Saturday, September 29, 2012

Code Violations Lead To 30-Unit Building Shutdown, Forcing Residents Out On Street; Two Fire Inspectors Attacked After Providing Tenants 72-Hour Notice To Pack Bags & Hit The Road

In Miami, Florida, WSVN-TV Channel 7 reports:

  • Residents of an apartment building have been forced out of their homes after the structure was deemed unsafe. Code compliance and police officers ordered all residents to evacuate the building located at 971 W. Flagler, Monday morning. City officials said they had given the owner months to get the building up to code. Officials said the building had multiple code violations, and the building is not safe. Officials also said the owner of the building had to hire someone to check the building hourly and keep a log, but when firefighters went by on Friday, they were not satisfied with the logs and closed the building. Everyone was then given 72 hours to leave. Jessica Hernandez said her and her husband have no where to go. "Right now, it's get out and find out what you gonna do," she said. "Nobody has nothing. We paid our rent. Right now, we have nothing, nothing, and we're out. They couldn't even give us enough time, They gave us the weekend. The weekend is nothing," she added as she began breaking down in tears. "There's nothing opening for leasing, and there's nothing open where you can go and rent. Nothing, nothing at all." Firefighters believe, as some of the residents were leaving, they turned their gas on, which caused a very heavy smell. Crews had to shut the gas off to the entire building and close the street. Officials had to wait for the gas level to come back down to normal before they reopened the street and residents could continue moving out. "We have a lot of angry residents out here," said Miami Fire Rescue Lt. Ignatius Carroll. "I don't think they understand that it's not trying to do anything bad to them. It's for their safety alone." According to police, on Friday, when a firefighter went to put a notice on the building he was hit by a car by someone who co-owns a marketplace located at the bottom of the building. That subject was later identified as Brinio Medrano. Police also said Medrano punched another firefighter. From the back of a police car, Medrano professed his innocence. "For what? I didn't do nothing. I didn't do nothing," he said. Medrano was later charged with two counts of battery on a firefighter. Once repairs are made, residents will be allowed back in.
Source:  Residents forced out after building condemned. See also:

Class Warfare Breaks Out In NYC 'High' Rise Between Haves, Have Nots; Cannabis Smoke Wafting Thru Vents Triggers Call By Rich To 'Weed' Out Pot-Smoking Poor

In New York City, the New York Post reports:

  • Class warfare has broken out at a swanky Midtown apartment complex, where high-end renters are tussling with their lower-income neighbors over pot use and messy hallways.

    Some of the well-to-do residents at tony 1 Columbus Place are blaming their less-fortunate neighbors — who live in the affordable-housing section in the concierge building — for the pot smoke that wafts through their vents and the cigarette butts that litter their halls. The richer residents, who pay up to nearly $7,000 a month in rent, say the pungent pot odor and litter had gotten so bad that the building’s management had to send security teams to patrol the hallways.

    Pot was coming through the vents,” according to a resident in the south tower of the double-high-rise complex near Columbus Circle. “It stopped for a little bit when they were using security, but as soon as they left, it started up again.”

    The landlord even tacked a stern warning in the elevators threatening to evict any tenant caught with pot, another resident said. “I don’t expect illegal things to be happening in this building,” said the resident, Lidia Fluhme, 31, who pays nearly $5,300 for a two-bedroom unit in the building, which boasts a gym and roof terrace. “We feel that it’s unfair that we have people living in the same building on the same floor and they pay a fraction of what we do. If you need special housing, there are so many places other than a block away from Central Park.”

    Nearly 150 of the building’s 700 units are set aside for low-income housing under the state’s 80/20 initiative. The program allows the developer to use tax-exempt bonds for construction, thus greatly reducing costs, as long as it sets aside 20 percent of the housing for tenants earning no more than 50 percent of an area’s median income.

    The median household income for Columbus Circle is about $93,000. That means to qualify for a low-income slot at 1 Columbus Place, tenants would have to make no more than $46,000.
Source:  Tony vs. stoney at ‘high’ rise (Posh: ‘Weed’ out poor).

NYC Points To Legal Technicality To Evict Longtime Greenwich Village Newstand Operator; Big Shot White Shoe Law Firm Volunteers Services To Help City Boot Hapless, Soon-To-Be Jobless Senior

In New York City, the New York Post reports:

  • The city has gone nuclear in its efforts to oust a longtime Greenwich Village newsstand operator beloved by thousands of New Yorkers and made famous in feature films. Legal papers show the city has retained — for free — the services of powerhouse international law firm Proskauer Rose to boot Jerry Delakas from the Astor Place news kiosk he’s run for the past quarter-century.

    This truly is David vs. Goliath,” said Gil Santamarina, the lawyer waging a long-shot battle to keep Delakas from being evicted over his lack of a license. Delakas — a neighborhood fixture who alongside his newsstand has appeared in such movies as “Sex and the City,” as well as countless ads — has run the business for 25 years by subleasing from the family who held the license.

    The city Department of Consumer Affairs became aware of that forbidden arrangement, and began eviction proceedings, only after the estate of the family tried to renew the license and keep Delakas there when the last relative died.

    Last week, “much to my shock and dismay,” Santamarina said he received a new letter revealing that the city now is being represented pro bono by a lawyer for the prestigious Proskauer Rose — instead of by a city Law Department attorney, as had been the case since last year. Such charity legal work is strongly encouraged for lawyers as a means to help criminal defendants and others who can’t otherwise afford legal counsel.

    So, Proskauer, a firm whose lawyers charge upwards of $800 per hour, is lending their legal services for free for the purposes of rending a 64-year-old man unemployed, jobless,” Santamarina said of the firm’s donating associate Alyse Fiori’s time — and the global company’s vast resources — to try to evict his client.

1,500 Elderly Residents To Get The Boot After Tribe Buys Out Master Lease On Mobile Home Park Located On Reservation & Announces Closure

In Broward County, Florida, The Miami Herald reports:

  • The Seminole Tribe of Florida announced on Friday plans to close the Hollywood Estates Mobile Home Park near Hollywood about one month after the tribe bought out a long-term lease on the 110-acre property previously held by a private management company.

    About 1,500 residents live in the 55-and-older community at 3300 N. State Road 7, and everyone will be required to vacate the park by June 30, 2013, said Gary Bitner, a tribe spokesman. Park residents may own their mobile home units, but pay monthly rent for the land and trash service.

    It’s pathetic. They’re kicking all us old people out,’’ said Nancy Gallagher, 73, president of the park’s tenants association. Gallagher said she is a retiree who has lived at the park about nine years and cares for her husband, Joe, who is bed-ridden. Gallagher spent Friday afternoon hanging posters in the community, informing residents of the changes.

    Some of those changes arrived suddenly and others will take more time.

    The Seminole Tribe immediately closed the park’s swimming pool, community room, bowling alley, meeting rooms, spa and gym. To make up for the loss of those common areas, the tribe reduced the monthly rent for residents by $100 per space, dropping the average rental from $533 to $433.

    Bitner also spent Friday afternoon driving through the park. He said about half of the estimated 720 mobile homes appeared to be shuttered, suggesting they belonged to seasonal residents, most of whom live in Canada during the summer. “This time of year, I’d say it’s only about half occupied,’’ Bitner said of the park.

    The tribe plans to close the park, which occupies about 20 percent of the 497-acre Seminole reservation, to build homes for members, Bitner said. A housing shortage on the reservation has resulted in a waiting list of more than 200 tribal members seeking housing on their ancestral land.

    The Seminole Tribe took over management of the park in July after a protracted legal battle for control of the land led to a negotiated settlement with Hollywood Mobile Estates, the former management company that held a lease on the land through 2024. The terms of the settlement were not disclosed.

    Essentially, the tribe bought them out of their long-term lease, and took over management,’’ Bitner said.

    The tribe wants most residents to leave the park by Dec. 31, and has offered financial incentives to lower-income, year-round residents.

    For those residents who earn a combined annual household income of less than $40,000, and who agree to move out by Dec. 31, the Seminole Tribe will pay up to $3,000 for abandonment or moving expenses. Residents who stay past Dec. 31 will see monthly rents rise to $590 on Jan. 1, with increases to $620 on March 1,and to $650 on May 1. Park residents are now allowed to terminate their lease without penalty at any time, Bitner said.

    Friday’s news of the park’s closure appears to close the book on a contentious and protracted legal battle over the property, which is steps from the tribe’s glitzy Hollywood-area casino.

    The park was built in 1969, and Hollywood Mobile Estates took over management in 1986 with approval from the federal government. But the company was forced off the property by the Seminoles in 2008, with no prior notice, and at gunpoint. The Seminoles had cited a litany of alleged lease violations that included desecration of a tribal cemetery.

    A federal judge ordered the tribe in July 2011 to return the park to the former management company, however, and the tribe complied. Now the Seminoles likely will face resistance from park residents such as Gallagher, the tenants association president.

    I can’t afford to move; neither can these other people,’’ Gallagher said. “It’s not right. It’s not humane to do this.’’
Source: Seminole Tribe to close Hollywood mobile home park (About 1,500 residents of a mobile home park on the Seminole reservation near Hollywood will have to move out by July 2013. The tribe says it wants to use the land to build more housing for tribal members).

Friday, September 28, 2012

Civil Rights Feds Settle Civil Suit With California Bank Alleging That $400K Minimum Loan Amount Policy Had Discriminatory Effect Against Blacks, Latinos

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

  • The Justice Department announced [] that Luther Burbank Savings will invest $2 million in California communities and take other steps as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race and national origin. The settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in the U.S. District Court for the Central District of California. The complaint alleges that from 2006 through mid-2011, Luther enforced a $400,000 minimum loan amount policy for its wholesale single-family residential mortgage loan program. The department alleges that this policy or practice had a disparate impact on the basis of race and national origin. “Today’s settlement demonstrates that the Justice Department is committed to addressing a wide range of abuses in the credit market,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “It is critical that lenders have policies in place to ensure that they don’t discriminate in their lending programs. We commend Luther Burbank Savings for revising its policies and working with the Justice Department to reach an appropriate resolution in this case.” The complaint alleges that from 2006 through 2010, Luther Burbank Savings, a prime lender, originated very few single-family residential mortgage loans to African-American or Hispanic borrowers or in majority-minority tracts throughout California. In the greater Los Angeles area, for example, only 5.8 percent of Luther’s single-family residential mortgage loans were made to African-American and Hispanic borrowers during this time period, compared to 31.8 percent of such loans made to African-American and Hispanic borrowers by comparable prime lenders. Similarly, only 5.2 percent of Luther’s single-family residential loans in the greater Los Angeles area were made in majority-minority census tracts (areas with a non-white population greater than 50 percent) during this time period, compared to 41.7 percent of such loans made in these tracts by comparable prime lenders. The complaint alleges that Luther continued its $400,000 minimum loan amount policy despite its knowledge that its low level of lending to African-American and Hispanic borrowers, and in majority-minority census tracts, was attributable to the policy.
For the Justice Department press release, see Justice Department Reaches Settlement with Luther Burbank Savings to Resolve Allegations of Lending Discrimination in California (Settlement Provides $2 Million to Remedy Effects of Minimum Loan Amount Policy).

Civil Rights Feds Tag Mobile Home Park Operators In Civil Suit Alleging Race-Based Housing Discrimination Against Black Rental Applicants

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

  • The Justice Department announced [] that it has filed a lawsuit against the owner and operator of the Heritage Point mobile home park in Montgomery, Ala., alleging that the companies and their employees or officers discriminated against African-Americans. The complaint, filed in the U.S. District Court for the Middle District of Alabama, names several defendants, including Lawrence Properties Inc., which manages Heritage Point, William Bounds, the district supervisor for Lawrence Properties, Lawrence at Lakewood LLC, which owns the property and Michael Lawrence, the president of the Lawrence at Lakewood, LLC. The complaint alleges that Lawrence instructed property managers not to rent to African-American applicants at Heritage Point or other mobile home parks managed by Lakewood throughout Alabama and Georgia.(1)
The alleged victim actually purchased, directly from a private homeowner, a mobile home located on a lot that the private owner rented from the mobile home park operator. Apparently, the mobile home purchase was not contingent on obtaining approval from the park operator to take over the existing lease on the lot. After a bit of alleged jerking around by the park operator's employees, the alleged victim was advised that her rental application for the lot upon which her just-purchased mobile home sat on was rejected. Consequently, not only was the alleged victim and her family unable to move into the mobile home, she was forced to pick up the mobile home and move it off the lot and out of the park, which she did, bearing the attendant costs of the move, according to the complaint. By the way, these allegations came to light some seven months after the alleged victim's application was rejected. According to the complaint, the then-property manager at the mobile home park, who now was no longer employed there, tracked down the alleged victim and informed her that her application to rent the lot had never been processed because the mobile home park owner did not want to rent to black people. Two other now-former employees have since come forward to assert that the company's policy was to limit rentals to black people, according to the complaint.

    Male California Landlord Agrees To Cough Up $2M+ To Settle Fair Housing Suit Alleging Illegal Use Of Hands, Etc. Targeting 25 Female Tenants

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

    • The Justice Department [] announced that Rawland Leon Sorensen, the owner and manager of dozens of residential rental properties in Bakersfield, Calif., will be obligated to pay more than $2 million in monetary damages and civil penalties to settle a Fair Housing Act lawsuit alleging that he sexually harassed women tenants and prospective tenants. The department’s complaint alleges that Sorensen sexually harassed the women by making unwelcome sexual comments and advances, exposing his genitals to women tenants, touching women without their consent, granting and denying housing benefits based on sex and taking adverse actions against women who refused his sexual advances. Sorensen has operated his rental business for more than 30 years. This represents the largest monetary settlement ever agreed to in a sexual harassment lawsuit brought by the Justice Department under the Fair Housing Act. The consent decree, which is subject to approval by the U.S. District Court, will result in a judgment against Sorensen requiring him to pay $2,075,000 in monetary damages to 25 individuals identified by the United States as victims of his discriminatory conduct. That amount includes court costs and attorneys’ fees for two of the victims who are private plaintiffs. In addition, Sorensen must also pay a $55,000 civil penalty to the United States, the maximum penalty available under the Fair Housing Act. The consent decree requires Sorensen to hire an independent manager to manage his rental properties and imposes strict limits on his ability to have contact with current and future tenants. “The conduct in this case was egregious,” said Thomas E. Perez, Assistant Attorney General for the Justice Department’s Civil Rights Division. “Women have the right to feel safe in their homes and not to be subjected to sexual harassment just because their families need housing. The Justice Department can and will vigorously prosecute landlords who violate those rights.”
    For the Justice Department press release, see California Landlord Settles Sexual Harassment Lawsuit for $2.13 Million.

    Leaky 7-Year Old 240-Unit Condo Complex Requires Stiff HOA Repair Assessments, Leaving Dozen Condo Owners Facing Foreclosure; Developer: 'Not My Problem!'

    In Calgary, Alberta, CBC News reports:

    • A Calgary architect is trying to turn the page on one of the city's largest condo repair projects, which left many residents of the leaky building with repair bills in the thousands. The Bella Vista in the city's southwest required millions of dollars to fix several leaks that caused mould. Residents first learned of the problem a few years ago and the condo board began substantial repairs at a cost of $4 million soon after. "We had to basically strip off the enclosure — the entire enclosure, all the stucco, roofing, flashing," said Tang Lee, an architect whose team fixed many of the problems. "There were some issues with the design, as well as the construction, workmanship," Lee said. At least a dozen unit owners fell into foreclosure because they were unable to pay their share repair bill, with some assessments coming in around $80,000. It was reported one owner had to pay over $180,000, which is a record high in Alberta. "We are all sitting on mortgages like everyone else, so it's a mortgage payment and condo fees, and it just seems a bit unfathomable," said Tricia Stephens who owns a unit. Other owners tried to get legal help. "Well, I went to two lawyers,” explained Nick Mascarenhas. “They both told me ‘Nick, don't throw good money at bad money.’ They advised me to file for bankruptcy, walk away, cut your losses — but I realized I'm here; I don't want to lose my car, credit cards and have to change different things." Mascarenhas ended up staying and borrowed cash to cover his bill. "I've had to change my schedule, get a different job — I now do a 60-hour work week, just to compensate for that extra payment," he said. The Bella Vista is now fully repaired, but the condo board is suing the people who built it. The developer maintains it's not at fault, saying the building passed inspection.
    For the story, see  Calgary condo owners still paying for big repair bills. See also:

    Thursday, September 27, 2012

    Married Couple Gets Multi-Year Prison Sentences In Sale Leaseback Equity Stripping Racket That Screwed At Least 21 Homeowners

    In Riverside, California, Southwest Riverside News Network reports:

    • A Murrieta couple who targeted distressed Inland Empire homeowners in a mortgage fraud scheme from which the pair profited handsomely were on their way [] to federal prison. Joe Daniel Cody, 43, and his wife, Angela Lynette Cody, 38, were sentenced [] to a combined 9 years behind bars after being convicted of money laundering and conspiracy. U.S. District Judge Virginia Phillips in Riverside imposed a 63-month sentence on Joe Cody and a 48-month term on his wife, ordering both to pay more than $1 million in restitution. According to the IRS, between May 2003 and June 2006, the couple ran All Fund Mortgage out of their Murrieta home, offering refinancing services that promised homeowners lower monthly mortgage payments if they agreed to “temporarily” sell their homes to predetermined buyers. The Codys, in fact, used straw purchasers with whom they were associated and paid between $1,000 and $25,000 to function as loan recipients to acquire properties that the defendants wanted, according to prosecutors. Once the couple’s buyers obtained the deeds to the properties, the Codys cashed out all available equity, leaving the homes with huge liens and the original owners with no chance of taking back title to their houses, prosecutors said. At least 21 people in Riverside and San Bernardino counties fell prey to the scheme, with losses totaling just over $1 million, according to the IRS.(1) The agency said almost all of the properties were either repossessed in foreclosure proceedings or were re-sold to new buyers.
    (1) For more on this type of foreclosure rescue ripoff, see:

    Foreclosed Homeowners Get Premature Boot As Auction Buyers/Investors Rush To Take Possession Of Premises Before Sales Becomes Final; Cops, DA Fiddle In Bringing Criminal Charges

    In El Paso, Colorado, The Colorado Springs Business Journal reports:

    • As real estate investment heats up and the El Paso County Public Trustee’s foreclosure auctions overflow with anxious bidders, ethics have become a bigger issue. Those closest to the action say there are regular stories of investors breaking into houses to check them out before the sale, trashing houses after lien holders redeem them, banks sending eviction notices on properties they don’t own yet, and investors going into homes to start remodeling them before they have the title. That last scenario is actually getting out of hand, said Public Trustee Tom Mowle. “We’ve had a rash lately of what I would characterize as burglaries,” Mowle said. “We’ve had a couple cases lately where people have bought property at sale and immediately go to the house, lock people out and take their stuff.” Whoever buys a property at the foreclosure auction — an investor or the bank — has to wait eight business days before taking possession of the property. That period allows the bank to discover mistakes and lien holders an opportunity to buy the property even if it already has been sold to an investor.
    • An El Paso County sheriff’s deputy responded to a burglary call on Sept. 4. Lydia Graham, referred to as Lydia Upchurch in the deputy’s report, said she felt an investor had burglarized her home. Graham told the CSBJ that she saw a dumpster in front of her property [...] on Monday, Sept. 3, which was a holiday and was only seven business days after her home sold at the El Paso County Public Trustee’s foreclosure auction on Aug. 22. She said there were cabinetry and personal items in the dumpster. “I was hot,” she said. “I was livid. They went in there without permission and were throwing my things in the trash.” Graham said she hadn’t received any notice that the property had finally sold at auction. She said she had furniture, cutlery, clothes, tile, paint and other home improvement supplies along with a motorcycle stored in the house. “They didn’t have any right to move stuff,” Graham said. Graham told deputies that the investor, Nikolas Fedorczuk, had called her and told her she could come get her things, but she had to get them before Sept. 4 or he would take possession of them. Mowle learned of the case Sept. 4 and said it was an upsetting example of recent behavior.
    • Civil or criminal? The county deputy who handled the case consulted with the 4th Judicial District Attorney’s office and determined that Fedorczuk had no criminal intent when he went into the house, so they would not file criminal charges. That sets a dangerous precedent, Mowle says. “In my opinion this is a property crime,” he said. “There’s absolutely no right for anyone to do anything other than secure against theft and damage.” That means fixing broken windows and leaky roofs and locking the doors, he said. It doesn’t mean moving motorcycles into storage facilities or tearing out carpets. “How is it a civil matter when you’re destroying someone else’s property?” Mowle said. He’s heard enough stories of this kind of thing and he’s sure it happens even more often than he realizes. “If a property is vacant, I think a majority of investors are going to bet the owner isn’t coming back,” he said. “And unless they contact me, I wouldn’t know about it.” While the DA’s office might have advised the sheriff’s office that Graham’s particular case is a civil matter, Robin Cafasso, chief deputy district attorney, said not all cases like this will be civil. “We do not have a policy that all cases like this are civil,” Cafasso said. “On the contrary, we would urge law enforcement to investigate it as a burglary.” In most cases, she said this type of thing probably should be handled as a criminal matter. “How did they get in? If they broke a lock, there’s property damage,” she said. “If they’re taking things out of the home, there’s theft.” She said ignorance of the law is no excuse. “Anyone buying property in a foreclosure process should know the law,” she said. “There is just no way that someone holding a certificate of purchase holds the right of possession.”

    Adverse Possession-Claiming Squatter Ignores Cops' 30-Day Notice To Hit The Road, Ends Up In Jail Facing Trespassing Charges

    In Brandon, Florida, ABC Action News reports:

    • Deputies found groceries on the counter, a bed on the floor and a car parked in the garage. None of which would be out of the ordinary, except the belongings did not belong to the Joyce Grimsley who actually owns the home. Grimsley locked up and moved out two years ago. Foreclosure looms, but county records list her as the current owner. Yet another woman moved in last November and has been living in the house ever since. We found a Norma Eaton had filed an adverse possession application with the Property Appraiser’s office. Eaton would not come outside to talk, but she explained over the phone that she moved in after an online search of foreclosed properties led her to this house. Squatters are nothing new. The glut of foreclosures spawned an increase the number of people laying claim to a home, based on a century-old adverse possession law. Grimsley tried contacting a lawyer and the sheriff's office, but deputies say warnings did not work on Norma Eaton. She was arrested on trespassing charges. The Hillsborough Sheriff’s Office says standard operating procedure for them is to issue a 30-day notice to vacate the property. Once the 30 days are up, they move in and arrest the reported squatter.

    Wednesday, September 26, 2012

    Media Discovery Of Old Bankruptcy Records Leads WWE Moguls To Cough Up, Pay Off 36-Year Old Debts As U.S. Senate Race Between Candidates w/ Creditor-Stiffing Pasts Heats Up

    In Hartford, Connecticut, The Day reports:

    • A personal bankruptcy cleanses the past to give debtors a fresh chance. Discharged of a legal obligation to pay their overdue bills, most bankruptcy filers never do. That is how the system was designed to work.

      Yet anecdotes exist about curious individuals who, out of personal convictions, political expediency or other reasons, later decide to make good on old debts that they officially jettisoned years ago.

      There was Walt Disney, who according to a biographer, eventually paid back creditors 45 cents on the dollar following the bankruptcy of his early Laugh-O-Gram film studio. And Harry Truman, the nation's 33rd president, who settled obligations on his long-out-of-business haberdashery.

      Add wrestling moguls Linda and Vince McMahon to the club.

      Connecticut's Republican nominee for the U.S. Senate, Linda McMahon announced last week that she and her husband will repay with interest all private individual creditors in their 1976 personal bankruptcy that happened before their wrestling entertainment business, now known as WWE, made it big. They have since expanded the creditor reimbursement to include labor unions' pension and health care funds.

      In her written announcement, McMahon said one reason why they are now making good on 36-year-old debts are because the bankruptcy records, once assumed lost to time, were located last week by The Day in a national archives office.

      Another possible reason - although unsaid by McMahon - was the gesture's effect of denying her Democratic opponent, current 5th Congressional District Rep. Chris Murphy, from using the old list of stiffed creditors as campaign ammunition to deflect attention from his more recent history of late bill payments.

      Additionally, her statement's closing remarks seemed to suggest that McMahon felt a moral tug to repay old creditors, now that she and her husband have recovered from their early struggles and achieved extraordinary success and wealth.

      McMahon's personal spending in this year's Senate campaign and her unsuccessful 2010 run now exceeds $65 million. By comparison, the young couple faced $955,805 in creditor claims when they filed bankruptcy.
    • The McMahons intend to repay their eligible creditors at four times the initial amount due. Her campaign would not comment Friday on why the McMahons' biggest and most numerous creditors - financial institutions, nearly all of them since absorbed into other banks - will not be paid via their new ownership.
    • Murphy, McMahon's Democratic opponent, has a history of late payments on financial obligations. He was reportedly late on his car taxes seven times between 1998 and 2005 and on paying a real-estate bill in 2005.

      He also missed rent payments in 2003 and mortgage payments on a Cheshire home that led to a brief foreclosure scare in 2007. The congressman said he paid all his creditors in full.
    For the story, see McMahons' repaying of old debt a relatively rare gesture (Recipients startled to receive checks).

    Connecticut Couple Reject 'Gag Order' As Part Of BofA's Loan Modification Offer; Say They'll Go Out Fighting In Battle To Avoid Foreclosure

    In West Haven, Connecticut, the Litchfield County Times reports:

    • Ronni and George Mandell won’t go out with a whimper in the fight to keep their home. And they say because of that, Bank of America won’t modify their mortgage terms to a payment they can afford. Bank of America offered the couple a chance to modify the loan on the Jones Street house they’ve owned for 10 years in order to make payments more manageable, but only with conditions that include essentially agreeing to a gag-order when it comes to the deal and the financial institution. That means keeping quiet about opinions of the bank on Facebook, blogs, websites and in the media, and taking down any existing postings — something that may be unexpected in a document relating to a financial matter. The Mandells rejected the settlement. “I cherish my rights to free speech,” George Mandell said. “We’re prepared to lose the house if we have to, but we’re going to fight it. We’re standing firm not just for ourselves, but hopefully for the rest of the people in the country. Because it’s gotta be cleaned up.” The Mandells say people across the country are being presented with offers like this one from Bank of America and worry some aren’t reading the fine print. They’ve called or written to just about every agency out there that oversees banks and consumer affairs, as well as politicians, and expect the bank to begin foreclosure proceedings on their home in the next few weeks.

    Pair Gets Multi-Year Prison Stays For Running Straw Buyer Flipping Scams, Rent To Own Ripoffs

    From the Office of the U.S. Attorney (Seattle, Washington):

    • Two men who engaged in a mortgage fraud scheme that collapsed with the real estate downturn, were sentenced [] to federal prison terms in U.S. District Court in Seattle. ROBERT STRONG, 48, of Bothell, Washington was sentenced to four years in prison and ANTHONY WALDRON, 49, of Kirkland, Washington was sentenced to 42 months in prison. Between 2005 and 2008, the men used fraudulent information to obtain more than $13 million in loans on 30 different properties, primarily in South King County. When the scheme ended and the homes went into foreclosure the lenders had lost more than $2.5 million.
    • According to records filed in the case, the men recruited straw buyers with good credit to “purchase” the houses. These straw buyers were paid as much as $18,000 for use of their identity and credit score on the loan documents. The men submitted false employment information on the straw buyers, in one case claiming the woman made $22,000 per month working for an entity they created and controlled. Using this false information the men got banks to fund the mortgages on the houses, then the men would quickly “sell” the house to another straw buyer at a higher price to claim the additional mortgage funds. The men also rented the houses on “rent to own” plans, asking the renters to pay an option, ranging from $400-$7000, to purchase the home at a later date and at an increased price. The men also falsely claimed repairs were made to the homes and increased the value of the homes based on those repair bills. Instead they pocketed the money that they claimed went to home improvements.
    For the U.S. Attorney press release, see Two King County Men Sentenced To Prison For Mortgage Fraud Scheme (Pair Used Straw Buyers to Buy and “Flip” Houses, Defrauding Banks of more than $2.5 Million).

    Title Agent Gets Pinched For Allegedly Converting Real Estate Escrow Cash Into Play Money For Her Own Personal Pleasure

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

    • A Wellington title agent faces up to 30 years in prison and $5 million in fines from federal charges filed last week that allege she diverted money from closings to gamble and pay personal expenses. Dawn Herndon, who ran Accurate Title Closings, LLC., was charged Wednesday with five counts of fraud on a financial institution. The complaint says the 46-year-old obtained more than $3.3 million of mortgage monies by falsyfing HUD-1 settlement statements in 32 separate sale closings that occurred between December 2009 and December 2010. Herndon could not be reached Monday, and no defense attorney was listed in federal court documents. A bond recommendation of $100,000 was filed with the complaint. “Contrary to the representations made on the HUD-1s, Dawn Herndon transferred most of the mortgage proceeds from the Accurate Title Closings escrow accounts to the business operating accounts and then used these monies for her personal benefit, that is, to gamble and pay personal and business expenses,” according to the complaint. The five felony charges stem from closings Herndon allegedly conducted on homes in Wellington, Lake Worth, West Palm Beach and Boynton Beach. Florida’s Office of the Chief Financial Officer issued an administrative complaint against Herndon in January alleging she wrote checks on Accurate’s escrow account that bounced, failed to pay $4,882 to the Miami-Dade Tax Collector and failed to maintain the company’s surety bond.

    Tuesday, September 25, 2012

    Ohio Supremes Reject 'Internet Method' Of Providing F'closure Notice Where Party's Address Is Known, Easily Ascertainable; Reverses 2 Lower Ct. Rulings That OK'd Cheap, Easy Way To Serve Non-Defaulting Defendants


    • At issue in this case was whether a county sheriff can meet the constitutional obligation of providing notice of a sheriff's sale to a plaintiff by letter directing the plaintiff's attorney to monitor a website for a listing of the date, time, and location of sale. The court of appeals affirmed the judgment of the trial court in denying plaintiff's motion to set aside the sheriff's sale.

      The Supreme Court reversed, holding that constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff's office website is insufficient to constitute due process when that party's address is known or easily ascertainable. Remanded.(1)(2)
    Source: PHH Mtge. Corp. v. Prater Opinion Summary.

    For the ruling, see PHH Mtge. Corp. v. Prater, 2012 Ohio 3931 (September 6, 2012).

    Thanks to Deontos for the heads-up on the ruling.

    (1) After its analysis of the applicable U.S. Supreme Court and Ohio case law, the state high court concluded its opinion with this nutshell:
    • Constructive notice through the Internet, which is more akin to notice by publication in a newspaper, is simply not sufficient or reasonably calculated to provide actual notice to all nondefaulting parties. Moreover, as noted by Judge Powell, a change in notice requirements in this area would more appropriately be contemplated by local or state rule change.

      Accordingly, we hold that constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff's office website is insufficient to constitute due process when that party's address is known or easily ascertainable.

      We reverse the judgment of the court of appeals denying PHH's motion to set aside the sheriff's sale.
    (2) Among the non-profit, consumer advocate 'friends of the court' who jumped into the litigation to urge the Ohio Supreme Court to reverse the lower court rulings were:
    • Southeastern Ohio Legal Services,
    • Ohio Poverty Law Center, L.L.C.,
    • Community Legal Aid Services, Inc.,
    • Legal Aid Society of Columbus,
    • Pro Seniors, Inc.

    Application Of The 'Wall Street Rule' Provides Protection For Banksters From IRS Enforcement Of Laws Regulating REMICs In Connection With Mortgage Securitization Screw-Ups

    From Thomson Reuters News & Insight:

    • They take aggressive positions, and they figure that if enough of them take an aggressive position, and there’s billions of dollars at stake, then the IRS is kind of estopped from arguing with them because so much would blow up. And that is called the Wall Street Rule. That is literally the nickname for it.”(1)

      Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities.

      This calamity is compounded by the fact that those professional advisers should have known that the REMICs they created were flawed from the start. If these losses are realized, those professionals will face suits for damages so large that they could put them out of business. That is, unless the Wall Street Rule is applied.

      The issue of REMIC failure for tax purposes is important in at least three contexts:

      (1) in any potential effort by the IRS to clean up this industry;

      (2) in civil lawsuits brought by REMIC investors against promoters, underwriters, and other parties who pooled mortgages and sold mortgage-backed securities; and

      (3) state and federal prosecutors and regulators who consider bringing criminal or civil claims against promoters, underwriters, and other parties who pooled mortgages and sold MBSs.
    For more, see Wall Street Rules Applied to REMIC Classification (or go here for the research paper by Brooklyn Law School Professors Bradley T. Borden and David J. Reiss.).

    (1) From a Monday, September 22, 2003 oral presentation given at a financal industry conference by Emily A. Parker, the then-Acting Chief Counsel for the Internal Revenue Service in discussing the Wall Street Rule:
    • Even in Dallas, Texas – where I practiced law for 28 years prior to joining the IRS – we had heard of the Wall Street Rule. Some might say that is not surprising because Dallas is just Fort Worth trying to be New York. The truth is that the Wall Street Rule is widely known in the tax world and is not limited to issues that originate from, or arise on, Wall Street. The Wall Street Rule may often be cited with respect to publicly traded securities, but the  underlying premises of the Wall Street Rule apply to the tax treatment of a variety of issues and transactions. Therefore, my comments today are not limited to the financial industry or to Wall Street.

      There are at least two accepted versions of the Wall Street Rule.

      One version is 
      that the IRS cannot attack the tax treatment of any security or transaction if there is a long-standing and generally accepted understanding of its expected tax treatment. This is the “golden oldie” version of the rule.

      The second version of the Wall Street Rule is that the IRS is deemed to have 
      acquiesced in the tax treatment of any security or transaction if the dollar amount involved is of sufficient magnitude. This version of the Wall Street rule is primarily premised on the dollars involved and the adverse economic  or market impact of any challenge by the IRS. This is the “golden rule” version of the Wall Street Rule.

      When I first started practicing law, a senior lawyer asked me if I knew the “golden 
      rule.” I mumbled something about “do unto others as you would have them do unto you.” He immediately corrected me with the real golden rule. He said: “The person with the gold makes the rules.” That pretty well  summarizes the “golden rule” version of the Wall Street Rule. If the dollars are big enough, the IRS cannot challenge the tax treatment of a transaction or security because the economic or market impact would be too large.

      Sometimes, both versions of the Wall Street Rule are invoked simultaneously. But, any version of the Wall Street Rule ultimately is based on the principle of estoppel by laches. This is an equitable principle holding that a claim or right may not be enforced if the plaintiff delayed too long in making the claim or enforcing the right.

      One of the basic legal rules I learned in law school, however, was that there is no estoppel against the King. This basic legal rule applies under the tax law. There is no equitable principle of estoppel by laches against the Commissioner under the tax law. The failure of the IRS to issue published guidance on a transaction, and even the failure of the IRS to raise issues regarding a transaction in audits for many years does not prevent the IRS from questioning the tax treatment of the transaction. As a legal matter, there is no such thing as The Wall Street Rule.

      As a lawyer, therefore, I must dismiss the Wall Street Rule, whether I represent the IRS or taxpayers. Taxpayers cannot rely upon the Wall Street Rule, since it is not equitably or legally binding on the IRS. Likewise, the Commissioner may challenge positions taken by taxpayers, however longstanding and however many dollars are at stake.

      While it is good tax policy and good tax administration to issue published guidance to inform taxpayers of the IRS’s view of the tax consequences of their transactions, the IRS cannot be expected promptly to identify and respond to all transactions. There are institutional and practical limitations on the ability of the IRS to issue published guidance on each and every transaction or issue. That we aspire to issue more, and more timely, published guidance does not give any credibility to the Wall Street Rule.

      Even though the Wall Street Rule is not legally relevant, we cannot ignore the widespread acceptance in the tax world of the Wall Street Rule. The widespread assertion of the Wall Street Rule also tells us something about the attitudes of taxpayers and tax practitioners regarding the self-assessment system.

    Florida High Court Suspends Two Lawyers From Practice For Their Involvement In Performing Loan Modification Services

    The Florida Bar, the state's guardian for the integrity of the legal profession, recently published its periodic 'gossip sheet,' announcing that the Florida Supreme Court in recent court orders disciplined 24 attorneys, disbarring eight and suspending 13. Among those Florida attorneys making this period's hit parade are the following pair for their involvement in the performance of loan modification services:

    1. Thomas C. Matevia, 4521 PGA Blvd., No. 254, Palm Beach Gardens, suspended for three years, effective 30 days from a June 29 court order. (Admitted to practice: 1970) Matevia worked at a high volume law firm providing loan modification services, in which he was ultimately unable to meet his payroll and other financial obligations. The financial failure of the law firm caused at least 41 complaints to be filed with The Florida Bar, by clients that paid a retainer fee for Matevia to handle cases for them that he didn’t complete. He also violated Bar rules by paying bonuses to non-lawyer employees for signing up clients for the law firm. Matevia was also ordered to pay restitution of $102,049 to clients. (Case No. SC12-1118).
    2. Robert Victor Rossenwasser, 99 N.W. 183rd St., Suite 100B, North Miami, suspended for 90 days, effective 30 days from a June 29 court order. (Admitted to practice: 1992) Rossenwasser is the subject of several Bar disciplinary matters stemming from his involvement in a loan modification business. (Case No. SC12-1120).

    Couple Get Prison Stays For Peddling Phony Mtg Reduction Racket Ponzi Scheme; Used Lulling Payments To Lull Investors To Sleep While Living High Life

    From the Office of the U.S. Attorney (Chicago, Illinois):

    • A Will County couple has been sentenced to federal prison terms for engaging in a brazen investment fraud scheme that swindled more than $1 million from approximately 40 victims, causing some of them to lose their homes and financial security while the couple spent the money primarily on themselves. JAMES PILON was sentenced today to 53 months in prison, while his wife, VERNA PILON, was sentenced last week to 78 months in prison, and they were ordered to pay $967,702 in restitution.
    • According to court records, the investigation of the Pilons, of Monee at the time, began in 2005 when the Illinois Securities Department ordered them to cease selling investments in the state. Instead of complying, the couple continued to solicit and obtain investment funds through 2005 and 2006. The couple operated numerous nusinesses through which they purported to sell two forms of investment — the Mortgage Acceleration Program, which essentially promised to pay investors’ monthly mortgage payments, completely pay off the outstanding balance in two years, and generate additional returns, and the Private Placement Program, which also promised high-yield returns of as much as 100 percent or more on investments within 90 days. In fact, neither investment program existed and the Pilons used some funds they fraudulently obtained to make Ponzi-type payments to lull some investors, while using the remaining funds for themselves. As a result, some investors’ mortgage payments were never made and their homes were foreclosed.
    • During court proceedings, Verna Pilon was identified as a member of the so-called Washitaw nation sovereign group and she repeatedly maintained that the U.S. District Court had no jurisdiction over her. Evidence showed that the Pilons were acquainted with many of their victims, including some who testified that the couple preyed upon their religious faith in appealing for investment funds.

    Monday, September 24, 2012

    NYC Federal Court Green Lights Class Action Certification In Alleged Sewer Service Racket Involving Fraudulently Obtained Default Judgments, Zombie Debt Buyer, Process Server, Law Firm

    From a recent client alert from the law firm Ballard Spahr LLP:

    • A recent decision by a New York federal court provides yet another example of the documentation-related challenges that creditors and debt buyers are increasingly facing in collection actions involving non-mortgage consumer debts. In its opinion in Monique Sykes v. Mel Harris and Associates, LLC, issued September 4, 2012, the U.S. District Court for the Southern District of New York granted class certification in a case alleging that a debt buyer, law firm, and process service company had engaged in a scheme to fraudulently obtain default judgments against more than 100,000 consumers in debt collection actions filed in state court. The complaint alleged that the process service company had regularly engaged in "sewer service" by failing to serve the summons and complaint. It further alleged that, after a debtor failed to appear in court for lack of notice of the collection action, the debt buyer and law firm would seek a default judgment based on a false "affidavit of merit" attesting to their personal knowledge of the "facts and proceedings" relating to the action and a false affidavit of service. According to the court, the plaintiffs had established that the affidavits of merit were "generated en masse by sophisticated computer programs and signed by a law firm employee who did not read the vast majority of them and claimed to, but apparently did not, have personal knowledge of the facts to which he was attesting." The employee typically did not receive the original credit agreement for a particular debt included in a portfolio of purchased debts. Instead, the employee received a bill of sale for the portfolio that included sample credit agreements and warranties from the portfolio seller. The court noted that even if the credit agreement existed (which it often did not), the employee's standard practice was to rely on the warranties and database information instead of reviewing the agreements before signing an affidavit of merit. The evidence showed that after producing the affidavits of merit in batches of up to 50 at a time, the law firm's employee would do a "quality check" of one affidavit per batch to confirm that the affidavit information matched the database information. If both sets of information matched, he would sign the remaining affidavits without reviewing them. The employee would sign as many as 350 affidavits of merit in any given week. The plaintiffs also alleged that, because the defendants had regularly engaged in "sewer service," the affidavits of service that accompanied the affidavits of merit were also often false. According to the court, evidence showing hundreds of instances of the same process server executing service at multiple locations simultaneously provided substantial support for the plaintiffs' "sewer service" allegations. In addition to claiming that the defendants' conduct violated the Racketeer Influenced and Corrupt Organizations Act and New York's General Business Law and Judiciary Law, the complaint alleged that the defendants had violated the Fair Debt Collections Practices Act by filing false affidavits in the collection actions. The court, in finding that the plaintiffs had satisfied the commonality requirement for class certification, noted that there is conflicting case law on whether making false representations in court, rather than to the debtor, violates the FDCPA.

    LA Feds Pinch Three, Seek Another In Alleged Sale Leaseback Equity Stripping Ripoff That Left Homeowners Broke & Straw Buyers Holding The Bag

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

    • The top two managers at a Westwood-based mortgage brokerage company have been arrested on federal charges relating to a foreclosure avoidance and equity-skimming scheme that targeted distressed homeowners. According to an indictment in this case, the scheme led several mortgage lenders to disburse more than $15 million in loan proceeds – with nearly half of that being lost to the fraud conspiracy. Federal authorities on Tuesday arrested David Singui, 49, of Inglewood, and Aziz Meghji, 35, of Los Angeles, who were, respectively, the principal owner and the second-in-charge at Direct Money Source (DMS), a mortgage brokerage which allegedly operated as an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses and also defrauded mortgage lenders. A third defendant in the case – Kiet Truong, 27, of Hawthorne, who worked at DMS, [subsequently] surrendered to authorities [...]. The fourth defendant named in the 42-count indictment – Starr Smith, 31, whose last known address was in Long Beach, is a fugitive currently being sought by authorities. The federal grand jury indictment, which was returned on September 6, charges all four defendants with conspiracy, wire fraud, loan fraud and aggravated identity theft. Singui and Meghji are additionally charged with money laundering. DMS held itself out as a company with a “Fresh Start Program” that was devoted to assisting distressed homeowners avoid foreclosure by arranging to have their homes purchased by so-called “credit investors,” who would hold the properties for 12 months and then sell them back to the original homeowners after they restored their credit ratings. In fact, as alleged in the indictment, DMS was an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses. The scheme allegedly defrauded mortgage lenders in connection with loans on approximately 50 different properties.
    • The distressed homeowners were told that, because they had equity in their homes, DMS would be able to draw down on the equity and make monthly mortgage payments on behalf of the homeowners during the one-year period in which they were to repair their credit. In fact, according to the indictment, DMS took title to more than four dozen properties belonging to the distressed homeowners it targeted and simultaneously misappropriated the existing equity in their homes. Using “straw borrowers” as the “credit investors,” DMS orchestrated loan transactions that allowed DMS to obtain access to the distressed homeowners’ equity. As alleged in the indictment, DMS and its principals falsified the employment, bank account and income information of the straw borrowers on the loan applications. DMS also allegedly fabricated fictitious bank statements to support this false information on the loan applications in order to facilitate the approval of these fraudulent loans. At the conclusion of these transactions, DMS usually ended up with approximately $100,000 equity per transaction, plus around $35,000 in fees and commissions associated with each loan. In the meantime, each of the straw borrowers ended up owing approximately $300,000 or more on loans that went into default because DMS did not make the 12 months of mortgage payments as promised.(1)
    (1) For more on this type of foreclosure rescue ripoff, see:

    Michigan Loan Modification Racket Operator Gets 10-20 Years For Screwing 60 Victims Out Of $250K+

    From the Office of the Michigan Attorney General:

    • Attorney General Bill Schuette [] announced his Corporate Oversight Division has secured a prison sentence for a Holly woman who ran a fraudulent foreclosure-rescue operation that scammed at least 60 victims across the state out of more than $250,000. Tashia Winstanley, 38, of Holly, has been sentenced to 10 to 20 years in prison and ordered to pay $243,474 in restitution [...]. Winstanley and her company, TLW Mortgage Solutions, each pleaded guilty on August 3, 2012 to three felonies for collecting upfront fees while impersonating a mortgage modification company. "Foreclosure rescue scam artists attack Michigan homeowners who are struggling financially and fighting to stay in their homes," said Schuette. "Anyone who exploits struggling homeowners through these scams will be prosecuted to the fullest extent of the law."
    • Winstanley offered prospective clients mortgage loan modifications for a fee. Winstanley promised victims she would secure a mortgage loan modification for them. Some victims even made their mortgage payments directly to Winstanley instead of their lenders, but instead of remitting those payments to the banks, Winstanley pocketed the funds in order to feed self-proclaimed shopping and drug addiction. The Attorney General Investigation uncovered evidence that Winstanley made no efforts to secure loan modifications for many of the victims. Affected victims reside in the following counties: Grand Traverse, Leelanau, Kalkaska, Roscommon, Oakland, Genesee, Benzie and Macomb. Winstanley and her company, TLW Mortgage Solutions both plead guilty in Grand Traverse County's 13th Circuit Court to the following: One count of Conducting Criminal Enterprises (Racketeering), a felony punishable by up to twenty years in prison; One count of False Pretenses - More than $20,000, a felony punishable by up to ten years in prison; and One count of False Pretenses - $1,000-$20,000, a felony punishable by up to five years in prison and/or three times the value of money or property involved. Winstanley is currently incarcerated in Huron Valley Women's Correctional Facility serving time for previous convictions for Larceny by Conversion - $1,000-$20,000 charged in Leelanau and Kalkaska counties. Citizens who believe they may have been victims of Winstanley or TLW Mortgage Solutions are encouraged to file complaints with the Attorney General's Office at by clicking "File a Complaint."

    Sunday, September 23, 2012

    Criminal Prosecutors Jump Into Bed With Debt Collectors, 'Renting Out Their Office Stationery' To Facilitate Cash Recoveries In 'Rubber Check' Cases

    The New York Times reports:

    • The letters are sent by the thousands to people across the country who have written bad checks, threatening them with jail if they do not pay up. They bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead.

      In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.

      The practice, which has spread to more than 300 district attorneys’ offices in recent years, shocked Angela Yartz when she was threatened with conviction over a $47.95 check to Walmart. A single mother in San Mateo, Calif., Ms. Yartz said she learned the check had bounced only when she opened a letter in February, signed by the Alameda County district attorney, informing her that unless she paid $280.05 — including $180 for a “financial accountability” class — she could be jailed for up to one year. “I was so worried driving my kid to and from school that if I failed to signal, they would cart me off to jail,” Ms. Yartz said.

      Debt collectors have come under fire for illegally menacing people behind on their bills with threats of jail. What makes this approach unusual is that the ultimatum comes with the imprimatur of law enforcement itself — though it is made before any prosecutor has determined a crime has been committed.

      Prosecutors say that the partnerships allow them to focus on more serious crimes, and that the letters are sent only to check writers who ignore merchants’ demands for payment. The district attorneys receive a payment from the firms or a small part of the fees collected. “The companies are returning thousands of dollars to merchants that is not coming at taxpayer expense,” said Ken Ryken, deputy district attorney with Alameda County.

      Consumer lawyers have challenged the debt collectors in courts across the United States, claiming that they lack the authority to threaten prosecution or to ask for fees for classes when no district attorney has reviewed the facts of the cases. The district attorneys are essentially renting out their stationery, the lawyers say, allowing the companies to give the impression that failure to respond could lead to charges, when it rarely does.

      This is guilty until proven innocent,” said Paul Arons, a consumer lawyer in Friday Harbor, Wash., about two hours north of Seattle.

    Mortgage Cancellation Rackets That File Suits To Obtain Default Judgments To Wipe Out Banksters' Liens Gain Steam In Florida

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

    • More companies are jumping into the land trust business. At least two new firms in Florida are trying to cancel mortgage debt with lawsuits that lenders call “baseless” and “nonsensical” but that some borrowers say are their last chance at keeping their homes. The companies, including one with a Jupiter address, are in addition to the Fidelity Land Trust Company that opened last year in Boca Raton. Together, they have filed scores of lawsuits statewide and collected hundreds of deeds from homeowners, who are typically solicited by phone because they have underwater mortgages. And desperate borrowers are biting.
    • [P]roponents of the trusts point to a Levy County case they say proves it works. A press release issued Tuesday by one of the trust referral companies says Boca Raton attorney Howard Feinmel, who is under a Florida Bar investigation for issues relating to quiet title lawsuits, won a judgment in November that canceled a mortgage. It was a default judgment, typically awarded when the defendant fails to respond within 20 to 30 days and can be reopened if there are legitimate reasons for missing the deadline. The plaintiff in the Levy County case was Levy County Partners, which had the homeowner deed his house to it before filing the lawsuit, according to property appraiser records. The deed has since been transferred from Levy County Partners to Fidelity Land Trust Company. The foreclosure lawsuit against the homeowner was voluntarily dismissed in June by the lender. The dismissal was done without prejudice, meaning it can be re-filed. Bank of America, the servicer on the loan, did not respond to a request for comment. Fidelity Land Trust Company, which was incorporated in December and is believed to be one of the first firms to make widespread attempts to cancel mortgages by suing the banks, has amassed about 240 deeds statewide, including 100 in Palm Beach County.

    Mortgage Servicers' Contractor Cops Plea In $12M Ripoff, Admitting To Fabricating Foreclosure Property Inspection Reports

    In Tampa, Florida, the Tampa Bay Times reports:

    • As the housing market imploded, Dean Counce's business boomed. Counce's Brooksville company contracted with lenders to regularly inspect properties in foreclosure throughout the state. By 2009, Counce was sending as many as 100,000 inspection reports each month to Bank of America, receiving about $6.50 for each. Bank of America then billed the federal entities that owned or insured the mortgages. At one point, Counce was making as much as $1 million per month. The problem: Half of those reports were fabricated. Now, investigators say, Counce owes taxpayers more than $12 million and faces up to 20 years in prison. On Friday, the 42-year-old Spring Hill resident pleaded guilty in federal court to one count of conspiracy to commit wire fraud. His sentencing date has yet to be set.
    • As part of a plea deal, Counce agreed to cooperate with an ongoing investigation and testify if necessary. Prosecutors, in turn, will not oppose his request for a prison term on the low end of the sentencing range.

    Title Insurer Screws Itself w/ Ambiguous Policy Terms; Forced To Calculate Loss On Search Screw-Up By Including Value Decline Based On Market Factors

    (This post will probably be of absolutely no interest to absolutely anyone, other than maybe some title insurance industry people, and possibly, a certain anonymous blogger - me. Accordingly, here goes.) The following facts are taken from a recent ruling of the South Carolina Supreme Court:

    1. On October 30, 2006, Plaintiff purchased a lot along the Intracoastal Waterway in Myrtle Beach. A mobile home and an out-building were situated on the property at the time of purchase. Plaintiff purchased the lot intending to build a single-family home on the property.
    2. Since 1931, the property has been subject to a properly recorded spoilage easement allowing for the construction and maintenance of the Intracoastal Waterway. According to Plaintiff/Landowner, the spoilage easement allows the Army Corps of Engineers to dredge and maintain the Intracoastal Waterway and to dump dredged material on Plaintiff/Landowner's lot at any time.
    3. At closing, Plaintiff purchased from Defendant an owner's title insurance policy in the face amount of $410,000—the amount of the purchase price.
    4. The existence of the spoilage easement was missed in the title search and therefore was not included as an exception to coverage in the title policy. The existence of the spoilage easement was not known by Plaintiff at the time she purchased the property.
    5. In January 2010, Plaintiff sought a building permit from Horry County to construct a home on her property. Through that process, she learned of the spoilage easement, which prevented her from obtaining a building permit.
    6. It is undisputed that by 2010, the value of the property had decreased as a result of the downturn in the real estate market, irrespective of the diminution in value caused by the title defect.
    7. Plaintiff filed an action seeking damages caused by the existence of the easement. The parties filed cross motions for summary judgment. Defendant argued the value of any loss should be measured as of the date of the discovery of the title defect.
    8. Plaintiff moved for summary judgment as to liability only and argued the case presented a jury issue regarding damages. Plaintiff contended that her damages, as measured by the diminution in property value, should be measured as of the date the property was purchased.
    9. The United States District Court found Defendant/Title Insurer was liable under the insurance policy and granted summary judgment in favor of Plaintiff.
    10. However, as to the issue of damages, because this issue required an interpretation of substantive state law for which the state law precedent may not have been clear, the district court 'punted' on answering that question, instead opting to certify the question to the South Carolina Supreme Court for an authoritative determination.
    Despite acknowledging the apparent inequity against the title insurer resulting from its decision, the South Carolina Supreme Court ruled that, because of ambiguous language in the title insurance policy, state law required it to interpret the policy in a light most favorable to the insured. Accordingly, they ruled that the date the property was purchased was the date to be used in measuring the diminution in property value resulting from the screw-up in the title search (when the property was worth much more due to the real estate market 'bubble'), resulting in a greater damages calculation for the landowner than would have been the case had the date of discovery of the title defect been used to calculate damages (when the property value was worth much less due to the subsequent real estate market 'crash' several years later). In recognizing that courts around the country have generally identified three points in time to measure an owner's actual loss (the date the property was purchased, the date the title defect was created, and the date the defect was first discovered), the South Carolina Supreme Court made these comments:
    • [W]e are guided by the contract principle that parties may contract as they see fit, provided the contract terms do not offend public policy. In the context of establishing a method of valuation in a title policy, as noted above, "[t]he terms of individual insurance agreements can control the method of valuation." Stanley, 377 S.C. at 411, 661 S.E.2d at 65. The title policy here does not unambiguously set forth a method of valuation in line with the construction Defendant urges us to adopt. Thus, we need look no further than the general rule that ambiguities in an insurance contract must be construed in favor of the insured. In this case, that construction results in a date-of-purchase valuation date. We fully appreciate the equity and inherent logic for valuing the property in this case as of the date of the discovery of the title defect as Defendant suggests. See generally Matthew C. Lucas, Now or Then? The Time of Loss in Title Insurance, 85 Fla. B.J. 10, 15 (2011). Defendant asserts that under a title policy the risk of a decline in the land's market value because of market conditions should be assumed by the purchaser, and the risk of the land's market value being impacted by a title matter should be assumed by the title insurance company. We conceptually agree with Defendant, but we are construing a contract of insurance, not attempting to fashion an equitable remedy. The insurance policy here simply fails to identify the valuation date as the date of discovery of the title defect or otherwise provide clear language that would require a valuation date in line with Defendant's position. The well-established rule concerning construction of ambiguous terms in insurance contracts compels a result adverse to Defendant's position. In sum, although we acknowledge the apparent inequity in our answer to the certified question, the resolution of this question is not a matter of equity. Rather, this Court is faced with the task of construing an insurance policy, and in the presence of an ambiguity we are constrained to interpret it most favorably to the insured. In this case, the date the property was purchased is the proper valuation date.
    For the ruling, see Whitlock v. Stewart Title Guaranty Company, Opinion No. 27169 (S.C. September 12, 2012). Thanks to Deontos for the heads-up on the ruling.