Saturday, September 15, 2012

City Slams Brakes On NYC Bus Driver, Wife Accused Of Clipping Government Out Of $94K In Housing Subsidies, Other Public Assistance

In Staten Island, New York, the New York Post reports:

  • Authorities have charged a Staten Island bus driver and his wife with cheating the government out of $94,000 in housing subsidies and other benefits. City Department of Investigation Commissioner Rose Gil Hearn announced the arrests of David Vale and Maria Almanzar yesterday.

    A criminal complaint accuses the couple of collecting $60,000 in housing subsidies by falsely claiming she was living alone in a home they shared on Staten Island. It says Vale was making about $104,000 a year as a bus driver at the time.

    Authorities also charged Almanzar with fraudulently obtaining another $34,000 in food stamp and Medicaid benefits. The husband and wife each face up to 10 years in prison if convicted.

Rich Divorcée Hit With $4.7M 'Hotel Bill' & Faces Add'l $3M Tack On For Seller's Legal Fees For Backing Out Of Deal To Buy $18.75M Residential Suite

In New York City, the New York Post reports:

  • That’s one heck of a hotel bill. A well-heeled divorcée who lost $4.7 million when she backed out of buying a swank Upper East Side co-op now faces more than $3 million in legal bills from the developer.

    Defense lawyers say they spent more than 5,000 hours battling Roberta Campbell after she filed suit in 2009 to recoup her deposit on a residential suite in The recently renovated Mark hotel on East 77th Street.

    In particular, this lawsuit was difficult and hard-fought, with plaintiff’s counsel raising numerous issues in an effort to excuse plaintiff’s failure to close her purchase,” according to papers filed in Manhattan federal court.

    And while admitting that their fees “are large in comparison with the down payments at issue,” the hotel’s lawyers insist that the amounts — including $1,025 an hour for lawyer Michael Korotkin — “are reasonable under all of the facts and circumstances.”

    Campbell, the ex-wife of Intuit software chair Bill Campbell, walked away from her planned $18.75 million purchase after inspecting the pad and noting a laundry list of problems, including no heat or hot water, unstained floors and missing hanger rods in the closets.

    But a judge ruled that Roberta wasn’t entitled to break the deal, saying Con Ed was ready to turn on the gas and that most of her complaints were easily fixed “punch list” items.

    Judge William Pauley III also noted that Roberta wasn’t exactly hurting, having moved into 15 Central Park West, “one of the most desirable addresses in Manhattan.” Campbell reportedly paid $17.5 million in cash for that apartment, which has four bedrooms and views to both the east and west.

    Her lawyer declined to comment.

Attorney Gets Bar Boot For Ripping Off $80K In Client Funds From Family Trust

From the California Bar Journal (August 2012):

  • Luann Marie Kelley [#131841], 61, of San Diego was disbarred June 16, 2012, and was ordered to make restitution and comply with rule 9.20 of the California Rules of Court.

    Kelley stipulated that she failed to account for client funds and misappropriated thousands of dollars from a family trust. Kelley represented the trustee, who transferred $80,000 of trust assets to Kelley, who in turn deposited the money in her client trust account. The balance the account dropped to $3,950.75 and later to zero.

    Although Kelley believes she is entitled to $27,123 of the $80,000 for attorney fees and costs, she did not obtain a required order concerning fees and costs from the probate court. The court ordered her to refund $80,000 to the trust, along with an additional $115,752.98 in damages, by May 13, 2010. Kelley contends the issue of her claim to attorney fees and costs remains open with the probate court.

    In mitigation, she had no prior discipline record, provided evidence of her good character, suffered from depression and cooperated with the bar’s investigation.

Friday, September 14, 2012

Adverse Possession-Claiming Squatter Hijacks Vacant Home, Refuses To Budge Days After Homeowner Takes Bank's 'Cash For Keys' Offer & Moves Out

In Houston, Texas, KTRK-TV Channel 13 reports:

  • One local woman is locked in a real estate headache. She moved out of her home to avoid foreclosure and now she says someone is squatting in her former house. That's causing big problems with the mortgage company.

    Days after she moved out, Katrina Collins says she got a call from her mortgage company, questioning her as to who she let move into her home. She had no idea what they where talking about. Now she knows. They're squatters refusing to leave.

    Collins moved out of her home of 14 years last month. Days later, she discovered a squatter had settled in and refused to leave.

    "She said, 'I'm not going to argue with you, but I'm not going anywhere. If you want me out you need to evict me.' That's what she said to me," Collins told Eyewitness News.

    Collins was in a financial bind and to avoid foreclosure she agreed to a "deed in lieu." The mortgage company paid her $2,000 to relocate and they took possession of the home. After she moved out, the mortgage company learned someone else moved in, and even brought the family pet.

    "I got a call from the mortgage company asking me had I leased out the property because there was someone living here that said that they were leasing the property from me," said Collins.

    The squatter wouldn't come to the door, but claimed to Collins she filed adverse possession on the home. It's a real law, but doesn't allow for someone to just move in.

Misconduct In Connection With Bankruptcy, Loan Modification Cases Leads To License Revocation For California Attorney

From the California Bar Journal (August 2012):

  • Zachary Ian Gonzalez [#259663], 32, of West Covina was disbarred June 16, 2012, and was ordered to make restitution and comply with rule 9.20 of the California Rules of Court.

    Gonzalez stipulated to 43 counts of misconduct in 14 cases involving his failures to provide competent legal services in bankruptcy and loan modification matters.

    In 12 matters, he became ineligible to practice law and as a result could not complete his clients’ cases. However, he did not refund unearned fees and in some cases the clients’ bankruptcies were dismissed. Two matters were dismissed because Gonzalez didn’t file 13 required documents. In two other cases, he was not permitted to prepare and file the required documents. He also violated California law by twice agreeing to negotiate a loan modification and collecting advance fees before the work was completed. Gonzalez also did not return his clients’ files.

    He was suspended and placed on probation in 2011 for failing to refund unearned fees or account for advance fees, forming a partnership with a person who is not a lawyer, splitting legal fees with a non-lawyer, soliciting prospective clients with whom he had no family or professional relationship and committing acts of moral turpitude. In mitigation, he stipulated to disbarment.

    He agreed to make restitution totaling $60,855 to the clients in the 14 disciplinary matters.

MTA Stiffs Tenant On $65K Promise After She Was Booted From Rent Controlled Apartment Resulting From 2nd Ave. Subway Construction-Related Condemnation

In New York City, the New York Post reports:

  • She famously wiped out her husband’s “ring around the collar” — but now, she says, she’s getting taken to the cleaners by the MTA [Metropolitan Transit Authority]. Sally Ardrey — the actress who appeared in the 1970s Wisk commercial featuring that catch phrase — was booted from her rent-controlled apartment during Second Avenue Subway construction and is now battling the agency for financial assistance because it wants her to take an apartment she can’t afford.

    Ardrey, who is 74 and has four grandchildren, says she can’t make ends meet on her fixed income and has hired a lawyer to take on the MTA. “I’m frightened of what’s going to happen,” said Ardrey, whose commercial featured a suitcase flying open and taunting her bout collar stains on her husband’s shirts — ads she denounced years later as sexist.

    I can’t tell you how jittery and sad it makes me feel. This is a terrible thing,” she said. Ardrey says the MTA ran her through the wringer, at first negotiating with her and her lawyer before suddenly backing out. “I don’t feel it’s fair . . . I just don’t understand,” Ardrey said. “Why string us along?

    In 2009, she was forced to leave her $1,726-per-month, rent-controlled apartment at 257 E. 73rd St. — where she’d lived for more than two decades — because the building was condemned due to the subway line.

    The MTA helped Ardrey got a new place to live — an offer made to the 57 others dislocated by the project — eventually finding a $2,195-per-month pad that was not rent stabilized. “The MTA told Sally that if she moved into the comparable apartment, it would give her a [one-time] rental assistance payment of $65,553.01,” said her lawyer, Joshua Colangelo-Bryan.

    But Ardrey, whose income is less than $40,000 per year, crunched the rent numbers and realized the MTA was trying to whitewash a bad situation. The new apartment rate amounted to a $5,600 rent increase per year, and she would be exposed to big increases.

    To avoid breaking the bank, Ardrey in 2009 instead moved into an apartment on East 91st Street that cost $1,600 per month and was not rent stabilized — and asked the MTA to honor its $65,500 rent-assistance offer.

    But “the MTA told Sally that because the rent in this new apartment was, at that time, less than the rent in her [old] apartment, it would not give her any rental assistance payments,” said Colangelo-Bryan.

    Over time, the new, nonstabilized, apartment would become more expensive, and, in fact, it already has,” Colangelo-Bryan, said, adding that Ardrey’s rent has now increased to $1,756.

    Ardrey and her lawyer negotiated with the MTA — which was initially receptive — until it abruptly pulled out of the talks. “We eventually traded settlement proposals that actually would have had Sally getting the full $65,553.01,” and they were near a deal, Colangelo-Bryan said.

    But, suddenly, “there is no offer on the table and no willingness to negotiate.” “Ultimately, the MTA has punished Sally for being frugal,” the lawyer said.

    MTA spokesman Aaron Donovan said, “We are sympathetic to Ms. Ardrey’s situation, and we are considering a settlement of her appeal.”

Thursday, September 13, 2012

Vegas Man Cops Plea To Peddling Bogus Loan Modification Ripoff; Suspect Targeted Underwater Homeowners With Phony Principal Reduction Offers

From the U. S. Department of Justice (Washington, D.C.):

  • A Las Vegas man pleaded guilty [] to operating a foreclosure rescue scam that defrauded distressed homeowners who were struggling to pay their mortgages, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

    Alex P. Soria, 65, pleaded guilty [...] to one count of wire fraud and one count of theft of government funds in connection with a scheme to defraud homeowners who were behind on their mortgages.

    According to court documents, Soria identified homeowners whose mortgage debt exceeded the value of their homes and charged them a fee purportedly to reduce the principal balance of their mortgages using money from the Department of the Treasury’s Troubled Asset Relief Program (TARP).

    Soria admitted in court that he lied to homeowners about his affiliation with several mortgage lenders and that he provided victims with fraudulent letters stating they had been approved for loans.

    Soria also admitted he falsely told victims that his loan program had been successful in the past and charged homeowners for loan modifications he knew he could not deliver. Court documents show that Soria concealed from homeowners the fact that the state of Nevada had issued a cease and desist order which legally prohibited him from working in the mortgage industry.

    Soria collected more than $100,000 in fees from distressed homeowners, many of whom lost their homes to foreclosure after Soria failed to deliver the loan modifications he promised.

California Attorney Agrees To Disbarment After Ripping Off $66K+ In Fees From Three Clients For Promised Mortgage-Related Litigation Never Pursued

From the California Bar Journal (August 2012):

  • Thomas Craig Nelson [#82506], 58, of San Diego was disbarred June 16, 2012, and was ordered to make restitution and comply with rule 9.20 of the California Rules of Court.
    Nelson stipulated to nine counts of misconduct in three matters.

    He represented two couples who had disputes with their mortgage lenders, agreed to file chapter 13 bankruptcy petitions to stop pending trustee sales of their homes and then to initiate litigation against the mortgage lenders.

    One couple paid Nelson $20,700 in advance fees and the other gave him $25,500. Although he filed bankruptcy petitions for both couples, they were dismissed and Nelson never initiated litigation. He stipulated that in both matters he failed to perform legal services competently, account for client funds or refund unearned fees.

    He represented another couple, who paid an advance fee of $20,000, to pursue a loan modification and to sue their lender if unsuccessful. Nelson did little to secure a loan modification, never filed a lawsuit and eventually filed a chapter 13 bankruptcy petition that was dismissed. The clients hired a new lawyer after their lender sued them. Nelson admitted he provided no legal services of value to the couple, nor did he account for or refund their advance fee.

    Nelson was suspended and placed on probation in 2011 for failing to perform legal services competently, refund unearned fees or cooperate with the bar’s investigation, and he committed acts of moral turpitude. He also was disciplined in 2002 for failing to maintain entrusted funds in a trust account and misappropriating $38,000 in client funds, an act of moral turpitude.

    In mitigation, he stipulated to disbarment.

Ex-R/E Agent Cops Plea For Role In Bogus Mortgage Elimination Scam Based On Discredited 'Sovereign Citizen' Claims; Ripoff Fleeced $2.5M From Victims

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

  • A South El Monte man has agreed to plead guilty to a federal mail fraud charge in a scheme that falsely promised to eliminate mortgage debts for approximately 200 distressed homeowners who each paid a $15,000 fee. Instead of working on behalf of the homeowners, the man simply sent worthlessSovereign Citizenpaperwork to lenders – paperwork that did nothing to affect the mortgage of a single homeowner.

    In a plea agreement filed [] in United States District Court in Los Angeles, Ernesto Diaz, 57, who formerly worked as a realtor, agreed to plead guilty to one count of mail fraud. As part of the agreement, Diaz has agreed to cooperate in an ongoing investigation into against his company, Crown Point Education Inc., which had offices in Montebello and El Monte.

    Diaz joined the Crown Point scheme in March 2010 after the company had been in business for approximately one year. Diaz spoke at seminars to recruit distressed homeowners and to train salespersons in the Crown Point program.

    In his plea agreement, Diaz admitted that he and others promised distressed homeowners at these seminars that, in exchange for fees that were generally $15,000 per property, Crown Point would eliminate the homeowners’ mortgages within six to eight months through a secret process that involved sending packets of documents to lenders.

    Even though he told victims that he could eliminate their mortgage woes, Diaz admitted in his plea agreement that the process had never been successful. Diaz failed to tell distressed homeowners that earlier Crown Point clients – including Diaz’s own brother – had lost their houses to foreclosure and been evicted from their houses.

    In the plea agreement, Diaz admitted that another person affiliated with Crown Point filed bankruptcy documents in the names of Crown Point clients to delay foreclosure and eviction. Diaz acknowledged that Crown Point filed many bankruptcy documents without the knowledge of the company’s clients and that signatures of debtors and notaries were forged on many documents filed with the Bankruptcy Court.

    In his plea agreement, Diaz admits that approximately 200 homeowner-victims paid Crown Point nearly $2.5 million for help they did not receive. The claims made to distressed homeowners were based on discreditedSovereign Citizenclaims that mortgages are invalid because the banks did not actually lend the money used to fund mortgages and the notes were securitized.

Wednesday, September 12, 2012

Senior Homeowners The Target Of Phone Campaign By Outfit Seeking Personal Info By Implying They May Be Eligible For Property Tax Refunds

From the Clark County, Washington Assessor's Office:

  • The Clark County Assessor’s Office is warning county residents of a telephone marketing campaign that seeks personal information from older residents, implying they could receive property tax refunds or relief.

    Seniors in several Washington counties have received calls from telephone solicitors who are marketing reverse home mortgages. The callers identify themselves as agents of “Seniors First.”

    The callers ask residents for personal information such as income, age and employment status. Callers say they are trying to help residents determine whether they qualify for the state’s property tax relief programs or assistance to veterans. The solicitors imply they are calling on behalf of the state Department of Revenue.

    Confused taxpayers in Clark, Lewis and Thurston counties have contacted the state regarding the calls. The Department of Revenue has alerted counties statewide to the telephone campaign.
For the Clark County Assessor press release, see Confusing, inaccurate phone calls target older property owners (State, county officials warn of reverse mortgage sales pitch).

Scammer Who Ran Loan Modification Ripoff Dodges Hard Prison Time, Gets 180 Days In County Jail, Probation On Five Misdemeanor Charges

From the Office of the Los Angeles, California City Attorney:

  • City Attorney Carmen A. Trutanich [] announced his office secured a criminal conviction and restitution for victims of a Los Angeles man operating a loan modification scam.

    Defendant Carlo Hamrahi bilked each of his victims out of thousands of dollars by claiming he could reduce their mortgage interest rates through federal government programs RESPA (Real Estate Settlement Procedures Act) and TILA (Truth in Lending Act). [...] Defendant Hamrahi, 40, entered a no contest plea to five misdemeanor counts of grand theft and identity theft.

  • Los Angeles Superior Court Judge Yolanda Orozco sentenced Defendant Hamrahi to 180 days in jail and five years probation. In addition, the defendant was also ordered to pay $18,500 in restitution to the five victims named in the case and is prohibited from engaging in the business of real estate loans, modifications, servicing and all other financial transactions relating to real estate during the period of probation.
  • Dating back to 2010, Defendant Hamrahi, through his Los Angeles business, engaged in a scheme of soliciting money, primarily from members of the Armenian-American community residing in the San Fernando Valley, for the purposes of assistance with loan modification and debt relief.

    Each of the victims paid thousands of dollars in fees and advance payments to Defendant Hamrahi who failed to perform any of the promised and paid-for services.

State Bar Pulls Attorney's License, Orders Restitution After Admitting To Ripping Off $50K+ From Three Clients Seeking Loan Modification Help

From the California Bar Journal (August 2012):

  • Moses Sheldon Hall [#153759], 56, of Fullerton was disbarred June 21, 2012, and was ordered to make restitution and comply with rule 9.20 of the California Rules of Court. Hall stipulated to nine counts of misconduct in three loan modification matters.

    In each case, he advised his clients to stop making mortgage payments and they lost their homes to foreclosure. All the clients were current on their mortgage payments when they hired Hall.

    He instructed one client, who paid him a flat fee of $3,495, to stop making payments on her mortgages because lenders were only approving loan modifications on mortgages of delinquent borrowers. Instead, he told her to send monthly payments that he calculated at $779.42 — based on a presumed loan modification — and he would hold the money in his client trust account. The client followed his advice and her home was sold at foreclosure. Hall did not refund any of the $11,507.46 he was supposed to hold in trust.

    He calculated monthly payments of $1,987.93 for another client, who also sent the money to him instead of her lender. Her home also was sold in foreclosure and Hall misappropriated the $15,903.44 the client gave him. That client also paid Hall a $3,000 fee.

    A couple who paid $1,500 of a flat fee gave Hall monthly payments he calculated at $2,023.82; their house was sold at foreclosure. He misappropriated the $22,262.02 the couple gave him to hold in trust.

    Hall stipulated in each matter that he failed to perform legal services competently or maintain client funds in trust and he misappropriated client funds, committing acts of moral turpitude. Hall was publicly reproved in 1993.

Tuesday, September 11, 2012

NJ Man Gets 66 Months For Role In Mortgage Fraud Scam That Included Targeting Homeowners Facing Foreclosure

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

  • A Newark, N.J., man was sentenced [] to 66 months in prison for his role in a $40.8 million mortgage fraud conspiracy, recruiting “straw buyers” to purchase real estate properties in New Jersey, South Carolina, and Georgia and causing lenders to release more than $18 million based on fraudulent mortgage loan applications, U.S. Attorney Paul J. Fishman announced.

    William Brown, 60, previously pleaded guilty before U.S. District Judge Joseph E. Irenas to an Information charging him with conspiracy to commit wire fraud and conspiracy to commit money laundering. Judge Irenas imposed the sentence [] in Camden federal court.

    According to documents filed in this case and statements made in court:

    Brown recruited “straw buyers” for his co-conspirators to purchase oceanfront condominiums overbuilt by financially distressed developers in Wildwood Crest, N.J., premier real estate in vacation destinations in Georgia and South Carolina, and properties in New Jersey owned by financially distressed homeowners facing foreclosure.

    Brown’s co-conspirators caused fraudulent mortgage loan applications and supporting documents to be submitted to mortgage lenders in the straw buyers’ names, attributing to them inflated income and assets in order to induce the mortgage lenders to approve the loans.

    Once the loans were approved and the mortgage lenders sent the loan proceeds in connection with the real estate closings on the properties, Brown’s co-conspirators took a portion of the proceeds from the fraudulent mortgage loans. Brown also admitted that he and his co-conspirators laundered the proceeds of the mortgage fraud by having some of those proceeds transferred to the recruiters and straw buyers. Brown received $96,000 for his role.

Loan Mod Scammer Pleads Guilty To Ripping Off 48 Known Victims Out Of Upfront Fees, Monthly Mortgage Payments

From the Maryland Department of Labor, Licensing and Regulation:

  • Rodney Getlan, age 45, of Owings Mills, entered a guilty plea to nine counts of mortgage fraud and faces up to 90 years in prison. Pursuant to the plea, the State is requesting 40 years with 10 years suspended and 30 years of incarceration to serve as well as restitution to all 48 known victims in the area of $400,000.

    Judge Ballou-Watts scheduled sentencing for December 3, 2012. Getlan was charged earlier this year with felony theft, operating as a credit service business without a license, mortgage fraud, and related charges.

    An investigation by the Maryland Department of Labor, Licensing & Regulation’s (DLLR) Office of the Commissioner of Financial Regulation and the Baltimore County Police Department led to Getlan’s arrest in March for defrauding homeowners of considerable upfront fees for mortgage modifications and stealing their monthly mortgage payments.
  • Getlan’s 46-count charging document stated that Getlan offered loan modification services from January 2009 through January 2012. The charges specifically referred to nine separate homeowners who fell victim to Getlan’s scheme, in which he forged documents to support his claim that lenders of the homeowners had approved their loan modifications.

    Homeowners believed that their monthly payments were going to their lenders; however, the investigation determined that Getlan deposited those payments into his own accounts.
For the Maryland DLLR press release, see Mortgage Fraud Schemer Convicted (Getlan found guilty of defrauding Maryland homeowners).

Wells Fargo OKs Loan Modification, Then Forecloses On Home Anyway Without Telling Homeowner; Screw-Up Discovered When Latter Finds Prospective Buyer

In Moreno Valley, California, KCBS-TV Channel 2 reports:

  • A Moreno Valley woman tried to sell her home, only to find out the bank mistakenly foreclosed it.

    Real estate agent Lisa Duarte had been showing Lily Diaz’s home in Riverside County. The house, priced at $235,000, got two quick offers. However, a title search showed Wells Fargo, not Diaz, owned the home.

    The property was actually foreclosed on in January of this year and when I found that out, I called my client and let her know,” said Duarte.

    Diaz said she was shocked because she has the paperwork that shows she completed a loan modification with Wells Fargo in January. She said she made every monthly payment on time since it was approved.

    Wells Fargo apparently didn’t let title know the modification was accepted and they let the foreclosure proceedings continue,” said Duarte. “Wells Fargo knows they made the mistake. They don’t know how to fix it.”

    As it stands now, the home can’t be sold. “As far as I’m concerned, we lost two good offers because of (the situation),” said Diaz. Wells Fargo called Diaz to work out the mix up.

Another Home Mistakenly Trashed-Out By Bankster's Contractor; Wells Fargo Offers No Help To Victims To Mitigate Screw-Up Until Media Begins Calling

In Twentynine Palms, California, KABC-TV Channel 7 reports:

  • A local couple's dreams have been shattered by a foreclosure mistake that left their retirement home in ruins.

    When banks take over foreclosed homes, they often try to salvage the contents inside to recoup their losses. But what if they have no right to those contents in the first place? Alvin Tjosaas says that scenario is all too real for him.

    Back in 1961, a 14-year-old Tjosaas literally helped his father build a vacation home in Twentynine Palms. He's taken his family there ever since, sharing unforgettable moments.

    "I put my whole life into this place, building it for my mom and dad," said Tjosaas.

    The house recently had valuables stored in the garage, including decades worth of family heirlooms. But the house was in ruins after Tjosaas says subcontractors hired by Wells Fargo entered the property with a foreclosure notice in hand. The notice had the name Stephen A. Janosik on it, but the address for the Tjosaas family home.

    "It's the wrong house, simple as that. It's a big mistake, but sort of a simple mistake," said Tjosaas.

    Tjosaas says the subcontractors broke down doors, smashed windows, tore down walls, taking anything of value to sell later on.

    He says they took three tractor mowers and three golf carts. Their camper trailer was badly damaged. His wife, Patricia, couldn't believe her eyes.

    "We had all of his masonry tools, all of his carpenter tools, all of his plumbing tools, everything that he owned," she said.

    Tjosaas said his dad's WWI uniform and flag were also gone. The Tjosaas say they've tried to reach out to Wells Fargo for answers, but to no avail.

    "The way it's been going, I don't think they really care. That's the way it's been for the three months. Now, all of a sudden, it's you guys. Now, all of sudden, they call me," said Tjosaas.

    After repeated calls from Eyewitness News, Wells Fargo released a statement, saying, "We are deeply sorry for the very personal losses the Tjosaas family suffered as a result of their home being mistakenly secured and entered by an outside party hired to address a different nearby property. We are moving quickly to reach out to the Tjosaas family to resolve this unfortunate situation in an attempt to right this wrong."

    Tjosaas says because of the media calls, a Wells Fargo representative asked to meet with him in person on Thursday to apologize. He hired a lawyer, who will be at that meeting. They hope they can reach an agreement and avoid legal action.

Monday, September 10, 2012

Washington Appeals Court: Homeowner's Failure To Stop Foreclosure Sale Not Neccssarily Waiver Of Right To Pursue State Consumer Protection Act Claims

In Seattle, Washington, Seattle Weekly reports:

  • As we all know, the real estate industry has been rife with shady loans over the past decade. If you were a borrower, and you lost your house to foreclosure, too bad. The way courts have often ruled, there's been little you could do about it. [Recently], however, the state Court of Appeals ruling set a new precedent.

    The case concerns a Pierce County woman named Tamara Frizzell, who owned her house free and clear, according to her attorney Dan Young. In 2008, needing some money to pay bills, she contacted a couple who advertised their lending business in a local paper. Frizzell initially wanted $20,000, but Barbara and Gregory Murray talked her into a $100,000 loan instead, the court ruling relates.

    The deal made no sense. Frizzell, who inherited her house from her husband, had essentially no income, according to Young. Yet, the agreement called for her to make $1,000-a month payments, which would only cover interest on the loan. At the end of the three years, she was to pay back the entire $100,000.

    Why would she agree to a deal like that? Young has argued in legal papers that Frizzell isn't fully competent. She has a learning disability and possibly "incipient dementia," according to a psychologist giving his opinion to the court. A friend of Frizzell said that offering a loan to her "was like giving the money to a small child who had no conception of how to spend the money, what would be required to pay it back, and what would happen if it were not paid back."

    Indeed, Frizzell subsequently squandered $60,000 of the loan on eTrade-purchased stocks that tanked. Since she had virtually no income, she only made a few of the $1,000 payments. The Murrays moved to foreclose.

    Frizzell's sister found Young, who took the case on pro bono and filed a court motion for an injunction. The court agreed, but only on condition that Frizzell come up with a $15,000 payment and $10,000 bond by the very next morning. Of course, Frizzell had no way to do so, and the house went up for sale. Barbara Murray bought it and evicted Frizell.

    Frizzell, with Young's help, filed suit in Pierce County Superior Court, charging deceptive practices that constitute a violation of the [Washington State] Consumer Protection Act(1).

    Young's theory is that the Murrays were out to acquire Frizzell's house all along, and for less than half of what it was worth. The couple's attorney, Darren Krattli, denies the claim, but declines to comment further.

    A Superior Court judge dismissed Frizzell's claims, saying she had waived her right to redress by failing to stop the foreclosure sale. And if her lawsuit's only goal was to invalidate the sale, she might well have. State law discourages such after-the-fact lawsuits, because they could destabilize foreclosure sales; people couldn't be sure that the home they bought at an auction was really theirs.

    But the appeals court noted that Frizell's claims were broader. She sought damages under the Consumer Protection Act. And Frizzell hadn't compromised that by failing to keep her home off the market. Her case will now proceed in Superior Court.

    She certainly could use any money she gets from the case. Young says his client was rendered homeless by the foreclosure. The last he knew, she was living in an inoperable van she had found on Craigslist and parked at somebody's house.
Source: Even After Foreclosure Sale, Borrowers Can Sue Over Allegedly Deceptive Loans, Court Rules.

For the court ruling, see Frizzell v. Murray, No. 42265-4-II (Wn. App. Div. 2, August 28, 2012).

(1) The Consumer Protection Act is Washington State's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes). For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

Washington High Court: Irregularities In Following Statute Invalidates Foreclosure Sale; Experienced 3rd Party Winning Bidder At Auction Not A BFP

A May, 2012 ruling by the Washington State Supreme Court affirmed an intermediate appeals court ruling finding that:

  1. A trustee's sale under a non-judicial foreclosure proceeding taking place beyond the 120 days permitted by state law (RCW 61.24.040(6)) warrants invalidating the sale,

  2. Under the circumstances of this case, the homeowner/borrower did not waive the right to bring a postsale challenge for failing to utilize the presale remedies under RCW 61.24.130, and

  3. Without actually distinguishing/determining whether the sale was absolutely void, or merely voidable (it appears that the state Supreme Court was never asked to decide whether the sale was absolutely void, or merely voidable; the high court apparently just implicitly assumed that the foreclosure sale was voidable - calling it "invalid"),(1) the third party buyer at the foreclosure sale was not a bona fide purchaser ("BFP") and accordingly, was not entitled to receive title to the property on account of his winning bid.
Specifically, with regard to the status of the third party winning bidder at the foreclosure sale as a bona fide purchaser, the court made the following analysis:
  • ¶ 23 Despite the trustee's failure to strictly comply with the statutory requirements and in addition to the waiver argument, Dickinson contends he is a BFP and should receive title. While the trial court concluded that Dickinson was a BFP, the Court of Appeals disagreed. We agree with the Court of Appeals.

    ¶ 24
    Under RCW 61.24.040(7), the deed's "recital shall be prima facie evidence of [statutory] compliance and conclusive evidence thereof in favor of bona fide purchasers."[9] Whether Dickinson was a BFP is factual and legal inquiry.

    A BFP is one who purchases property without actual or constructive knowledge of another's claim of right to, or equity in, the property, and who pays valuable consideration

    But if the purchaser has knowledge or information
    that would cause an ordinarily prudent person to inquire further, and if such inquiry, reasonably diligently pursued, would lead to discovery of title defects or of equitable rights of others regarding the property, then the purchaser has constructive knowledge of everything the inquiry would have revealed.

    Thus, in considering whether a person is a BFP, we ask (1)
    whether the surrounding events created a duty of inquiry, and if so, (2) whether the purchaser satisfied that duty. In this determination, we consider the purchaser's knowledge and experience with real estate. Miebach v. Colasurdo, 102 Wash.2d 170, 175-76, 685 P.2d 1074 (1984).

    ¶ 25
    The facts pertaining to Dickinson's status are undisputed. We give, as did the Court of Appeals, substantial weight to Dickinson's real estate experience. Dickinson has extensive experience with nonjudicial foreclosure sales, purchasing 9 of his 13 properties at such sales. He familiarized himself with foreclosure law and knew enough about the process to obtain the notice of trustee's sale from a title company.

    ¶ 26 Dickinson had within his knowledge sufficient facts to put an experienced real estate purchaser, such as himself, on inquiry notice. He had a copy of the notice of trustee's sale, which listed the amount in arrears as only $1,228.03, suggesting Tecca had substantial equity in the property. CP at 530.

    Dickinson contacted Tecca, who refused to sell him the property and insisted the sale would not happen. Dickinson kept track of the numerous continuances and was surprised that the property was finally up for sale, five months after the date listed in the notice. The number of continuances, however, chilled the bidding process, contributing to the grossly inadequate purchase price.

    Although four or five bidders showed up to the original sale, only Dickinson and another bidder showed up at the actual sale. Dickinson was prepared to bid up to $450,000 for the property, showing he knew the property was worth at least that much. The substantial equity coupled with the minor default amount, Tecca's intention to keep the property, and the numerous continuances created a duty of inquiry, which Dickinson failed to satisfy.

    Given that he had already contacted Tecca once, Dickinson could have contacted Tecca again to determine whether default had been cured. Had Dickinson made a reasonably diligent inquiry, he could have discovered that the numerous continuances were tied to payments under the Forbearance Agreement.

    Because real estate investment was his livelihood, Dickinson should have taken more care with this purchase in order to claim BFP protection
    . We agree with the Court of Appeals and hold that Dickinson was not a BFP.
For the ruling, see Albice v. Premier Mortg. Servs., 174 Wn.2d 560, 276 P. 3d 1277 (Wn. May 24, 2012).

(1) Note that if the court had been asked to determine whether the sale was absolutely void, or merely voidable, and had it concluded that it was the former, it would have been unneccessary to determine a winning bidder's BFP status - one who would otherwise qualify as a BFP will never prevail if the foreclosure sale is found to be absolutely void.

DC High Court: Foreclosure Trustee 'Could' Be Liable For Damages For Failure To Call Off Sale When Homeowner Has Prospective Buyer For Property

From a Client Alert from the law firm Seyfarth Shaw:

  • On May 24, 2012, the District of Columbia Court of Appeals reviewing the Onyeoziri v. Spivok case determined that trustees under a deed of trust may be liable for interference with business relations if the trustees prevent the debtor from curing the default in a foreclosure proceeding.

    In this case, days before the scheduled foreclosure under a deed of trust, the debtor presented a copy of a contract of sale of the secured property to the trustees together with a letter prequalifying the buyer for a loan in an amount sufficient to pay off the secured indebtedness.

    The Court of Appeals determined that the evidence, taken in the light most favorable to the debtor, supported a finding that by following through with the foreclosure sale after the trustees were made aware of the debtor’s contract to sell the property, the trustees intentionally interfered with the contract for sale in a manner that, a jury could find, was unnecessary to protect the security interest.

    Specifically it was the trustees’ “unreasonable refusal” to permit the debtor to go forward with his contract for the sale of the property, and the trustees’ insistence on proceeding with the foreclosure sale that “interfered with [debtor’s] business relations with the prospective purchaser.”

    Although the Court acknowledged the right of a secured party to protect its interest in its collateral, it decided that the trustees clearly knew that they were impeding the debtor’s ability to perform the contract to sell the property, which would have covered the indebtedness and negated the necessity of the foreclosure sale.

Sunday, September 9, 2012

NYT On Banksters' Big Win In Nationwide Foreclosure Fraud Settlement

From an op-ed piece in The New York Times:

  • It has been six months since the big banks settled with state and federal officials over evidence of widespread foreclosure fraud, promising to provide $25 billion in mortgage relief in exchange for not being sued over past foreclosure abuses.

    At the time, it looked like a sweet deal for the banks. The fines were paltry compared with the damage done to homeowners and the economy. And much of the relief the banks were obliged to provide could be met by continuing more or less with business as usual.

    It still looks like a sweet deal.

    The Office of Mortgage Settlement Oversight, the monitor of the settlement, released a preliminary report last week showing that 138,000 homeowners had received some form of relief from March 1 through June 30. That is roughly the number that would have been expected under various aid programs in effect before the settlement.

    Worse, with some three million borrowers now in or near foreclosure, according to Moody’s Analytics, it is nowhere near the level of relief needed to fix the housing market.

NYC Home Lender To Cough Up $3.55M To Settle Fair Housing Allegations That It Clipped Blacks, Latinos For Higher Loan Prices Than Non-Hispanic Whites

From the U.S. Department of Justice (Washington, D.C.):

  • GFI Mortgage Bankers Inc., a large independent home mortgage firm that concentrates on the New York, New Jersey, and Florida markets, will pay $3.555 million to resolve a lending discrimination lawsuit filed by the Department of Justice and the U.S. Attorney’s Office for the Southern District of New York.

    The lawsuit alleges that GFI engaged in a pattern or practice of discrimination by pricing residential mortgage loans for qualified African-American and Hispanic borrowers higher than for similarly-qualified non-Hispanic white borrowers between 2005 and 2009.

    The settlement provides $3.5 million in compensation to approximately 600 African-American and Hispanic GFI borrowers identified by the United States as paying more for a loan based on their race or national origin, and it requires GFI to pay the maximum $55,000 civil penalty allowed by the Fair Housing Act.

    The settlement also requires GFI to develop and implement new policies that limit the pricing discretion of its loan officers, require documentation of loan pricing decisions, and monitor loan prices for race and national origin disparities not justified by objective borrower credit characteristics or loan features.
  • The settlement came after the United States had filed its opposition to GFI’s motion to dismiss the case and the court had stated it was “skeptical” of GFI’s argument that federal law allows lenders to price loans in a way that produces such disparate impacts on minority borrowers.

    The settlement, which was entered by the court, was filed in federal court in Manhattan, where GFI is headquartered.

Lawsuit: Latino Influx Into Eastern Long Island Town Making Locals Antsy; Officials Allegedly Target Landlords Renting To Hispanics w/ Code Violations

In East Hampton, New York, the New York Post reports:

  • They forced him to clean dirty toilets while everyone else lazed on four-hour lunches. They left him notes such as “Now just why in the hell do I have to press ‘1’ for English?” with a picture of John Wayne. Then they denied him leave to care for his dying mother-in-law.

    It’s hell being Hispanic in the Hamptons.

    Chilean immigrant Jorge Kusanovic, 67, has lived among the rich of East Hampton for 36 years. But now he’s suing the town for $3 million for back pay he says he is owed — as well as his dignity.

    The park worker filed a suit this month that alleges a decade of toil, where white supervisors threatened to fire him at every turn. “Because I’m Spanish, I have to pay a price the rest of my life to live here,” Kusanovic said. “You start to think this is normal.”

    Tension over Hispanic residents in the Town of East Hampton, population 21,457, is nothing new. But the conflict has gotten hotter this summer, as residents have complained about new immigrants, and Kusanovic has bared his case in court.

    This spring, residents packed town board meetings during public sessions, demanding officials enforce East Hampton’s housing code to stop people from living in town illegally. Some residents, particularly in the hamlet of Springs, say large immigrant families are packed into single-family homes.

    They brought photos of their neighbors’ homes to town board hearings — saying their multiple satellite dishes and car-covered lawns were ruining property values.

    Deputy town supervisor Theresa Quigley blasted the complainers for targeting “Latino” families. During one meeting, she was overheard calling the complainers “Nazis.” “I’m telling you, this is disgusting,” she said. “I don’t want to be in this town.”

    Census data shows that the number of Hispanic residents in East Hampton has skyrocketed 94%, with 5,660 in 2010, compared to 2,914 a decade earlier.

    Lawrence Kelly, an attorney for Kusanovic, says the feuding has gotten so bad that the town is targeting landlords who rent to Latinos — issuing building violations just to coerce them into changing tenants.

    It’s pitted neighbor against neighbor, with longtime resident Tina Piette calling some people’s efforts to spy on newcomers “disgusting.” “People move to East Hampton or retire there and don’t expect to see Ecuadorians next door, or someone who speaks Spanish and is a permanent resident,” she said.

    Still, Kusanovic says such unwelcome treatment of Latinos in the Hamptons is the norm. He purchased his home in Montauk during a housing lottery in the ’70s. At the time, more than a dozen minority families signed up for two homes, but Kusanovic was told he’d win because he has light skin, light eyes and a European-sounding last name.

    Those attributes never proved helpful again, as residents made clear he would never be one of them.
For more, see Hamptons race rift (Hispanic influx, lawsuit roil the East End).

"Legal, Non-Conforming Use" Zoning Status Throws Monkey Wrench Into Couple's Effort To Sell Home

In Deltona, Florida, The Daytona Beach News Journal reports:

  • The moving boxes speak to Lynne and Earl Hoisington's intentions.

    But two closings this week -- the one where they planned to buy a new house in DeLand and the one where they would turn in the keys to their three-bedroom, two-bath Deltona home -- are off.

    The Hoisingtons and the real-estate agents involved in their deal say a city ordinance, an eagle-eyed appraiser and the square-footage of the Deltona house are to blame. They suggest the city's rules, if not changed, could slow the sale of homes in a city that continues to be in the throes of the foreclosure crisis.
  • [A]n appraiser reviewing their Giovanni Street home found its dimensions, 1,068 square feet, fell short of the Deltona requirement for single-family homes in its residential zoning. He checked a box marked "legal nonconforming (grandfathered use)."

    The nonconforming tag means if the home were to be destroyed by fire or a natural disaster, it would have to be rebuilt at the current standard, 1,200 square feet, or more. That clause meant the buyer could not obtain financing, according to Matt Gurnow, a loan originator with Watson Mortgage Corp., DeLand.

    Gurnow wrote Deltona Mayor John Masiarczyk last week explaining that the loan for a nonconforming house is "not sellable on the secondary market and therefore not a loan we can close and fund. ... Our investors (JP Morgan Chase, Wells Fargo, Bank of America, B&T) will not purchase a loan on a home that is nonconforming, knowing that if their collateral for the loan is destroyed, it cannot be rebuilt as it sits."