Saturday, July 28, 2012

BofA Duped Me Into Loan Modification When It Really Wants To Foreclose, Says Texas Woman In Lawsuit

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

  • A woman claims Bank of America wrongly foreclosed on her property despite its agreement to work out a modification with her.

    Shayla Zuzukin claims that after she fell behind on her mortgage payments to Bank of America, it agreed to enter into a modification with her to allow her to catch up on her note.

    On April 23, Zuzukin had arranged to meet with representatives from Bank of America to discuss the modification, but no one from the company arrived at her home, according to the complaint filed June 29 in Jefferson County District Court.

    "However, and much to her shock and chagrin, plaintiff found out that defendants never actually intended to modify her note, misrepresented facts to her that led her to rely on their statements, only to receive notice from defendants that her house was going to be foreclosed on July 3, 2012," the suit states.

    Since Zuzukin bought her home in March 2008, she has invested $30,000 and will lose all that money if the bank does foreclose on her property, the complaint says.

    Had she known of the bank's intentions, Zuzukin claims she would have made other plans instead of relying on a modification to help her out.

    She alleges breach of contract and misrepresentation against Bank of America. In her complaint, Zuzukin is seeking a temporary restraining order that prohibits the bank from foreclosing on her property and other relief the court deems just.

Flawed Design For Letter Used To Notify Homeowners Of Foreclosure Settlement Cash Impedes Response, Say Critics; Form Too Complex, Looks "Like A Scam"

Reuters reports:

  • Nothing about the letter that Keturah Miller received late last year indicated it could be worth as much as $125,000 to her. So she put it aside, forgetting about it for months until she stumbled across it while cleaning.

    Miller, 34, a family liaison worker with the New York City Department of Education, read it over four times. It still made no sense to her. "I can read the words, but the meaning of what they're saying? That's the confusing part for me," she said.

    The letter was one of 4.3 million forms sent under a flagship U .S. program to try to help people who may have experienced financial injury due to errors in their mortgage servicing. An estimated 4 million families lost their homes due to foreclosure from 2007 to 2012.

    So far, fewer than 5 percent of the potential beneficiaries - 214,000 - have requested a review of their cases, a number critics say confirms their suspicion that the process was designed to protect banks, not help consumers.

    Miller's struggle to understand the rights laid out in her review letter may not be unique.

    A report released last week by the Government Accountability Office found that the letters' complex language, their omission of important information about remediation, and a failure to consider that some recipients speak or read little English could "impede some borrowers' ability to respond."

    Miller, who is finishing her Master's in Business Administration this year, finally called a housing counselor. "It's like it's done for a lawyer to understand, or someone who's involved with mortgage loans," she said.
  • Consumer advocates say the low numbers are indicative of the outreach's flawed design. While almost half of U.S. adults read at the level of a 13- or 14-year-old, the form is written at a second-year college level, according to an analysis by a consumer group.

    The letters and the review's website were not tested with target audiences, and the letters were sent out only in English, although 5.5 percent of the adult population in the United States reports they speak poor or no English.

    A Spanish-language advertising campaign was launched and translators for over 200 languages are available at a toll-free number, but the form itself remains available only in English.

    "By the time we were able to meet with the OCC and the Fed, a lot of things were too late," said Graciela Aponte, senior legislative analyst at the National Council of La Raza, a Hispanic civil rights organization.

    She told regulators that the form was too complex and looked "like a scam," but was told "there were absolutely no edits that could be made to it."

    [Walter] Walker, [a 20-year] Florida housing counselor, said his clients declined to fill out the form when they realized they were not guaranteed compensation, or were suspicious of it and unwilling to give out personal information.

    "Those were the two most common responses I got other than, 'What is this?' and throwing it in the trash can," he said.

Head Federal Number Crunchers: Regulators Fall Short In Oversight Of Compliance By Banksters w/ Law Protecting Servicemembers From Being Screwed Over

MortgageOrb reports:

  • The Government Accountability Office (GAO) has issued a report warning that regulatory oversight of compliance relating to the Servicemembers Civil Relief Act (SCRA) has been "limited."

    "At least 15,000 instances of financial institutions failing to properly reduce servicemembers' mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years," says the GAO.
  • The GAO notes that although the U.S. Department of Justice has explicit SCRA enforcement authority, the department has only brought three cases against mortgage servicers for SCRA violations during the past five years.

    The GAO also observes that the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration and the Federal Housing Finance Agency respectively obtain SCRA compliance data, but do not share this information among themselves or with the regulatory agencies.

Lack Of Bankster Oversight When Contracting w/ Property M'gment Firms Problematic As Lawsuits Alleging Thug-Like Break-Ins Of Occupied Homes Pile Up

The Huffington Post reports:

  • A review of court records by The Huffington Post turned up more than 50 homeowner lawsuits against banks and the two largest property management contractors in the U.S., Safeguard Properties and Lender Processing Services, stemming from break-ins of occupied homes.

    The allegations follow five years of generally woeful management of the foreclosure industry by all involved, as the inspector general for the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is raising red flags about the lack of contractor oversight by the government-backed mortgage giants.

    A June report by the inspector general cited deficiencies "in key [foreclosed home] contractor management controls" at Fannie and Freddie, which own or guarantee more than half of all home loans in the United States. Kristine Belisle, a spokeswoman for the inspector general, said she could not comment on whether the potential misconduct described in the report includes instances of wrongful contractor break-ins.
  • It isn't clear how often contractors are breaking into lived-in homes, but consumer lawyers say these legal complaints represent just a small sample of what is happening in communities across the country, as overzealous contractors whose earnings are pegged to the amount of work they do on a home are entering occupied houses, slapping new locks on doors and sometimes walking away with family possessions.
  • Many of the problems with property inspections appear to stem from a lack of oversight and accountability. There are typically four layers of control between companies that own the loans, and the local contractors who actually do the work.
  • Typically, a bank that services or collects the payments on a home loan will send an electronic notice to an independent contractor when a borrower is in default. The contracting company, in turn, will ask a local subcontractor in its network to conduct a "drive-by inspection." Abandoned homes are then supposed to be secured against the elements, vandalism or other types of damage.
  • The decision about whether to enter a private home is up to a local contractor. That disturbs Pamela Campbell, a circuit court judge for Pinellas and Pasco counties in Florida. Campbell said banks should have to obtain a court order before one of their contractors can enter a home.

    "There should be due process," Campbell said. "When people borrow money to buy a house, they don't anticipate that someone may one day drive by their home and make a determination on their own about whether it is vacant or not, and then possibly change their locks and go through their stuff. That is a scary proposition to me."

Friday, July 27, 2012

Las Vegas Homeowner Dies Before 'Under-Aged' Wife Turns 62; Now Wells Fargo Moves To Boot Widow By Foreclosing On Deceased Hubby's Reverse Mortgage

In Las Vegas, Nevada, KTNV-TV Channel 13 reports:

  • [I]n 2006, Linda and Tom [Brumfield] got a reverse mortgage from Wells Fargo. In a regular mortgage, you make monthly payments to the lender. But in a "reverse" mortgage, you get money from the lender and generally don't have to pay it back for as long as you live in your home.

    It's a way for people 62 and older to convert home equity into cash for things like medical bills, which is what Linda and Tom needed it for. "Wells Fargo gave us $80,000 for the house and they said we could both live here until we died, which I believed."

    But she says Wells Fargo didn't keep their word. [...] Tom -- a World War II veteran -- was 62 long before Linda, so only he could qualify for the reverse mortgage loan at the time. But Linda says the bank made them a promise.

    "They said that if we put the house in his name, then as soon as I turned 62 they'd just include my name on it for a service fee." But Tom passed away suddenly in 2008, shortly before Linda turned 62.

    "And when my husband died, everything changed. They wouldn't call me or anything, didn't get any response." What she did get were foreclosure notices posted on her door even though they sent her a letter in 2009 saying she was eligible for the reverse mortgage.
  • "It's a real, real tragedy," says Attorney Matthew Callister, who's filed multiple lawsuits over reverse mortgage loans like Linda's. "Typically, and from what I've seen here, the cost of that loan is horrific. There's not just lots and lots of hidden fees and costs built into the loan..." There's also lots he says banks don't tell borrowers.

    "Invariably it's fraud in the inducement, fraud in the making of the loan," Callister says. Linda's name isn't on the reverse mortgage loan, but Wells Fargo wants her to pay it off. And even though her name is on the title of the house in a living trust, they won't put it on the mortgage. "Not unless I pay $330,000, whereas a stranger off the street could come and buy it at the auction for $90,000."

    And don't think she hasn't considered being that stranger. But she says Wells Fargo warned her neither she nor any of her family members could buy the home at auction. "I think they were very deceitful and they tricked us into this reverse mortgage. I do believe that."
  • Callister will be working to help Linda fight to keep her home, "Because we recognize that this is a potentially predatory lending situation that's going on involving a senior citizen, that can very well constitute elder abuse."

Lender Admits Illegal Foreclosure, Rescinds Sale, Then Continues To Refuse Loan Modification Payments & Begins Foreclosure Process Again

In Lansing, Michigan, WLNS-TV Channel 6 reports:

  • One local woman says banks have tried to foreclose on her twice in one year, despite having a loan modification and making payments on time.

    After partnering with Ingham County Register of Deeds Curtis Hertel Jr. and Legal Services of South Central Michigan, the homeowner was able to stay in her home following the first foreclosure attempt.

    "The bank admitted they had illegally foreclosed on my home," says the woman, who does not want to be identified.

    "They admitted in a sworn statement that they filed with the register of deeds that they were wrong, that she had a loan modification," says Perry Thompson, lawyer with Legal Services of South Central Michigan. "They rescinded the sheriff's sale. Nothing has changed. She still has the loan modification, they still won't take payments and they're foreclosing again."

    So far, Thompson has been able to get a temporary restraining order against the company trying to force the homeowner from her home. They will return to court in late July to try and make the restraining order permanent.

80+ Year Old Sisters Victimized By Loan Servicer; Find Themselves In F'closure After Being Duped Into Missing Mortgage Payment To Qualify For Loan Mod

In Sand Springs, Oklahoma, Tulsa World reports:

  • At 82, Joyce Jackson is the spry younger sibling who takes care of her older sister and teaches cooking and gardening.

    Her sister, Doreen Wood, suffers memory loss and lingering health issues at age 84 after a serious illness several years ago. Jackson is glad to take care of her older sister's finances and health because Wood can't drive or live alone.

    But both women say they feel victimized by Wood's mortgage service company, CitiMortgage. They say they were told to stop making payments in 2010 on the Sand Springs home, where Wood previously lived for decades, to qualify for a payment modification program.

    CitiMortgage refused to give them a timely response about whether they qualified for the program and began foreclosure proceedings in early 2011 without their knowledge, the sisters say.
  • "I feel so frustrated," Jackson said. "Out of one side of their mouth, they were talking to us about modification, all while beginning the foreclosure process. That's incredibly dishonest. They had no intention of helping."

BofA Loan Modification Jerkaround Stories Continue To Pile Up; Payments Made Too Early, 35 Cent Short Land Befuddled Homeowner In Trouble

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:

  • It might make financial sense for Lisa Fiorilli to just walk away from her home in Manayunk — a tidy, three-story rowhouse on one of the neighborhood's familiar, hilly streets that rise up from Main Street and the canal.

    But Fiorilli, facing foreclosure after a two-year bureaucratic tangle with Bank of America over a mortgage modification, would rather stay and fight — even if her home is now worth less, as she says bank officials have suggested, than what she owes on it.

    Fiorilli's saga — backed up by a thick file of documents and call logs — is a story of a mortgage accommodation dangled and apparently snatched away for flimsy reasons, such as a phone payment that came in 35 cents short, and another payment that came in two weeks early. That's no misprint: early, not late.
  • So what went wrong? Fiorilli has gotten multiple answers.

    She says she dutifully made her monthly [loan modification] payments starting in March 2010, paying by phone to ensure she knew the right amount. When she got a letter denying her a permanent modification six months later, it said she failed because of "trial plan default."

    Baffled, she finally got a bank rep to compare the bank's records against her own statements, revealing the 35-cent shortfall. Fiorilli says he encouraged an appeal.

    Every time she called, she says, she got a different answer. Sometimes she was told she'd finally been approved. Others times, she was told she'd been declined. Her pleas to speak with an executive with actual decision-making authority were ignored.

    Then, this spring, she got another denial letter. This one said that her initial appeal was valid, but that now she didn't qualify because of the financial formula.

    When she called this time around to question the decision, asking pointedly whether "anybody should lose their house over 35 cents," a new bank rep denied that the tiny shortfall was the reason for the initial denial.

    Instead, she blamed it on the fact that Fiorilli's first payment came in March 2010, before her modification was due to begin April 1. Funny, since Fiorilli has two Bank of America letters dated in early March 2010 urging her to make her first payment immediately.

Thursday, July 26, 2012

MERS Foreclosure Issues To Be Heard By Oregon Supremes; High Court Will Address Four Certified Questions Sent By Federal Judge

The Oregonian reports:

  • A day after a key ruling from a lower appeals court, the Oregon Supreme Court said it will resolve uncertainty surrounding the mortgage industry's controversial loan tracking system and its role in out-of-court foreclosures.

    The state's highest court on Thursday officially accepted questions sent to it by U.S. District Court chief judge Ann Aiken. The questions stem from four cases challenging the legality under Oregon law of the Mortgage Electronic Registration Systems Inc. and non-judicial foreclosures.

    On Wednesday, the Oregon Court of Appeals ruled in a separate case that a record of past mortgage sales must be filed publicly in Oregon before an out-of-court foreclosure can begin. It also said that MERS, the industry's private registry of mortgage transactions, could not act as a stand-in for filing the mortgage assignments in county recorders offices.
See the Oregon Supreme Court Order Accepting Certified Question for the four certified questions that will be addressed by the Oregon high court.

Suspended S. Florida Mayor Accused Of Duping Unwitting Bankster Into Approving Short Sale By Getting Relative To Pretend To Buy His Underwater Condo

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

  • Suspended Mayor Jose Rodriguez — already facing corruption charges that led to his suspension from office — has been hit with three new felonies alleging he defrauded a bank by short selling a Palm Beach condominium to a relative.

    He also allegedly falsified an affidavit in October saying the condo had been his primary residence for four years, even though he was renting it out at the time and living miles away at his Boynton Beach home, and had been mayor for nearly 18 months.
  • According to a probable cause affidavit released Monday, Rodriguez had applied on Oct. 10, 2009, to Chase Bank for a loan modification, saying he had only $2,000 in the bank. Investigators later determined that he had more than $250,000 in an American Express Bank account.

    The bank declined the modification, saying Rodriguez didn’t qualify. Less than a year later, on Aug. 27, 2010, foreclosure proceedings began.

    Then, in August, an attorney for Rodriguez asked JP Morgan Chase Bank to approve a short sale for $74,000 in cash to Eric Molares of Royal Palm Beach. Prosecutors don’t detail Molares’ relationship to Rodriguez. The bank agreed and the deal was struck Oct. 18.

    Rodriguez and Molares each signed anaffidavit of arm’s length transaction,” in which Rodriguez said he was neither a relative nor business associate of Molares and they shared no business interests.

    Investigators later discovered that on Sept. 8 Rodrigu­ez deposited $75,000 in one of his accounts, then wrote a check for $74,000 to Molares. Molares then gave a cashier’s check to cover the short sale. Molares told investigators Thursday that Rodriguez gave him $75,000 to pretend to buy the unit.

    The condo’s tenant later told investigators she’d received an email pur­portedly sent from Molares, saying he was the new owner and landlord, telling her Rodriguez would be managing the property and directing her where to send the $950-a-month rent.

    Molares told investigators he did not give Rodriguez permission to create an email account impersonating him. He said Rod­riguez later admitted creating a bank account for the rent.

Family Who Paid $5K To 'Adverse Possession Deed' Peddler Gets The Boot As Homeowner Permitted To Recover Possession Of Temporarily Vacated Home

In Littleton, Colorado, CBS4 reports:

  • A judge in Arapahoe County gave a Littleton family permission to move back in to their home after squatters took possession and lived there for eight months.

    The illegal occupants of the home were given 48 hours to leave the premises after their claim to occupy the home by “adverse possession” was shot down in court.

    After 12 years living on Mabre Court in Littleton, Troy Donovan got a job with a racing team in Indiana. Donovan left Colorado in March, 2011, his wife Dayna and their two children followed a few months later in August. After months of trying to sell the house, the Donovan’s winterized their home, turned off the utilities, and left for Indiana.

    The Donovans say their plan was always to return to Colorado. But that turned out to be quite difficult. While still in Indiana, the Donovan’s former neighbors on Mabre Court told them people were living in their house.

    Donovan recalls asking the occupants to leave when they returned to Littleton. “We show up at the house and we say ‘Look, I’m Troy Donovan, this is my wife Dayna, we own this home,’ ” he told CBS4. The people inside wouldn’t budge, so the Donovans were forced to move into a relative’s basement in Greeley.

    The people living inside, Veronica Fernandez-Beleta and Jose Rafael Leyva-Caraveo, claimed they bought the home. They told Littleton police they paid a man named Alfonso Carillo $5,000 for some legal paperwork called a deed ofadverse possession.”

    Carillo is a former realtor whose license has been revoked. Carillo also faces criminal charges in Denver and has been connected to a string of homes occupied by squatters up and down the Front Range. The homes vary in size and price, but all have connections to Carillo through various court documents CBS4 has obtained.

    After seeing previous CBS4 stories on stolen homes, the Donovans confronted the people living in their home. “I told her ‘What you’re doing is wrong, it’s illegal. I would really like you to move out of the home or we will take legal action against you,’ ” said Dayna Donovan.

    On Thursday a judge ordered that the Donovans get their home back. Fernandez-Beleta told CBS4 in Spanish, “I am sad and confused and distressed.” The Donovans say they are thankful they can finally return home.

    We get to get out of the basement, get a full home to live in,” Dayna said. “A home we created and worked very hard in as well.”

Wednesday, July 25, 2012

Alabama Judge: City Court System That Could Reasonably Be Characterized As A 'Debtors' Prison' Amounts To A "Judicially Sanctioned Extortion Racket!"

In Harpersville, Alabama, The Birmingham News reports:

  • A Shelby County judge shut down what he called a "debtors prison" run by Harpersville Municipal Court and a private probation company that he said amounted to a "judicially sanctioned extortion racket," court records show.

    Circuit Judge Hub Harrington took control of all cases in Harpersville involving people jailed for failing to pay court fines and fees. He also ordered the city's mayor and all council members to attend an Aug. 20 injunction hearing and future court hearings in the case.

    Harrington filed the order Wednesday afternoon on a lawsuit filed in 2010 on behalf of Dana Burdette, contending that Harpersville Municipal Court routinely violated defendants' Constitutional rights. If they were unable to immediately pay court-imposed fines and fees, defendants often were trapped by the system into paying several times that amount, the judge found.

    The judge wrote in a scathing five-page order that he reviewed sworn statements filed by Burdette's lawyers during the Fourth of July holiday and was appalled by the evidence he saw of systematic abuses in Harpersville.

    "Most distressing is that these abuses have been perpetrated by what is supposed to be a court of law," Harrington wrote. "Disgraceful."

    The judge found evidence that the city would turn over to the private probation company, Judicial Corrections Services, cases in which Municipal Court defendants could not immediately pay the court-imposed fine and costs.

    Many defendants later were locked up, some on bogus failure-to-appear complaints, resulting in more charges that led to more fines, court costs -- and more debt
    , the judge wrote.
Thanks to Deontos for the heads-up on the story.

Title Insurer Sends Out Alert On Short Sale Racket Involving Use Of Phony Paperwork Simulating Authentic BofA Short Sale Approval Letters

The South Florida Sun Sentinel reports:

  • Local homeowners and title insurance companies are being warned about possible mortgage fraud that involves bogus short sale approval letters from Bank of America.

    Attorneys' Title Fund Services, one of the largest title insurance underwriters in Florida, sent an alert last week, saying scammers are mimicking the lending giant's approval letters, including similar language and the bank's logo. In response, Bank of America is asking those who receive letters to verify their authenticity by calling 866-880-1232, option 1.

    Three California men were arrested last month in connection with a series of schemes targeting homes in some stage of foreclosure, authorities said.

    "In some cases, the defendants used short sale approval letters that had been entirely fabricated to carry out their schemes," the U.S. Attorney's Office in Los Angeles said in a statement. "As a result, homebuyers and investors purchased homes they thought had a clear title but were actually devalued and subject to hundreds of thousands of dollars worth of liens."

    In other instances, defendants assumed identities of homeowners or claimed to be working with bank employees, who would approve short sales for less than fair market value, federal law enforcement officials said in the statement. The scams allegedly resulted in more than $10 million in losses.

    One of the men, Ahmed Tariq Asghari, 32, of Sherman Oaks, Calif., was arrested in Miami Beach. It's not clear whether other banks were affected or if any of the schemes occurred in Florida, though mortgage fraud is a major problem in the Sunshine State.

    In a short sale, a seller has the lender's permission to unload the home for less than what's owed on the mortgage.
For more, see Scams on short sale approvals (Bogus letters result in $10 million in losses).

Feds Pinch Group Running Alleged Foreclosure Rescue Racket That Manufactured & Sent Phony Military Orders To Lenders To Stall Repo Process Under SCRA

From the Office of the U.S. Attorney (Plano, Texas):

  • Five individuals have been indicted have been indicted for their roles in a combination foreclosure rescue/drug distribution scheme in the Eastern District of Texas, announced U.S. Attorney John M. Bales today.

    Charles Williams, 37, of McKinney, Texas; Jarrod Williams, 33, of McKinney, Texas; Julius Williams, 41, of McKinney, Texas; Jemilat Williams, 33, of Missouri City, Texas; and Christopher Carter, 33, of Leicester, England, have been indicted by a federal grand jury on July 11, 2012 and charged with multiple violations.

    According to counts one through 17 of the indictment, Charles Williams, Jarrod Williams, Julius Williams, and Jemilat Williams controlled and operated Applied Investment Strategies Inc., which marketed itself as a foreclosure rescue service that would assist homeowners who were at risk of foreclosure.

    However, once retained by their customers, AIS fraudulently used their customers’ personal identification information to prepare and send false military orders to lending institutions in order to claim relief from foreclosure efforts under the Servicemember’s Civil Relief Act.

    AIS then leased out the homes and collected the rental payments for its benefit. The scheme involved approximately 38 homes and also extended to efforts to forestall repossession of cars. According to count 18 of the indictment, after at least one of the fraudulently acquired properties was vacated, Charles Williams, Jarrod Williams, Julius Williams, and Christopher Carter turned it into a marijuana grow operation that housed in excess of 1,000 marijuana plants.
For the U.S. Attorney press release, see Five Indicted in Combination Foreclosure Rescue/Drug Distribution Scheme (Subjects Used False Military Orders to Forestall Foreclosures Before Converting Home into Marijuana Grow Operation).

Tuesday, July 24, 2012

Bank's Failure To Inquire Into Rights Of Persons In Possession Prior To Giving Loan In Connection With Sale Leaseback Ripoff Leaves It Holding The Bag

In another court ruling that has come down in recent years applying the age-old legal doctrine of bona fide purchase to a situation involving some form of home equity ripoff, the Minnesota Court of Appeals concluded that a mortgage lender that provided financing in connection with a sale leaseback equity stripping racket was not entitled to protection as a bona fide purchaser and, accordingly, voided its mortgage, when:

  1. it failed to prove that it received purported lienholder's interest without notice of a violation of the state's anti-foreclosure rescue ripoff statute (Minn. Stat. §325N) and
  2. it failed to fulfill its duty of inquiry as to the rights or interests of persons in possession [ie. the screwed-over homeowner in this case] of the residential real property in foreclosure.
In this case, the lower court found that, because the screwed-over victim was still in possession of his recently-foreclosed home when the mortgage lender extended credit to the then-title holding sale leaseback peddler, and it (the lender) failed to inquire into what rights or equities in connection with the home the victim may have had, the lender was deemed to be on notice of the violations of law committed against the victim by the sale leaseback operator.

The bottom line here was the lender was found not to be entitled to its purported lienholder's interest in the home it thought it received when it loaned money to the sale leaseback operator and, accordingly, was left holding the bag.

For the court ruling, see Graves v. Wayman, 816 N.W.2d 655 (Minn. App. 2012) (for publication) - (includes court syllabus, but no embedded links). Go here for Google version (includes embedded links, but no court syllabus).

Representing the successful homeowner was Jeramie R. Steinert, Steinert P.A., Minneapolis, Minnesota.

See Minnesota Bona Fide Purchaser, Possession, Duty Of Inquiry for some Minnesota case law addressing the duty to inquire of persons in possession of real estate that subsequent purchasers and encumbrancers are burdened with prior to taking title to property or taking a lien as a security interest for a loan.

For other posts on the application of the bona fide purchaser doctrine by the courts in recent years in connection with some type of a home equity ripoff where the victim's title is scammed out from under, see:

'Rambo' Slams C. Pennsylvania Sale Leaseback Peddler; $2.4M+ Ripoff Tagging 3 Dozen Homeowners In Equity Stripping Racket Ends w/ 19+ Year Prison Stay

From the Office of the U.S. Attorney (Harrisburg, Pennsylvania):

  • The United States Attorney’s Office for the Middle District of Pennsylvania, announced [] that a former York County woman has been sentenced to 238 months’ incarceration for defrauding 36 homeowners in Cumberland, York and Adams Counties out of $2,470,666 between 2006 and 2008.

    United States Attorney Peter J. Smith said that following a six-day jury trial in November 2011, Joanne M. Seeley, age 42, formerly of East Berlin, Pennsylvania, was found guilty in November of 2011 on four counts of Wire Fraud and four counts of Money Laundering.

    After a lengthy sentencing hearing [...], Judge Sylvia Rambo sentenced Seeley to the term. Judge Rambo also ordered Seeley to pay $2,470,666 in restitution to the 36 homeowners.

    Seeley, who now lives in South Carolina, was a Pennsylvania licensed real estate agent until December 12, 2006, when she permanently surrendered her license in lieu of disciplinary action. Testimony during the trial showed that between September 2005 and December 2008 Seeley perpetrated a wire fraud scheme that defrauded 36 homeowners plus dozens of mortgage lenders and several investors.

    The particular scheme Seeley executed is more commonly known as a Foreclosure Rescue/Equity Skim, operating under the name of a new business she created, S&D Property Solutions.

    Seeley would identify a residence scheduled for Sheriff's Sale and advise the homeowner he could avoid foreclosure by selling the home to her or one of her investor/buyers, who would then lease the property back to the homeowner after the sale.

    Seeley assured the homeowner she would use the equity in the property to pay off his personal debts, rebuild his credit rating, and allow him to buy his home within one year. Seeley also promised other homeowners that their equity would be held in escrow by the investor/buyer for their repurchase of their home.

    Before surrendering her real estate license Seeley would simply charge the distressed homeowner an extremely high commission equal to the exact penny of the homeowner’s proceeds from the sale. Later, Seeley would have the homeowner sign over their sales proceeds check to S&D Property Solutions.

    Contrary to what the homeowners were promised, no funds were ever escrowed on their behalf and no sales proceeds were ever applied against their personal, unsecured debts. As a result, no homeowner was ever able to buy back the home.(1)

    Seeley recruited and induced several investor/buyers into participating in her program by assuring them they would be reimbursed for all out-of-pocket expenses, including their down payment plus an $8,000 "fee" for engaging in the transaction.

    Seeley also promised the investor/buyers they would receive monthly rent from the homeowner that would cover most, if not all, of their mortgage payments. Some buyers were also promised an up-front payment designed to make up the difference between their mortgage payments and the rent they received.

    Seeley submitted a plethora of false documents to mortgage lenders in order to induce them into approving the investor/buyers’ loan applications, including false employment verifications, false leases, false rental income, and false occupancy verifications.

    Seeley also submitted redacted sales contracts to the lenders that concealed the fact the buyer and seller had entered into buy-back agreements and that the buyer’s down payment was being refunded to the investor/buyer from the loan proceeds.

    The trial also showed Seeley used a large portion of the homeowners’ equity she stole to live a lavish lifestyle, including the purchase of a 23-acre York County horse farm; several Jaguar automobiles; a $200,000 truck and horse trailer; a built-in swimming pool; a Caribbean cruise; and a Rehoboth Beach, Delaware rental property.

    The evidence also showed Seeley spent more than $400,000 on horses and other animal expenses between 2006 and 2008. Judge Rambo directed Seeley to begin serving her 238-month sentence on August 20, 2012.
For the U.S. Attorney press release, see Former York County Woman Sentenced To Nearly 20 Years For Fraud.

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

Elderly Couple Include RICO Charges In Lawsuit Alleging They Were Duped Into Signing Over Their Home As Collateral For Loan

In Los Angeles, California, Courthouse News Service reports:

  • An elderly couple claim in court that real estate agents bilked them into using their home as collateral for a new church.

    Erma and James Marshall and the Mt. Zion Missionary Baptist Church of San Bernardino sued Dan Bochner and Rolando DeArmas (also referred to as DeArmis in the complaint) and Bochner's foreclosure agent Reliable Trust Deed Services, in a federal RICO complaint.

    The Marshalls, with "ages exceeding 74 years," claim that in 2005 DeArmas tricked them into signing over their home as collateral for the purchase of a movie theater in San Bernardino, which the couple intended to use as a church. After the property was purchased, mortgage payments fell into arrears and the Marshalls' home was entered into a foreclosure sale, the couple says.
  • "DeArmas knew that plaintiffs, Marshalls, were an elderly couple who were unfamiliar with real estate transactions and could easily be tricked and convinced into signing documents for their residence to be used as collateral for the Del Rosa church property," the complaint states.
  • The Marshalls seek cancellation of instrument and damages for RICO fraud, negligent misrepresentation, usury, and elder abuse.

For the lawsuit, see Marshall v. Bochner, et al.

For some California case law on one legal approach to undoing a scam like the one alleged here, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Florida Man Gets 60 Months For Duping Victims Into Borrowing Against Their Home Equity In $2M Ripoff

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

  • United States Attorney Richard S. Hartunian and [another] announced that ARTHUR STRASNICK, age 64, of New Smyrna Beach, Florida, was sentenced [...] following his guilty pleas on two counts of mail fraud and one count of identity theft.

    STRASNICK was sentenced to 60 months of imprisonment to be followed by three years of supervised release. STRASNICK was also ordered to pay $1,994,620.32 in restitution.

    STRASNICK’s fraudulent activities in the Northern District of New York began in early 2003 when he lured a Saratoga Springs woman into investing money with STRASNICK’s firm, Backstreet Associates, Inc. Investors in Backstreet Associates, Inc. were “guaranteed” high fixed annual rates of returns ranging from 12.0% to 20.0% interest.

    STRASNICK’s investors were paid purported interest and principal payments, when in reality, the investors were receiving monies obtained from the same investor or other investors.

    In the Fall of 2006, STRASNICK also operated a mortgage fraud scheme in which he tricked other individuals, including the aforementioned Saratoga Springs woman, into providing him money representing equity in their homes.

    The mortgages were obtained after STRASNICK either made false representations to the homeowners or forged the signatures of the actual homeowners.
For the U.S. Attorney press release, see Florida Man Sentenced In Fraudulent Investment And Mortgage Schemes (Defendant Who Orchestrated a Ponzi-type Investment Scheme and Who Fraudulently Obtained Mortgage Proceeds Sentenced to 60 Months of Imprisonment and Ordered to Pay $1,994,620.32 in Restitution).

Houston-Area Man Faces Aggrevated Theft Charge For Pocketing $50K By Unloading Home In F'closure Onto Unwitting Buyer Without Disclosing Mortgage Lien

In Harris County, Texas, The Atascocita Observer reports:

  • An Atascocita man faces a felony charge of aggregate theft for allegedly attempting to sell his home with the knowledge that it was under foreclosure proceedings. Harris County court records show Matthew Louis Seiffert, 60, is accused of fraudulently accepting payments from a non-profit organization called “Hands Across the Equator Peru” for the sale of his residence located in the 19600 block of Atasca Oaks Dr.

    [The complainant] stated he paid Seiffert a total of $50,000 toward the residence,” Harris County District Attorney’s Office investigator Dustin Deutsch states in a probable cause statement [...].

    Deutsch says a general warranty deed was subsequently filed with the Harris County Clerk’s Office in Sept. 2010, promising to transfer the residence into the ownership of “Hands Across the Equator Peru” and its local agent, board member Douglas Ashworth.

    Months later, as the buyer of the home continued to pay installments on the home purchase, Ashworth was reportedly notified by the district attorney’s office that the bank had foreclosed on the property.
    Ashworth stated he was never refunded the $50,000 he had paid to Seiffert for the residence,” Deutsch says.

    Investigators learned that Seiffert was allegedly in default of his loan agreement on the residence for “failure to provide proof of insurance, failure to pay taxes, and failure to notify First Bank of a bankruptcy judgment entered against him.” Seiffert, court records say, was also behind on loan payments.

    Seiffert, investigators allege, entered into a sales contract for his residence on Atasca Oaks Dr. just after he reportedly received notice of the foreclosure proceedings in March 2010.
    [I] determined that Matt L. Seiffert executed a warranty deed purporting to convey the foreclosed property when he had no legal authority to do so due to First Bank being the primary lien holder on the property and having foreclosed the property,” Deutsch said.

    Seiffert was taken into custody July 12 and is being held in Harris County Jail without bond.

Trio Bagged For Allegedly Duping Dying 81-Year Old Into $50K Refinance Ripoff That Led To Her Loss Of Home To Foreclosure

In Cleveland, Ohio, NewsChannel 5 reports:

  • Eighty-one year old Evelyn Chudzinski only owed $14,000 on her Cleveland home, but Cuyahoga County Prosecutors have charged three suspects with tapping into her home equity, and playing a role in the loss of her property.

    Richard While Jr., Sharon Stucco, and Gary Thomas appeared in Cuyahoga County court to face multiple felony counts of identity fraud. Assistant Prosecutor Frankie Goldberg told NewsChannel5 exclusively that While was the leader of the alleged plot.

    Goldberg said the trio of suspects befriended Chudzinski in May 2008, allegedly telling her they needed her personal information to help her refinance her Finn Avenue home.

    "They received $50,000, Chudzinski had no idea what she was signing," said Goldberg. "They refinanced the home she was living in for 20 years, and used her identity to allegedly buy an investment property on Dakota Avenue."

    Chudzinski later her lost her home to foreclosure, and months later passed away, before charges where brought against the suspects. While, Stucco and Thomas all pleaded not guilty, the case has been assigned to Judge Eileen T. Gallagher, and is set to start on July 17.

    Meanwhile, Prosecutor Goldberg praised the Ohio Legislature with recently increasing the statute of limitations on crimes against the elderly to five years. "People need to be accountable for these crimes, they are absolutely egregious, they're despicable, and we really need to send a message, we need to be vigilant in protecting our senior population," said Goldberg.

    If convicted, While could be sentenced to up to 21 years in jail, Stucco 15 years and Thomas 3 years.
Source: Trio charged with defrauding thousands from dying 81-year-old Cleveland woman (Prosecutors alledge trio opened 50K equity loan).

Monday, July 23, 2012

Florida Bankruptcy Court OKs 'Chapter 20' Junior Lien Strip-Off From Debtor's Home; Ch. 13 Case Filed Less Than 2 Months After Scoring Ch. 7 Discharge

From the Florida Bankruptcy Law Blog:

  • [A Florida bankruptcy] judge held that a Chapter 13 debtor may strip a wholly unsecured junior lien from his homestead even though the debtor filed a prior Chapter 7 case and is therefore ineligible for the Chapter 13 discharge.

    However, the court also said that the Chapter 13 must have been filed in good faith, and a debtor is not proceeding in good faith if he files a Chapter 13 primarily to strip the second mortgage. The issue is whether the Chapter 13 is designed mainly to achieve a lien strip that could not be obtained in the prior Chapter 7. In this particular case, the court did not find the debtor acted in bad faith.

    The debtor had initially filed a Chapter 13 case until the Chapter 13 moved to dismiss the case because the debtor’s unsecured debts exceeded Chapter 13 ceilings. The debtor then retreated into a Chapter 7 to discharge the unsecured debt.

    Subsequently, the debtor filed a Chapter 13 to strip the second mortgage.(1) The court noted that the debtor did not start off with plan to file Chapter 7 and a subsequent Chapter 13.
For the ruling, see In re: Dang, 467 B.R. 227 (Bankr. M.D. Fla. March 12, 2012).

In a 'somewhat' related post, see Another Fully Underwater 2nd Mortgage Holder Gets Wiped Out As Federal Appeals Court OKs Lien Stripping Of Subordinate Loan In Ch. 7 Bankruptcy, which addresses a recent ruling by the U.S. Court of Appeals for the 11th Circuit (the court that has appellate jurisdiction over cases coming from the lower Federal courts in Florida - as well as from Georgia and Alabama) that stamped its approval on a junior mortgage lien strip-off in a Chapter 7 bankruptcy case.

(1) The approach of filing a bankruptcy petition under Chapter 13 shortly after obtaining a debt discharge under Chapter 7 is sometimes informally referred to as a "Chapter 20 bankruptcy." In this case, the Chapter 13 petition was filed about seven weeks after obtaining the debt discharge under the earlier-filed Chapter 7 case. According to the court ruling, the following timeline sets forth when the petitions were filed:
  • On November 9, 2010, the Trustee filed a Motion to Dismiss the first case, and alleged that the Debtor was not eligible to be a debtor under Chapter 13 because her debts exceeded the limits provided by § 109 of the Bankruptcy Code. On November 15, 2010, the Debtor converted the first Chapter 13 case to a case under Chapter 7 of the Bankruptcy Code. She received a discharge in the Chapter 7 case on March 8, 2011. On April 25, 2011, the Debtor filed the petition that commenced the current Chapter 13 case.

Delaware Suit Targeting MERS Ends With A Wimper; State AG Scrambles To Save Face, Accepts Crappy Settlement

In Dover, Delaware, The Associated Press reports:

  • The Delaware attorney general’s office has agreed to drop a deceptive trade practices lawsuit against a company that runs a nationwide electronic mortgage registry. Attorney General Beau Biden announced a settlement with Virginia-based Mortgage Electronic Registration Systems Inc. [].

    The settlement was reached after a judge expressed skepticism about the state’s claims at a May hearing on MERS’ motion to dismiss the lawsuit.

    MERS was set up by the banking industry to rapidly package and sell mortgages as securities without recording each transaction in county recorder offices.

    Biden’s office argued that the MERS registry is riddled with inaccuracies that raise questions about the rights of homeowners facing foreclosure, including trying to find out who owns the underlying loan.

    MERS argued that state officials couldn’t point to any deception of consumers because the registry operates solely for the benefit of its member financial institutions and does not provide any goods or services to homeowners.
See also:

Michigan Trial Court: No Right Of Redemption When Realty Sold By Court-Appointed Receiver; Rights Typically Associated With F'closures Not Applicable

From a news alert from the law firm Warner Norcross & Judd, LLP:

  • In a victory for banks and other mortgagees, a Michigan circuit court recently held that a sale by a court-appointed receiver does not trigger a right of redemption.

    In First Financial Bank, N.A. v. Scott T. Bosgraaf, a court-appointed receiver sought court approval to sell mortgaged real estate and other property. The mortgagor objected, arguing that the proposed sale would “deprive” the mortgagor of its statutory right to redeem the property.

    The Ottawa County Circuit Court disagreed, concluding that a receiver sale is not a statutory foreclosure, and that the rights that accompany foreclosure, in particular the right of redemption, is "a creature of statute" that is not available following a sale by a receiver.

    The Circuit Court observed that this conclusion should not be surprising since the Michigan Supreme Court has held that a receiver succeeds to all property rights and interest of a debtor, including the debtor's right of redemption.

    It bears noting that the Bosgraaf ruling is an order of a Circuit Court and has no binding effect. It remains to be seen if other courts will follow suit.

    However, if the principle takes hold that a mortgagor has no right to redeem property sold by a court-appointed receiver, banks and mortgage lenders can be expected to turn to receivership sales as a strategy to avoid statutory redemption rights.
  • In a substantial number of these cases, mortgagors will object to a receiver's motion to sell real estate free and clear of their redemption rights, arguing that such a sale is a disguised mortgage foreclosure sale for the sole benefit of the first mortgagee or that it is a "judicial sale" that is subject to the mortgagor's redemption rights.

MERS Takes Big Hit In Oregon; State Appeals Court Says Outfit's Method Of Handling Non-Judicial F'closures Is Bogus; Expect State Supreme Court Review

In Salem, Oregon, The Oregonian reports:

  • The Oregon Court of Appeals struck a blow to the mortgage industry in Oregon Wednesday, ruling that its controversial document-registry system could not be used to skirt state recording law in out-of-court foreclosures.

    In a decision with implications beyond the Mortgage Electronic Registration Systems Inc., the state's second-highest court also held Wednesday that a lender must ensure a complete ownership history of the mortgage is filed in county records before it can foreclose outside a courtroom.

    MERS was created by the mortgage industry to bundle and sell loans to investors without having to record every assignment with county clerks. It is involved in most mortgages across the country.

    But the court found that the Oregon Trust Deed Act requires the party that receives loan payments to publicly record all changes in mortgage ownership before starting a so-called nonjudicial foreclosure.

    MERS does not take loan payments and does not qualify as a “beneficiary” of a trust deed, so the digital registry cannot be used to avoid the recording requirement, the court ruled.

    A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing--publicly recorded assignments," the court ruled. Judge Lynn Nakamoto wrote the decision.

    The ruling won't be the final say on the matter. In a statement, MERS said it disagreed with the ruling and would appeal it to the Oregon Supreme Court. "
    MERS validity as beneficiary has been affirmed in 48 prior Oregon rulings, including 30 since this case was filed," MERS spokeswoman Janis Smith said in the statement.

    But other judges have ruled against MERS. The state Supreme Court was asked earlier this year by Chief U.S. District Court Judge Ann Aiken in Portland to resolve the differing opinions. Stephen Armitage, a spokesman for the court, said he did not know when the justices would address the matter. A third Oregon case is on appeal before the 9th U.S. Circuit Court of Appeals.
  • For the time being, lower state courts will likely have to follow Wednesday's ruling, said Kelly Harpster, a Lake Oswego attorney who represents homeowners. "Right now, it is the first and last word in Oregon," said Phil Querin, a real estate attorney in Portland. "The [state] Supreme Court will have to make the final decision."

    Smith of MERS noted that the ruling does not affect judicial foreclosures filed in court and does not overturn any completed foreclosures. But attorneys representing homeowners speculated that it might compel some homeowners to try to overturn previous foreclosures where assignments aren't completely recorded.
For the court ruling, see Niday v. GMAC Mortgage, LLC, A147430 (Ore. App. July 18, 2012).

Sunday, July 22, 2012

Arizona Appeals Court: Homeowners' Post-Foreclosure Rights Under State Anti-Deficiency Statute Applies To Forced Sale Of Time-Share Vacation Homes

In Phoenix, Arizona, The Associated Press reports:

  • A new state court ruling says Arizonans with partial ownerships of time-share vacation homes are entitled to the same post-foreclosure rights as owners of year-round homes.

    A mortgage company had sued a couple for the balance still owed on their mortgage for a Sedona condo after a foreclosure of the couple's one-tenth share of the property.

    However, the Court of Appeals rejected the company's argument that the vacation condo isn't a single-family dwelling covered by the state law prohibiting so-called deficiency judgments.

    The court says the purpose of that law is to protect consumers from financial ruin. It says the law places the risk of inadequate security on lenders rather than borrowers.

U.S. Bank A Major Slumlord Conducting Illegal Foreclosure Evictions, Says City Of Los Angeles In Lawsuit

In Los Angeles, California, the Los Angeles Times reports:

  • For Mary Sanchez, the vacant, foreclosed home across from hers on Abner Street in El Sereno was an assault on the senses and her piece of mind.

    Gang members and squatters used it as a stash house. The place stank of dead animals. Mice made constant incursions from across the way onto her property, prompting her to get cats to head them off. Weeds in the yard reached as high as her chest.

    "It was embarrassing," she said. "When people would come over I would say 'look for the ugly house with all the stuff in the lawn. I live next to that.' "

    On Monday, Los Angeles officials accused US Bank of illegally allowing the Abner Street home and many others to deteriorate into slums. The civil allegations found problems in the way US Bank handled 1,500 home foreclosures and cited more than 150 homes that had fallen into disrepair. The city is demanding that the bank clean up vacant properties and improve conditions for families living in others.

    The lawsuit marks the second time the city has accused a major bank of being a slumlord, part of an aggressive attempt to deal with the urban decay caused by the housing crash.
  • The lawsuit follows an 18-month investigation by the city and accuses US Bank of fostering poor conditions in some neighborhoods that contribute to crime and blight. The bank was also responsible for illegally evicting some tenants and forcing others to live in dangerous conditions, according to the complaint.

    The city is seeking an injunction and potentially millions of dollars in penalties and restitution from the Minneapolis-based financial institution, whose logo crowns the top of the West Coast's tallest building in downtown L.A.

    "U.S. Bank National Assn. disregarded virtually every one of its legal duties and responsibilities as owner, resulting in the creation and maintenance of an alarming number of vacant nuisance properties," the complaint alleges. It also said the bank was "repeatedly advised" over the course of years to fix the problems, but "made no efforts … to comply with the law."

    Last year's complaint targeted Deutsche Bank, the fourth largest bank in the world, for its actions related to more than 2,000 foreclosures in Los Angeles.
For more, see L.A. sues US Bank over blighted, abandoned homes (The city attorney accuses the bank of being a slumlord and demands that it clean up properties it foreclosed on).
For the Los Angeles City Attorney press release, see City Attorney's Office Files Law Enforcement Action Against U.S. Bank For Failure To Maintain Foreclosed Properties And For Illegal Evictions (National Bank Faces Hundreds of Millions of Dollars in Potential Liability and Injunction to Clean Up Foreclosed Properties and Stop Illegal Evictions).

Bankster Accuses Local County Clerk Of 'Un-Recording' Home Loan Docs & Removing Them From Land Indexes; Missing Paperwork Needed To Start Foreclosure

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

  • A bank claims it is having difficulty foreclosing on a property due to missing paperwork in the county clerk's office. Bank of America filed a lawsuit June 20 in Jefferson County District Court against Allen K. Marble, Shannon Marble, Shawn A. Jurek and Carolyn D. Jurek.

    In its complaint, Bank of America claims its predecessor, Countrywide, issued a mortgage to the Jureks for $177,300 to help them buy property in 2007 from the Marbles at 1028 North 22nd St. in Nederland. The Jureks secured their loan with a Deed of Trust, according to the complaint.

    Bank of America has since discovered that the Power of Attorney, the Warranty Deed and the Deed of Trust can no longer be found in the real property records in Jefferson County, the suit states. However, when the Jureks first purchased the property, the required paperwork was filed in the correct place, the complaint says.

    "At some subsequent date, the County Clerk 'un-recorded' those instruments and removed them from the indexes," the suit states. "Plaintiff was not told of this 'un-recording' at the time in occurred."

    As a result, Bank of America claims it has been impossible to foreclose on the Jureks' property. The bank seeks a declaratory judgment that validates the Power of Attorney, the Warranty Deed and the Deed of Trust originally signed with the Jureks. It also seeks equitable relief in the form of a foreclosure, plus attorney's fees and general relief.