed should have bolstered Smith's assertions that Bank of America did not hold her mortgage. She also contends she was current on her new loan until she was forced out of her house.

    A bank spokesman blamed Taylor Bean & Whitaker, Smith's original mortgage lender. Taylor Bean was a Florida firm that collapsed in August 2009. Its chairman was convicted last year on charges related to a $3 billion mortgage fraud scheme.

    Eight days after Taylor Bean was closed, Smith refinanced her Taylor Bean loan with Freedom Mortgage. The payoff of the Taylor Bean loan wasn't recorded in Rockdale until December 2010, eight months after Bank of America foreclosed on Smith's house.

    The government transferred thousands of Taylor Bean mortgages after it was closed to Bank of America, and records of monthly payments and mortgage payoffs were temporarily lost in the confusion. Bank of America said it is working with regulators and borrowers to fix problems.

    That's little solace to Smith. She says her health deteriorated from the stress and she took medical leave from work.

    The mother of four is suing Bank of America. She's also suing Freedom Mortgage, contending it mishandled canceling the Taylor Bean mortgage, and another company that she alleges violated state law when it seized many of her belongings from the house.

    Though her case is unusual, Smith is not the only Georgia borrower caught up in Taylor Bean's collapse. In February, the Atlanta Journal-Constitution reported on the documentation snafu in a Lithonia woman's mortgage refinance, which led to as many as three banks attempting to foreclose. She filed for bankruptcy to stop a foreclosure and is also suing Bank of America.

    John Bartholomew, an attorney with Atlanta Legal Aid Society, said his group has seen "dead mortgages" bite other borrowers when other lenders mishandled paperwork. He said a judicial review system might help root out documentation problems.

    "You have thousands of foreclosures being posted every month in a state where it doesn't take long to foreclose," Bartholomew said. "It makes these types of errors happen more often than they should be."

    Smith started receiving late notices from Bank of America within weeks of her refinance with Freedom Mortgage. She said Bank of America and Freedom Mortgage gave her the runaround and that the companies refused to talk to one another to confirm the payoff of the Taylor Bean loan. She claims one Freedom Mortgage representative even told her to ignore Bank of America's notices.

    James Blum, an attorney for Freedom Mortgage, denied his client did anything wrong. In an e-mail, he wrote, "In connection with that refinance transaction, Freedom Mortgage paid off Ms. Smith's prior mortgage loan, which Bank of America thereafter improperly foreclosed."

    Though Smith hasn't had a perfect finanical record — she filed for bankruptcy in 2003 — she contends she paid Freedom Mortgage every month until a law firm sent a notice to vacate the house, about five months after Bank of America foreclosed.

    After packing up half her belongings and moving them to North Carolina in November 2010, Smith returned to the home a few weeks later to find the locks changed and her remaining valuables gone. Today, Smith lives in a three-bedroom apartment about 20 miles north of Charlotte.

    "We have a roof over our heads. We're grateful," she said. "But it can never replace a dream home you thought you'd have forever."

Cops Bag R/E Operator Accused Of Duping Strapped Homeowners Into Signing Away Deeds To Avoid Foreclosure, Then Looked To Flip Them On Craigslist

In Brooksville, Florida, WTVT-TV Channel 13 reports:

  • Authorities have arrested a man they say scammed homeowners with promises of rescuing their homes from foreclosure. Gaetano Antonelli, 62, was arrested on June 27 at his house in Hernando County and was charged with organized fraud amounting to less than 20,000.

    Investigators say that Antonelli targeted homeowners under financial pressure with foreclosure proceedings looming over their heads. They say he lured one set of victims by assuring them he could rescue their homes from foreclosure; and he approached another set of victims as a home seller advertising properties for sale on Craigslist. The sheriff's office says the victims were in Hernando and Citrus counties.

    Reports say Antonelli deceived his victims into signing the deed of their property over to him by an attorney so he could save them from their mortgage. Once he falsely received the deed to the property, he ran an ad on Craigslist, trying to sell the property that was not legally in his name.

    His victims were suspicious of his activities and reported him to authorities. When Antonelli was interviewed by detectives, reports say he told them that "mortgages are not legally binding contracts and are a scam backed by the federal government."

    Detectives believe that there may be more victims out there. Anyone with information is asked to contact the Hernando County Sheriff's Office at 352-754-6830.
See also: Hernando Today: Home sales fraud alleged:
  • June and Robert Nestlerode didn't waste time moving into their new home off Naomi Drive. They signed on the dotted line — after meeting the home seller in a parking lot off U.S. 19 — and wrote him a check for $73,000.

    The next day they moved in belongings. Then they spent $3,000 on a new roof, bought homeowners insurance, purchased an air-conditioning unit, had landscaping done and installed a fence.

    Unbeknownst to them, the house was in foreclosure. The man they purchased it from duped them — and duped the previous owner into thinking he was going to sue the mortgage company on her behalf and make her a large sum of money, according to the Hernando County Sheriff's Office.

    Authorities in Hernando and Citrus counties said they have connected the devious home seller to three schemes — and they are still investigating to see whether others have been victimized.

    Gaetano Antonelli, 62, was arrested on three counts of organized fraud. He was booked June 27 at the Hernando County Jail and released later that day after posting $17,300 bail.

    The house Antonelli sold to the Nestlerodes was owned by Chauna Adorni, who was interviewed by economic crimes detectives, according to sheriff's office reports. Adorni, who according to deputies had gone through difficulties in her personal life and could no longer make the payments on her home, saw an advertisement for mortgage rescue and called the listed number. Antonelli answered, deputies said.

    Adorni agreed to meet Antonelli — in the same parking lot off U.S. 19 — and several documents were signed, according to sheriff's reports. Detectives said they acquired copies of the paperwork, including power of attorney, a warranty deed and a compliance agreement.

    Adorni said Antonelli promised he would sue the mortgage company and get a large settlement. "Chauna advised that (the suspect) never mentioned to her that he was going to sell the property to anybody else and advised that if she knew those were his intentions, that she would never have entered into any agreement with him," wrote Detective Dustin Mormando in his report.

Failure To Set Up, Pay Into Tax Escrow On Refinanced Mortgage Ambushes Servicemember/Landlord; Now Seeks To Recover House Lost In County Tax F'closure

In Pamelia, New York, the Watertown Daily Times reports:

  • A Pamelia homeowner who owed Jefferson County about $8,000 in back taxes faced the fate that is common among delinquent property taxpayers: His home was put up for sale at an auction in June and sold.

    But word of the months-long foreclosure process, a safeguard put in place to give homeowners a chance to pay what they owe before they lose their properties, didn’t make it to Christopher G. Hurlburt until the new owners showed up at the house to start the eviction process. That’s because he is a soldier who was stationed in Rwanda for almost two years.

    Complicating matters, the address posted on the mailbox outside the home didn’t match county records, meaning that mailed notifications of the foreclosure never made it to the home — though signs were posted outside in April. “There’s quite a story to this,” David J. Paulsen, Jefferson County’s attorney, told the Board of Legislators at its meeting Tuesday.

    The county now is seeking to cancel the foreclosure, on one condition: Lt. Col. Hurlburt must pay the back taxes and also pay the $7,500 fee that the auctioneer charged to sell his house last month.

    Attorney James A. Burrows, of the Watertown law firm Slye & Burrows, said his client already has paid the $8,000 in taxes and is willing to pay the $7,500 auctioneer fee, too.
    I think they’ve made a good choice, and one that certainly is appreciated by Chris Hurlburt,” Mr. Burrows said.

    Col. Hurlburt is now stateside, Mr. Burrows said, awaiting deployment to Afghanistan. He is a lieutenant colonel and was the Defense Department’s attache, its highest-ranking official, to Rwanda, a nation in southern-central Africa.

    The Jefferson County Board of Legislators passed a resolution Tuesday that would cancel the foreclosure sale once Col. Hurlburt pays the auctioneer’s $7,500 fee.

    The Servicemembers Civil Relief Act, a federal law, makes it all but impossible to foreclose on the home of an active-duty soldier. The county, though, contends that the law applies only to a soldier’s residence, and not to homes that soldiers own as rental properties. Mr. Hurlburt didn’t live in the home when he was stateside, but rented it out.

    The law does indeed apply to active service members such as Col. Hurlburt, said Mr. Burrows, his attorney. So there are legal avenues open to him to fight the $7,500 fee. But Col. Hurlburt is willing to settle with the county, Mr. Burrows said. He said he’ll discuss the matter with his client, who will have to weigh the cost and risk of a lawsuit.

    Mr. Burrows said that the issue arose when Col. Hurlburt refinanced his home in 2008. Under the terms of the original mortgage, he placed the property-tax payments in an escrow account, which then were paid by the bank. The new mortgage, though, wasn’t arranged that way.

    During his deployment, Col. Hurlburt incorrectly believed he was making property-tax payments with his mortgage payments.

Tuesday, July 10, 2012

Conversations On Use Of Eminent Domain To Clean Mess Created By Underwater Mortgages Begin To Heat Up As Banksters, Others Begin To Sweat

In San Bernardino County, California, the Los Angeles Times reports:

  • A plan by San Bernardino County to seize mortgages and restructure them for underwater homeowners using eminent domain is perhaps the most aggressive example of how local governments are seeking new ways to combat foreclosure.

    The cities of Ontario and Fontana are partnering with the county to create a Homeownership Protection Program that would use private funds to acquire underwater mortgages from investors. The county and the two cities have created a joint authority to explore and possibly enact the plan, and the first public meeting of that authority will be held [this] week.

    David Wert, a spokesman for the county, said the program is worth exploring because it could offer a solution to one of the region's most entrenched problems: the vast number of loans that are stuck underwater, with more money owed than the property is worth. If the program were to go countywide, it could benefit 20,000 to 30,000 homeowners, he said.

    "The only thing we are doing at this point is conducting a conversation," Wert said. "But the reason the county is interested in talking about this is because this is a proposal that could — if everything checks out — address the problem on a fairly large scale."

    Although still in its initial stages, the aggressive proposal has attracted controversy. A number of banking, financial and business groups oppose it, contending that seizing mortgages would raise constitutional issues and could increase lending costs in those cities.

    The California Mortgage Bankers Assn., the American Bankers Assn. and the American Securitziation Forum, along with several other financial groups, sent a letter of opposition to the county and the two cities.

    "We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues," the letter read. "It would also be immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions."
For more, see San Bernardino County weighs eminent domain to fight foreclosures (The county, along with Ontario and Fontana, wants to use eminent domain to seize underwater mortgages from investors and restructure them to help borrowers keep the homes).
See also, KCBS-TV Channel 2: Realtors, Banks Warn Plan To Seize Distressed Homes May Backfire (Half of San Bernardino County homeowners 'underwater'):
  • A controversial plan to help struggling homeowners in the Inland Empire by invoking eminent domain in order to rescue distress properties was under fire on Friday.

Maryland High Court: Gap In Mortgage Note's Chain Of Title Does Not Necessarily Constitute Fraud That Infects Deed Of Trust

From a news alert from law firm Saul Ewing LLP:

  • An appellate court in Maryland(1) recently handed down a decision that makes it easier for a creditor holding a promissory note, secured by a deed of trust and with gaps in its chain of title, to foreclose.

    Last week, the Court of Appeals of Maryland rejected a borrower in foreclosure's argument that gaps in a promissory note's chain of title amounts to fraud that infects a deed of trust. The Court's holding makes it easier for creditors who hold notes that are not completely traceable to the original lender, to foreclose.

    In Thomas v. Nadel, No. 106, 2012 WL 2368881 (Md. June 25, 2012), the Thomases, a couple in foreclosure, challenged the sale of their home, in part, because there was a gap in the chain of title of the promissory note, which was secured by a deed of trust against their home. Biltmore Specialty Investments II, LLC ("Biltmore") held the promissory note and was also the winning bidder of the Thomases' home at a public foreclosure auction. Just how Biltmore came to hold the note is unclear.

    The borrowers' original lender indorsed the note to a mortgage corporation that subsequently went out of business. Before going out of business in 2008, the mortgage company made blank indorsements of all its notes, so they could be transferred. At some point, the mortgage company transferred the note to another company, but Biltmore did not exist until 2009, leaving a one-year period where ownership of the note was anyone's best guess.

    Maryland borrowers in foreclosure have two opportunities to challenge a foreclosure sale – before the sale is conducted or within 30 days following the sale. The general rule in Maryland is that a borrower challenging a foreclosure action must assert known defenses prior to the sale. After a foreclosure sale, a borrower is limited to raising only procedural irregularities.

    The Court of Appeals in Bates v. Cohen, 417 Md. 309, 9 A.3d 846 (2010), left open the possibility that following a sale, a borrower could assert a mortgage or deed of trust was itself a product of fraud. Seizing on this open question, the borrowers in Thomas argued the gap in the note's chain of title amounted to fraud that tainted the deed of trust and the sale should have been set aside.

    The Court was not convinced that a mere gap of ownership in a note's chain of title amounted to fraud. The Court noted that in the context of fraud relating to the execution of a document, Maryland courts recognize charges of forgery, alteration and misrepresentation.

    The borrowers in Thomas conceded that no forgery took place at any point during the note's assignment; they were not the victims of misrepresentation and all documents including the note and the deed of trust were genuine.

    The Court concluded that the couple's "general allegation" of fraud did not suffice and the question left in Bates is still an open one – whether fraud infecting the underlying mortgage or deed may be raised by a borrower following a foreclosure sale.

    In rejecting the borrowers' fraud argument in Thomas, the Court has made it easier for creditors holding a promissory note, secured by a deed of trust, with gaps in its chain of title to foreclose. A note that is not completely traceable to the original lender does not, by itself, rise to the level of fraud in the underlying mortgage or deed of trust.

(1) While, technically, it is considered an 'appellate' court, the Court of Appeals of Maryland is the actually highest court in the state, as opposed to the state's 'intermediate' appellate court (ie. the Maryland Court of Special Appeals).

Title Insurers Red-Flag Homes w/ Quiet Title Suits In Ownership History; Add'l Scrutiny Required As One R/E Operator Peddles Mortgage Elimination Plan

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

  • Alerts issued by two of Florida’s largest title insurers are drawing scrutiny to a complex bank bypass tactic that dozens of Palm Beach County homeowners are attempting by signing their deeds over to the Fidelity Land Trust Co.

    Old Republic National Title Insurance, which carries the largest share of Florida’s market at 30 percent, according to the Florida Land Title Association, first circulated its warning in November. It requires additional review for new policies on homes with a so-called “quiet-title” action in their history.

    An April 19 alert from the Jacksonville-based Fidelity National Title Group, identifies the land trust by name, saying agents are not to close or process transactions from the company without written authorization from underwriters.

    Title insurance protects homeowners and lenders against financial loss from defects in the title, liens, or if someone tries to challenge ownership. Most banks will not approve loans without title insurance. Fidelity National Title Group, which carries 10 percent of Florida’s title insurance market, has no relation to the Fort Lauderdale-based Fidelity Land Trust Co.

    The Palm Beach Post first wrote about the trust last month after it had quietly amassed more than 150 deeds in Palm Beach, Broward and Miami-Dade counties since it registered as a limited liability company in December. The land trust is heavily soliciting South Florida’s underwater homeowners through several marketing firms including the North Palm Beach-based Lincoln Property Consultants, previously called Lincoln Financial Group.

    Under the land trust’s plan, homeowners sign their deed into a trust, with themselves as beneficiary, while also signing a contract to pay the trust an up-front fee of thousands of dollars. The trust then sues the homeowner’s lender claiming flawed or fraudulent loan practices in an attempt to cancel the mortgage and get a quiet title judgment naming the trust as owner.

    At this point, the homeowner still owes the mortgage debt, or note, but because it is no longer secured by the home, the idea is the lender will be more willing to sell the debt for pennies on the dollar to the trust.

    Some attorneys say what the trust is doing is an unproven tactic that relies on the banks not responding to the lawsuit within a 20-day period, which can result in a default judgment in favor of the trust. Default judgments are routinely overturned if the defendant can show good cause as to why they didn’t respond.
  • [T]itle insurance experts said the warnings from Old Republic and Fidelity National Title Group are red flags. Getting clear title on a property where the mortgage was canceled without a full trial may be difficult, they say. Neither title company returned phone calls for this story.
  • Marlyn Wiener, a real estate attorney with an office in Boca Raton, said title insurers fear they will have to pay off a reinstated mortgage if the cancellation is overturned. “If a mortgage was extinguished through a full trial of the quiet title action and court order after a judge heard all of the arguments, I imagine that the underwriters would approve issuance of new policies,” she said.

    What we have, ironically, is a quiet title action, which is supposed to clean up title issues, having the potential to cloud the title and create more issues.”

FTC Scores Judgment Against Loan Mod Scam Purporting To Be Affiliated w/ Gov't & That Exaggerated Lawyer's Role In Obtaining Relief For Duped Victims

The Federal Trade Commission recently announced:

  • The Federal Trade Commission won a $2.6 million federal court judgment against three defendants behind a scheme that charged consumers large upfront fees and failed to deliver the mortgage modifications they promised.

  • The court also banned the three defendants for 10 years from telemarketing financial products or services; from selling mortgage modification, foreclosure rescue, and debt-relief products or services; and from collecting or attempting to collect from consumers who had agreed to purchase a mortgage-assistance product or service. The court ordered the defendants to destroy any consumer information they have collected within 30 days after the order takes effect.

  • The U.S. District Court for the Middle District of Florida, Tampa Division, entered permanent injunctions against three defendants. It also approved settlements with five more defendants in the case, and entered a default judgment against another defendant.

  • The FTC filed a complaint against the nine defendants behind the Crowder Law Group in a 2009 law enforcement sweep as part of its continuing effort to keep homeowners from being targeted by mortgage-related scams.

  • The FTC alleged that the defendants behind Crowder Law Group promised relief from burdensome mortgages by falsely claiming they could modify consumers’ mortgages and substantially reduce their monthly payments; exaggerating the role an attorney would play in obtaining a loan modification; and pretending to be affiliated with a government agency.

  • All nine defendants were charged with violating the Federal Trade Commission Act and the Telemarketing Sales Rule. The operation involved a marketing company that contracted with a direct-mailing company to send oversized postcards to homeowners nationwide whose mortgage payments were at least two months in arrears.

  • Each postcard offered financial relief to the homeowner and displayed a toll-free phone number and the signature of an attorney who was local to the homeowner and was paid $100 to accept the homeowner into the program. When homeowners called the toll-free number, a customer service representative collected financial documents and the $2,000 fee from the consumer.

  • The court found that the defendants, through the post cards and telephone procedures, assured homeowners that they had qualified for loan modifications. In fact, homeowners still had to go through the modification process with lenders, and it which was usually unsuccessful.
For the FTC press release and links to related court documents, see FTC Wins $2.6 Million Court Judgment Against Operation That Made Exaggerated Claims for Mortgage and Foreclosure-Relief Services (Defendants Charged Consumers $2,000 Each for Services They Did Not Perform).

Duo Plead Guilty To Duping Unsophisticated, Financially Drained Home Sellers Out Of $600K In Sale Proceeds In Scam Purporting To Give F'closure Relief

From the Office of the New Jersey Attorney General:

  • Attorney General Jeffrey S. Chiesa announced that a Ewing couple who ran a real estate firm pleaded guilty to stealing from home sellers by diverting proceeds from home sales, and also defrauding mortgage companies by falsifying the earnings of loan applicants.

  • An investigation by the Division of Criminal Justice Financial & Computer Crimes Bureau revealed that the couple, using their real estate firm, S&B Property Management and Maintenance LLC of Trenton, stole over $600,000 from sellers in connection with 11 home sales, and defrauded mortgage companies of a total of $641,800 in proceeds of three home loans.

  • Joann Smith, 47, and her boyfriend, Wayne Betha, 42, each pleaded guilty on Friday afternoon (June 29) to second-degree theft by deception and third-degree failure to file tax returns before Superior Court Judge Mark J. Fleming in Mercer County. Under their plea agreements, they will each face a sentence of five to 10 years in state prison and will be required to enter a consent judgment to pay restitution to the home sellers, as well as the mortgage lenders, to the extent that the lenders have sustained losses.
  • The state’s investigation revealed that between August 2006 and February 2008, the couple stole more than $600,000 from clients who agreed to have Smith sell their homes. Smith and Betha allegedly diverted proceeds of the sales into their own bank accounts for their personal use, deceiving the sellers into believing they were not entitled to all of the profits from their homes.
  • The couple used a variety of schemes to fraudulently divert proceeds from the home sales into bank accounts maintained by Smith and S&B. They represented to sellers and title companies that monies were owed to them for expenses, including property renovations and repairs that were never done and exorbitant consultant fees that they claimed the sellers had authorized.

  • Many of the checks issued by the title companies handling the property sales were written to the home sellers, but Smith convinced the sellers to sign the checks over to her for payment of business expenses and fees. In several instances, the defendants falsely indicated on HUD forms and tax forms that the sellers directly received all of the profits from the home sales. They also omitted to tell sellers that they were agreeing in mortgage closing documents to pay large, unauthorized “seller’s concessions or seller’s assists” to the buyers.

  • The victims were not financially sophisticated. They did not understand the details of the property closings and, because of their financial woes, were anxious to be free of the obligation of paying mortgages they could no longer afford. Smith and Betha took advantage of these facts to steal the victims’ profits from the home sales.
For the NJ AG press release, see Ewing Couple and Their Real Estate Firm Plead Guilty to Stealing from Home Sellers and Mortgage Lenders (Face state prison sentences in investigation by Division of Criminal Justice).

Monday, July 9, 2012

Big Foreclosure Compensation, But Only For The Right Wrongs

Paul Kiel writes in ProPublica:

  • Can you put a price on the damage caused by a wrongful foreclosure? Banking regulators have. And it’s $125,000. Or $60,000. Or $15,000. Or… it’s unclear.

  • Last November, banking regulators launched a process to force the big banks to compensate homeowners victimized by their foreclosure abuses. Many crucial details remained unclear, including how much victims might receive.

  • More than seven months later, regulators finally released a “framework” that shows some of the possible outcomes. It’s a list of thirteen mortgage servicingerrors,” each with its own associated form of compensation. In addition to fixing the bank’s errors, remedies include cash payments ranging from $500 all the way up to $125,000.

  • It turns out that, for homeowners seeking compensation for those errors and abuses, it’s crucially important just how the servicer messed up. The logic for the differences in payment isn’t always apparent and in some instances seems to defy common sense.

  • Two homeowners who each had their bid for a modification mishandled, for instance, could emerge with either $125,000 or $15,000 depending on just where in the process the error occurred.

Proof Of Common Law Fraud Not Needed To Maintain Suit Under "Catch-All" Section Of PA State Consumer Protection Law In Loan Servicer Jerk-Around Case

In a purported class action lawsuit filed in a U.S. District Court in Pittsburgh, Pennsylvania filed by two homeowners against a pair of mortgage servicers and a law firm/debt collector alleging conduct that is apparently now the standard for the servicing industry (jerk-arounds, conflicting communications, allegedly erroneous charges, etc.), a district judge recently granted the defendants' motion to dismiss several counts made against them, but allowed other counts to survive, thereby allowing the lawsuit to proceed.

Among the counts allowed to survive (specifically, count VII in the lawsuit) was one involving claims for violations under Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL").

The following excerpt is District Judge Mark R. Hornak's analysis of the applicable law and his assessment of the allegations in determining the the lawsuit should continue with regard to this count:
  • The Unfair Trade Practices and Consumer Protection Law ("UTPCPL") is Pennsylvania's consumer protection law. Bennett v. A.T. Masterpiece Homes at Broadsprings, LLC, 40 A.3d 145, 151 (Pa. Super. Ct. 2012). Its purpose is to prevent "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce," as defined by the act. Id.; 73 Pa. Cons. Stat. Ann. § 201-3 (West 2008). The Pennsylvania Supreme Court has stated that the UTPCPL should be liberally construed in order to effect its legislative goal of consumer protection. Bennett, 40 A.3d at 151 (citing Pennsylvania ex rel. Creamer v. Monumental Properties, Inc., 329 A.2d 812, 814 (Pa. 1974),

    Homeowners rely upon two specific definitional provisions of the UTPCPL for their claims that PHS. Citi, and Seterus engaged in "unfair or deceptive acts or practices." § 201-2(4).

    The first, Section 201-2(4)(v), is inapplicable to the facts as alleged by Homeowners
    . This section labels as "unfair or deceptive" the act of "[representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation or connection that he does not have." In other words, section 201-2(4)(v) applies to cases where a defendant misrepresents the characteristics of a product, such as suits involving false advertising. See, e.g., Haggart v. Endogastric Solutions, Inc., No. 10-0346, 2011 WL 466684, at *6 (W.D. Pa. Feb. 4, 2011) (noting that Pennsylvania law requires a plaintiff to allege, among other things, that the challenged advertisement is false for liability under section 201-2(4)(v) to attach); Glover, 2010 WL 5829248, at *9 (W.D. Pa Oct. 21, 2010) (dismissing claim against a mortgage servicer, because the servicer did not make any deceptive representations regarding the "characteristics, uses, or benefits" of a loan modification agreement); Meyer v. Cmty. Coll. of Beaver Cnty., 2 A.3d 499, 549 (Pa. 2010) (noting that sections 201-2(4)(v) through (vii) relate to claims of nonconforming goods or services). Homeowners' allegations that they paid improper reinstatement fees when in default does not equate to an allegation that PHS, Citi, or Seterus misrepresented the actual characteristics or benefits of the note and mortgage themselves. Glover, 2010 WL 5829248, at *9. Accordingly, to the extent that Homeowners bring claims against Defendants under section 201-2(4)(v) of the UTPCPL, that claim is dismissed with prejudice.

    The second UTPCPL provision upon which Homeowners rely is the "catchall provision" of section 201-2(4)(xxi).

    This section is expansive in that it encompasses a wide range of circumstances because a defendant need only engage in "any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding" for liability to attach. Id.

    PHS argues that a heightened level of pleading akin to an allegation of common law fraud is required to bring an action pursuant to the "catch-all" provision, and Homeowners fail to meet this heightened threshold. See, e.g., Ross v. Foremost Ins. Co., 998 A.2d 648, 654 (Pa. Super. Ct. 2010) ("In order to establish a violation of the [UTPCPL's] catchall provision, a plaintiff must prove all of the elements of common-law fraud." (internal quotations omitted)). Similarly, Citi and Seterus argue, among other things, that Homeowners do not show that they relied upon any statements from either company. Justifiable reliance on a misrepresentation is an element of common law fraud, along with scienter, intention by the defendant to induce action, and damages to the plaintiff. Id.

    Recent developments in Pennsylvania law convince this Court that meeting a heightened "fraud pleading" standard is not required to maintain a cause of action under the "catch-all" section of the UTPCPL.

    In Bennett v. A. T. Masterpiece Homes at Broadsprings, LLC, 40 A.3d 145 (Pa. Super. Ct. 2012), the Pennsylvania Superior Court analyzed two conflicting lines of cases on this issue of the appropriate pleading standard. One line of cases relied upon the pre-1996 language of section 201-2(4)(xxi) to conclude that litigants must allege enough facts to satisfy the elevated pleading standard necessary for common law fraud. Id. at 152.

    However, the Bennett court noted that these cases had not considered the change to the "catch-all" provision's language in 1996, when the Pennsylvania legislature amended section 201-2(4)(xxi) to include the term "deceptive" in addition to the term "fraudulent." Id.

    In order to give effect to all words in the statute as required by the Pennsylvania rules of statutory construction, the Bennett court adopted the reasoning of an opposing line of cases, which held that the inclusion of the word "deceptive" in section 201-2(4)(xxi) "lessened the degree of proof needed to maintain an action under the "catch-all" provision. Id. at 153-55.

    The Superior Court concluded its reasoning by stating "we hold deceptive conduct which creates a likelihood of confusion or misunderstanding can constitute a cognizable claim under Section 201-2(4)(xxi)." Id. at 154-55.

    Accordingly, conduct that is capable of being interpreted as "misleading" falls within the reach of the UTPCPL. See id. at 156 (holding that the lower court correctly instructed the jury when it stated that "misleading conduct" was actionable under the UTPCPL's catch-all provision). Having reviewed the Bennett court's analysis and the cases underpinning its decision, this Court is satisfied that section 201-2(4)(xxi) does not require a litigant to plead the elements of common law fraud.

    Regarding the alleged deceptive conduct here, Homeowners have asserted sufficient facts at this stage in the proceedings to show that confusion or misunderstanding could reasonably arise from PHS's, Citi's, and Seterus's actions and that Homeowners were indeed misled by those actions.

    Homeowners allege that Citi referred Homeowners' mortgage to foreclosure while, at the same time, the company was representing to Homeowners that there was the possibility of an alternate payment arrangement. The purpose of this arrangement was to allow Homeowners to avoid the very foreclosure proceedings Citi initiated. PHS and Seterus then sent Homeowners multiple conflicting reinstatement letters, which Homeowners allege contain misrepresentations as to the amount of their debt. Homeowners further claim that they were damaged when they remitted a payment that included intentionally mislabeled fees. These allegations allow Homeowners to maintain a cause of action against all three Defendants under the UTPCPL's "catch-all" section.

    Citi and Seterus also advance another argument in support of their Motions to Dismiss regarding the UTPCPL. They claim that Homeowners lack standing to sue them under the UTPCPL, because neither Citi nor Seterus were original signatories to the note and mortgage, meaning that Homeowners cannot allege that they purchased any goods or services from either Citi or Seterus.

    However, the UTPCPL's reach is expansive, and, to that end, the Third Circuit in In re Smith, 866 F.2d 576 (3d Cir. 1989) emphasized that a district court should not limit the UTPCPL's application to only those circumstances where the unfair or deceptive conduct induced the consumer to make the initial purchase. Id. at 583.

    Such a reading of the statute "would insulate all kinds of practices from the [UTPCPL], such as debt collection, which occur after entering an agreement and which were not a basis for the original agreement." Id. (emphasis added). Similarly, liability can be imposed upon a mortgage assignee under the UTPCPL providing the plaintiff advances specific allegations of wrongdoing against the assignee, not simply against the original lender. See Murphy v. F.D.I.C., 408 Fed. App'x. 609, 611 (3d Cir. 2010) (emphasizing the UTPCPL does not impose liability on a loan assignee absent claims of an assignee's wrongdoing). Homeowners assert such allegations directly against both Citi and Seterus here. Therefore, the fact that Citi and Seterus were not parties to the original mortgage is not dispositive.

    For the foregoing reasons, all Defendants' Motions to Dismiss as they apply to Homeowners' claims under the UTPCPL are denied.
For Judge Hornak's ruling, see Trunzo v. Citi Mortgage, No. 2:11-cv-01124 (W.D. Pa. June 25, 2012).
Editor's Note: Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL") is that state's consumer protection law that generally prohibits unfair and deceptive practices ("UDAP") in trade and commerce within the state. For similar UDAP statutes in other states, see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

NJ Federal Court Consolidates Civil Suits Alleging Bid Rigging In NJ Tax Sales; Defendants Include Those Having Pled Guilty In Related Criminal Probe

In Trenton, New Jersey, the Hunterdon County Democrat reports:

  • Six federal lawsuits regarding tax sales have been consolidated and a judge is scheduled to choose an interim class lead attorney today, July 2.

  • A class action lawsuit initiated by a Lebanon Township woman facing foreclosure was the first to be filed. Jeanne Boyer, who has been fighting to save her own home from foreclosure, filed the suit in March on behalf of herself and potentially thousands of other homeowners in similar situations. Boyer alleges that she is one of many victims of an illegal scheme that allowed tax lien investors to charge the highest amount of interest allowed by law by eliminating the competitive bidding process.

  • The suit was filed in Hunterdon County Superior Court on March 13 and removed to federal court on March 28. Since then five other similar suits have been filed in Federal District Court, one in the Camden district, the rest in the Trenton district.

  • Raymond Contarino, of Newfield; MSC, LLC, of Cherry Hill; T&B Associates, Inc.; Ronald English and Lana and Samuel Ledford filed the other suits. An order to consolidate the cases was entered on June 11.

  • The six suits have many of the same defendants in common. The defendants include those that have already pleaded guilty and others still under investigation.

  • The suits ask the court to stop the people who have pleaded guilty from enforcing any tax liens they currently hold, return title to properties already foreclosed upon and turning over proceeds from sales of properties they received because of the bid-rigging scheme. Such proceeds are the “fruits of the illegal conduct” of the people now awaiting sentencing, according to the suit.

Dubious Nature Of LLC-Peddler Claims That Some States Have More Debtor-Friendly Charging Order Laws Than Others

From a recent column in Forbes:

  • You see the advertisements all the time: “Form your LLC in Wyoming!” or “Create your LLC in Delaware”, or “Get the Nevada Advantage with Your LLC!”

  • Several states have healthy industries that consist of little more than forming corporate entities in those states. They often attract such business by making claims that the laws of their states are more debtor-friendly than those of other states, thus presumably providing greater asset protection for the owner.

  • In most states, Limited Liability Companies (LLCs) and partnerships in their most common variations (GPs, LP, LLPs, and LLLPs) have a benefit that corporation do not, which is that creditors cannot simply levy on the stock in such entities — they have no stock, technically — but instead creditors must obtain acharging orderthat has the effect of placing a lien on the debtor’s interest.

  • That lien operates to pay to the creditor if any distributions are made to the debtor’s interest, but if not distributions are made then the creditor gets nothing, and the creditor is not normally entitled to take assets out of the entity either.

  • As mentioned, a few states claim to havebetter charging order laws”, which means charging order laws that are more friendly to debtors and less friendly to creditors. Presumably, so says the marketing of those from these few states, a creditor will be stymied by their states laws and unable to obtain a creditor-friendly charging order.

  • But that theory hinges on the real question: Whose law applies? If somebody forms, say, a Wyoming LLC, but the LLC is actually doing business in California such that the California courts could enter their own charging order against the entity, must Wyoming respect the California court’s judgment even if the opposite decision might have been reached under Wyoming law?

  • This issue comes down to one involving the U.S. Constitution, and more particularly the Full Faith & Credit clause that says that the courts of one state must respect and give power to an order of the courts of other states, just as if a court in-state had issued that order.

  • That brings us to today’s question:

    Is a Charging Order the sort of order that is entitled to Full Faith & Credit by the courts of other states?

  • A recent opinion from a federal bankruptcy court says “Yes”.
For the ruling, see In re Inman, Case No. 10-17707-EPK, Adv. No. 11-01033-EPK, 2012 WL 2309359 (Bankr. S.D. Fla. June 18, 2012).
Editor's Note: Those 'judgment infected' real estate operators getting the bright idea of forming an out-of-state LLC to take title to real estate in an effort to stymie their judgment creditors may have second thoughts about using this asset protection technique in light of this ruling, which essentially provides something of a creditors' roadmap for collecting on outstanding debts in those situations.

Sunday, July 8, 2012

Developer's Takeover Of Failed HOA Leaves Eleven Unit Owners w/ Wrecked Credit, Continuing House Payments, Homes Legally Snatched Out From Under Them

In Reading, Pennsylvania, AOL Real Estate reports:

  • Teresa Fusco thought she had done everything that she needed to do to sail comfortably into her golden years. She owned a condominium unit in Reading, Pa., with an appraised valued of $101,000, and she had a rainy-day fund in case her health failed.

    So she was shocked when earlier this year she suddenly found herself with no home and a wrecked credit score after a company that bought most of the condo complex sold her unit for less than half of what she thought it was worth. To make matters worse, Fusco [] is still on the hook for the $71,000 mortgage on the property that she no longer owns.

    "As a single woman, 56 years old, who works hard and was looking to retire in that place, I had everything set up," Fusco said.

    Her plans -- and those of 10 other homeowners who say they've had their properties stolen from them -- started to unravel when Deer Path Woods, the condo complex where they lived, went into foreclosure last fall. Fusco's unit was one of 11 that were individually owned; another 97 were rental units. When the owner of the rental units failed to pay his mortgage, a company under the control of local developer Kevin Timochenko snapped all of them up for $7,200 at a foreclosure auction.

    The purchase gave Timochenko's company, Water Polo I, LP, control of nearly 90 percent of the units of the complex, arming it with enough votes to dictate condominium association policy. Soon after the purchase, Fusco and her fellow homeowners received a letter informing them that, come January, condo association fees would more than double, to $450 a month. The increase, according to a representative of Water Polo I, was to pay for upgrades to the complex that the tenants had demanded.

    "We were all freaking out because we couldn't afford that in addition to the mortgages that we were paying," said former unit owner Adrienne Dawkins [...] who took out a $102,500 mortgage to buy her unit at Deer Path in 2007, and has since been forced to leave her home along with her three children. "We agreed to pay $200 when we bought our homes."

    Anxiety over raised assessment fees paled in comparison to what happened next: The new condo owner called a vote to terminate the condo association altogether.

    From Condos to Rentals

    Dissolving a condominium organization isn't unusual. Termination reduces management costs, and in a depressed market makes it easier for homeowners to sell their units. It's often easier to find a buyer for an entire condominium, and a bank doesn't have to approve the sale. After termination, units of the dissolved condominium sell in bulk and are then typically converted into an apartment complex owned by a single developer.

    "By buying the 89 percent of the units at the foreclosure sale last year, [Timochenko] acquired all of the units and all of the votes he needed to approve a termination," explains Tom Beaver, an attorney whom some of the unit owners turned to for help.

    Here's the rub: Under Section 3220 of the Pennsylvania Uniform Condominium Act, when a condominium is dissolved, the condo association can put the entire condominium up for sale, regardless of who owns the individual units. So in acquiring control of the condo association, Water Polo I also gained the right to sell Fusco's home.

    In April 2012, Deer Path Woods was put up for auction. Beaver, who attended the auction, said it sold for $3.425 million.

    The buyer? Another company controlled by Kevin Timochenko. Along with the 97 rental units, the sale included the 11 owner-occupied apartments. The new buyer, Hoya I, LP, then converted the condominium into an all-rental apartment complex, now known as Spring Valley.

    "The effect of terminating the condominium was to divest all of the unit owners of their real estate interest," Beaver said, adding that rentals are especially profitable for developers in today's market of high rental rates and diminished home values.

Lender OKs Homeowner Request To Seek Short Sale Buyer, Then Starts Foreclosure, Changes House Locks Anyway; Action Put On Hold After Media Intervenes

In Tulsa, Oklahoma, KJRH-TV Channel 2 reports:

  • It was the home Penny and her husband had been searching for. "This was our dream house and it hurts my heart that we're losing it," Penny said. The couple lost it after Penny's husband lost his job, and she took a 45 percent paycut.

  • "I contacted my mortgage company at the time, let them know what was going on, asked if maybe we could work something out," she said. Penny says a loan modification fell through due to lost paperwork. Other programs didn't work either, she says.

  • Finally, Penny says Everhome Mortgage agreed to a short sale through a real estate agent, who put their dream home on the market. "Four days later we had an offer, in the meantime, our mortgage company had started foreclosure proceedings."

  • Penny says it hired a "property preservation" company, which entered the house to change locks. And she says that company went through their personal belongings.

  • Penny doesn't understand why since they had been approved for a short sale to avoid foreclosure. "It's really frustrating, this has been going on for nearly a year now."

  • But then Penny contacted the 2News Problem Solvers, and we got in touch with the mortgage company. We weren't given many details about Penny's situation, but within days, she got good news. The foreclosure was put on hold, to allow for a short sale.

  • Penny says she was eventually able to get information about her options, by contacting a government agency called Making Home Affordable.

Outfit Suspected Of Manufacturing Bogus Foreclosure Documents Countersues Nevada AG Alleging Due Process Violations

In Las Vegas, Nevada, Vegas Inc. reports:

  • The foreclosure processor sued by Nevada Attorney General Catherine Cortez Masto in last year’s robosigning cases has now retaliated, suing Masto and alleging due process violations.

  • In December, Masto’s office sued Lender Processing Services Inc. (LPS) of Jacksonville, Fla., claiming it was involved in widespread fraud involving mass document-signing procedures in which foreclosure documents were fraudulently notarized by the thousands. That suit remains active in Clark County District Court.

  • The investigation that led to her suit also resulted in criminal charges against several notaries and two LPS officers.

  • On Wednesday, attorneys for LPS sued Masto in federal court in Las Vegas charging its due process rights were violated in the investigation.