Saturday, October 27, 2012

Local TV Station Buys Delinquent Debt, Immediately Begins Foreclosure On Next-Door Neighbor In Effort To Stop Strip Club Developer From Building 'Jiggle Joint'

In North Bay Village, Florida, The Miami Herald reports:

  • The parcel on the JFK Causeway where a developer wants to open a strip club is once again in hot dispute. This time, Sunbeam Realty President Ed Ansin, owner of next-door neighbor WSVN-Channel 7, is looking to foreclose on the mortgage.

    Last year, Ansin appeared in a televised video speaking against the strip club, and several of his on-air reporters showed up at a North Bay Village meeting to persuade planners not to approve the plans. Now, his company is taking legal action.

    Sunbeam Realty filed a foreclosure lawsuit Aug. 10 in Miami-Dade County. About a week before filing suit, Sunbeam Realty acquired the property’s mortgage, records show.

    Isle of Dreams bought the land for $1.3 million in 2004, and it took out a $4.8 million mortgage in 2008, according to Miami-Dade County records. But the developer has defaulted on the mortgage, Sunbeam Realty argues in the complaint.

    As the new mortgage holder, Sunbeam Realty says in lawsuit documents that it has demanded all payments due under the note, or $4.8 million plus interest and other fees, from Isle Of Dreams. The developer has not paid, according to the complaint.

    We view this as a litigation tactic by Sunbeam and intend to vigorously defend our rights in the courts,” Isle of Dreams Manager Scott Greenwald said. WSVN and Sunbeam declined to comment.

    Isle of Dreams has proposed to build a five-story complex at 1415 JFK Causeway, including two floors for a strip club. Besides WSVN, which does not want a strip-club next to its studios, residents have spoken against the plans at city meetings. Isle of dreams has been fighting to open the club. In the past year, the company has twice sued the city.

    In the first suit, the company claims that part of the city’s zoning requirement violates the First Amendment right of freedom of expression because it gives commissioners too much discretion in deciding whether to approve the strip club. The U.S. District Court for the Southern District of Florida dismissed that lawsuit. Isle of Dreams has since appealed.

    It has also filed a second lawsuit against North Bay Village in which it claims the city is using the site-plan approval process to prohibit an adult-entertainment establishment, Greenwald told The Miami Herald in July.

    The City Commission has passed changes to its zoning laws that clarify the language of the ordinance and eliminate parts of the zoning requirements. Commissioners voted to add a new chapter in the city’s code that requires a business license for an adult-entertainment establishment, and prohibits full nudity within the building as well as the sale, service and consumption of alcohol.
Source: Strip club opponent tries a new tactic: foreclosure lawsuit (The company that holds the mortgage on land where a developer wants to build a strip club has filed suit).

Delinquent Debt, Deteriorating Conditions Fuel Property Acquisition Strategy For Some Real Estate Operators Targeting Bronx Buildings

In The Bronx, New York, Crain's New York Business reports:

  • The senior debt collaterized by two overleveraged buildings in the Morrisania section of the Bronx has been sold for $31 million. Brokerage Massey Knakal Realty Services represented LNR, the special servicer which took over the debt about two years ago, in the deal.

    The two rent-regulated towers—Fordham Towers and Robert Fulton Terrace—are at 530 and 540 E. 169th Street and 490 E. 188th St., respectively. The two total 434,000 square feet and together boast 490 apartments. The pair were just two of many properties across the city, where owners overpaid for rental buildings during the height of the real estate market and pinned their hopes on their ability to hike rents.

    When the market crashed, Fordham Towers and Robert Fulton Terrace fell into foreclosure. According to sources, the buyer of the note was real estate investment firm United Realty Trust.

    "This was a complicated transaction given the dynamics of the assets and how long the note was in default," Massey Knakal Chairman Robert Knakal said, declining to identify the buyers. United Realty Trust executives Jacob Frydman and Eli Verschleiser did not return calls for comment.

    All but 39 apartments at Fordham Towers and Robert Fulton Terrace are rent-stabilized. Almost all of the apartments that are no longer rent stabilized are vacant, according to Massey Knakal Realty's marketing material for the note. It's unclear if United Realty Trust has moved to acquire the deed of the properties.

    In 2007, real estate investor Mark Karasick bought Fordham Towers and Robert Fulton Terrace for $44 million. At the time tenants at the complexes were concerned about the deal and the inflated price. CIBC lent Mr. Karasick $36.5 million for the transaction and later sold the loan to J.P. Morgan Chase. Two years after buying the properties Mr. Karasick defaulted on his mortgage, according to public records, and the properties were foreclosed on. That is when LNR stepped in to take over the properties.

    Meanwhile, tenants have reportedly complained of the deteriorating conditions of the buildings. According to city records, as of mid-September there were 389 housing violations at Fordham Towers and Robert Fulton Terrace.
Source: Debt on two Bronx apt. buildings sells for $31M (The price is nearly 20% less than the amount a buyer paid five years ago for the pair, which boast 490 apartments. The loans had been in foreclosure for three years).

In a related story, see Bronx is burning over failed deals (Overleveraged buyers of rent-regulated apartments create one big mess across city).

Local Cops, Realtors Join Forces To Raise Awareness About Rent Scams Involving Vacant, Foreclosure Homes

In Naples, Florida, the Naples Daily News reports:

  • If it looks too good to be true, it probably is. In the wake of recent arrests of people charged with illegally renting and leasing foreclosed homes, the Collier County Sheriff's Office and Naples Area Board of Realtors are partnering to raise community awareness about rental scams so nobody becomes a victim.

    Both agencies will take steps to warn the public to be wary of ads for rental homes or condominiums, but no further plans about the recent partnership geared toward educating the public were immediately released.

    It's typical for the person behind the scam to post a notice on Craigslist, in local newspapers or on other social media sites advertising homes for rent, often using the legal owner's name in the return email address, according to a Sheriff's Office's statement.

    David Spahl, a Collier sheriff's Organized Crime Bureau investigator, said deputies are being proactive about monitoring vacant properties and researching the Internet for suspicious advertisements. Spahl said the majority of the scams discovered during the summer were posted on Craigslist and originated in Nigeria.

    In the summer, there were at least 15 victims of foreclosed home rental scams. "I'm reasonably certain there were more that we never learned about," Spahl said.

Owner Of Now-Destroyed Dry Cleaning Shop Facing Charges Of Failing To Clean Up Rubble Buys Out Of Jail Time w/ Back Tax Installment Payment Promise

In Lockport, New York, The Buffalo News reports:

  • It’s going to cost Patrick McFall a lot of money to stay out of jail. Jury selection was to have begun [] in his second trial on charges of violating the city’s property maintenance code by not cleaning up the wreckage of his partly collapsed dry cleaning shop, but McFall decided to plead guilty as charged last week.

    Under terms of a settlement with the city, McFall must pay $5,000 by the time of his City Court sentencing Nov. 15. That’s a down payment on the money he owes the city: [...] – a total of $42,909. Defense attorney Jon R. Wilson said that after the down payment, McFall will have to pay at least $200 a month until the taxes are paid in full.

    Based on McFall making the $5,000 payment, City Judge Thomas M. DiMillo has agreed not to send him to jail, Deputy Corporation Counsel Matthew E. Brooks said. [...] Next month, DiMillo could give McFall a one-year conditional discharge or three years of probation, Brooks said. During those periods, McFall would risk jail if he missed a monthly payment.

    The money he still owes after the period of supervision would be converted into a civil judgment, and the city could garnishee McFall’s wages or seize his assets if he doesn’t pay it all off, Brooks said.  "There’s no reason he should get off scot-free for something every citizen has to pay,” Brooks said.

    McFall owned Peters Dry Cleaning, [...] part of which collapsed Dec. 15. McFall was cited for not cleaning up the pile of bricks, which McFall said he couldn’t do because the city insisted on an asbestos survey. “Money has always been an issue for him. He didn’t have $50,000 to clean up the asbestos. He didn’t have $40,000 to pay the back taxes, thus the payment plan,” Wilson said.

    Corporation Counsel John J. Ottaviano said he expects the state Department of Environmental Conservation to stick McFall with the tab for cleaning up the property, which is listed as a Class 2 inactive hazardous waste site because of dry-cleaning chemicals poured onto the ground decades ago.

    We’re working with the DEC to clean it up and take it down,” Mayor Michael W. Tucker said. “We’re going to start a foreclosure process.” Ottaviano said the city intends to eventually take ownership of the land but won’t do so unless it’s cleaned up.

    McFall transferred the property earlier this year to Eddie Person, a city resident whom Ottaviano believes had no idea what was happening with the deal. Person owes $2,691 on this year’s school taxes, the City Treasurer’s Office said.

    Ottaviano said Person has hired an attorney, Brian J. Hutchison, to try to cancel the transaction. Ottaviano said it might take a year before the transaction and the demolition are completed. Then the city would be left owning a vacant lot in a residential neighborhood.
Source: Dry cleaner must pay city taxes to avoid jail (Monthly plan set in Lockport debris case to cover $42,909).

Friday, October 26, 2012

Unrecorded Contracts For Deed Continue To Leave Poor, Unsophisticated Property Owners (& Their Heirs) In Texas Colonias Vulnerable

From a news release from the University of Texas at Austin:

  • As many as 1 in 5 families who recently bought land on which to build their homes may have bought using an unrecorded “contract for deed”— one that does not confer formal title to their properties, according to a major report on the titling practices in Texas colonias and other informal settlements released [] by researchers at The University of Texas School of Law and Lyndon B. Johnson School of Public Affairs.

    Researchers visited more than 1,300 households on the border and in Central Texas counties to examine whether and how low-income buyers in Texas’ poorest communities are obtaining title to their land, with a specific focus on the use of contract for deed.
  • Concerned with the rampant use of contracts for deed in land sales to low-income homebuyers in colonias, Texas lawmakers intervened in the mid-1990s to afford buyers greater protections. This report is one of the first major studies to chronicle land transaction practices in colonias since the passage of the legislation, and highlights the need for further study. The report also examines land transaction practices in similar settlements located in Central Texas counties.
Among the report’s key findings:
  1. Since the passage of the legislative reforms of contracts for deed, most developers have steered away from using such contracts. However, in some newer low-income subdivisions and informal housing developments, developers and investors are quickly repossessing land from buyers with foreclosure rates that far surpass national rates. Buyers in these newer developments are also living in some of the poorest housing conditions in the state.
  2. Contracts for deed continue to be used frequently in land sales by former residents. These sales are very informal and continue to place the buyers in a vulnerable position.
  3. Texas is likely to see a rise in title problems in colonias and informal settlements caused by families inheriting property outside of the probate system. Nine out of 10 households in the study area do not have a will.(1)
For the news release, see Contracts for Deed Alive and Well in Texas, New Study Shows.

For the full report, see ―The Contract for Deed Prevalence Project (go here for report summary).

(1) Apparently, it's not all that uncommon in Texas to sell property using unrecorded contracts for deed. With regard to situations where a seller who sells property using this approach, and who (and without the knowledge of the buyer) subsequently either encumbers the property with a mortgage or sells the property to a second buyer, it should be noted that, in Texas (as well as in plenty of other states), the failure by the first buyer to record his/her instrument of ownership in the real property (while not exactly the preferred practice) is not necessarily fatal to his/her ownership claim against subsequent purchasers and encumbrancers who record their later-acquired interests where the first buyer under the unrecorded instrument takes possession of the premises and, provided that certain requirements are met.

Said possession is sufficient to impart constructive notice to the world of the possessor's interest in the property
, and thereby provides some measure of legal protection against subsequent purchasers and encumbrancers who come along and record their subsequently-acquired interests in the same property.

In essence, and contrary to popular opinion, such possession has the effect of 'recording' the unrecorded instrument of said ownership.

For more on what this means, see Madison v. Gordon, 39 S.W.3d 604; 2001 Tex. LEXIS 5; 44 Tex. Sup. J. 410, (Tex. 2001), where the Texas Supreme Court refers to their earlier ruling in Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 350 (1936) for the state law applicable in these circumstances:
  • In Strong, we described the kind of possession sufficient to give constructive notice as "consist[ing] of open, visible, and unequivocal acts of occupancy in their nature referable to exclusive dominion over the property, sufficient upon observation to put an intending purchaser on inquiry as to the rights of such possessor." Strong, 98 S.W.2d at 350. Possession that meets these requirements—visible, open, exclusive, and unequivocal possession—affords notice of title equivalent to the constructive notice deed registration affords. Strong, 98 S.W.2d at 348.
See In re Hayes, 2004 WL 2926006 (W.D. Tx. 2004) (apparently, an unreported case) for an example of how one unwitting homeowner who failed to obtain and record his deed was able to save his butt against a foreclosure of a mortgage that, unbeknownst to him, was placed on the premises by the prior owner (and, ostensibly, the still- owner of record as reflected in the local deed/land document registry) after he (the unwitting homeowner) bought his home and took possession thereof. The lower Federal court's ruling in In re Hayes gives a reasonably detailed analysis on the Texas law involving the effect of the bona fide purchaser doctrine to subsequent purchasers and mortgage lenders where one is in possession of land under an unrecorded instrument and how it was applied to the facts in this case

In a much less extensive (ostensibly rubber-stamped) per curiam opinion, a Federal appeals court subsequently affirmed the trial court's ruling. Bank of Am., N.A. v. Schwartz (In re Hayes), 194 Fed. Appx. 217; 2006 U.S. App. LEXIS 21139 (5th Cir. 2006).

For more on Texas law on this issue, see footnote 2 at More Contract For Deed Horror Stories - Texas Homebuyers Lose Home To Foreclosure Despite Making All Payments As Seller Pockets Cash & Stiffs Bank.

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

'Rogue' Foreign Pipeline Construction Outfit 'Invades' Lone Star State; Creates Uproar By Using Private Condemnation To Allegedly Bully Texans, Trampling Over Their Property Rights

In Sumner, Texas, The Associated Press reports:

  • Oil has long lived in harmony with farmland and cattle across the Texas landscape, a symbiosis nurtured by generations and built on an unspoken honor code that allowed agriculture to thrive while oil was extracted. Proud Texans have long welcomed the industry because of the cash it brings to sustain agriculture, but they also see its presence as part of their patriotic duty to help wean the United States off "foreign" oil.

    So the answer to companies that wanted to build pipelines has usually been simple: Yes. Enter TransCanada.

    As the company pursues construction of a controversial 1,179-mile-long cross-country pipeline meant to bring Canadian tar sands oil to South Texas refineries, it's finding opposition in the unlikeliest of places: oil-friendly Texas, a state that has more pipelines snaking through the ground than any other.

    In the minds of some landowners approached by TransCanada for land, the company has broken an unspoken code. Nearly half the steel TransCanada is using is not American-made and the company won't promise to use local workers exclusively; it can't guarantee the oil will remain in the United States.

    It has snatched land. Possibly most egregious: They've behaved like arrogant foreigners, unworthy of operating in Texas.

    To fight back, insulted Texas landowners are filing dozens of lawsuits, threatening to further delay a project that has already encountered many obstacles. Others are allowing activists to go on their land to stage protests. Several have been arrested.

    "We've fought wars for it. We stood our ground at the Alamo for it. There's a lot of reasons that Texans are very proud of their land and proud when you own land that you are the master of that land and you control that land," said Julia Trigg Crawford, who is fighting the condemnation of a parcel of her family's 650-acre Red'Arc Farm in Sumner, about 115 miles northeast of Dallas.

    Oil and agriculture have lived in peace in part because a one-time payment from a pipeline company or monthly royalties from a production rig can help finance a ranch or farm that struggle today to turn a profit from agriculture. The oil giants also respected landowners' fierce Texas independence, even sometimes drilling in a different yard or rerouting a pipeline to ensure easy access to the minerals below.

    TransCanada is different. For one, it has sought and received court permission to condemn land when property owners didn't agree to an easement.

    "This is a foreign company," Crawford said. "Most people believe that, as this product gets to the Houston area and is refined, it's probably then going to be shipped outside the United States. So if this product is not going to wind up as gasoline or diesel fuel in your vehicles or mine then what kind of energy independence is that creating for us?"

    Activists have handcuffed themselves to machinery. A group has moved into a grove of trees on a TransCanada easement. A 78-year-old great-grandmother, Eleanor Fairchild, whose late husband worked in the oil industry, spent a night in jail after trespassing — along with actress Daryl Hannah of "Splash" fame — on land condemned on her 425-acre farm. On Monday, eight others were arrested for their protest activities.

    TransCanada's pipeline, some landowners say, is more worrisome than those built by other companies because of the tar sands oil the company wants to transport. They point to an 800,000-gallon spill of mostly tar sands oil in Michigan's Kalamazoo River in 2010. It took Enbridge, the company that owns that pipeline, 17 hours to detect the rupture, and the cleanup is still incomplete.

    With a pipeline, landowners give up control of the land for a one-time check, risking a spill that could contaminate their land or water for years. It's a risk many are willing to take in exchange for cash -- to a point.

    Some say the risk of a spill now is too high to cooperate. Others want guarantees TransCanada will take full responsibility for a spill.

    Many just want respect.

    Most pipeline projects in Texas have been completed with an average of 4 percent to 10 percent of condemned land. TransCanada, however, has condemned more than 100 of the 800 or so tracts -- or about 12.5 percent -- of the land it needed to complete a 485-mile portion of the pipeline that runs through Texas.

    Many of the lawsuits in Texas are about TransCanada's "common carrier" status. This allows companies building projects benefiting the public to condemn private property. The Texas Supreme Court recently ruled if a landowner challenges a condemnation, the company must prove its project is for the public good.

    Crawford, whose family has denied other pipelines access to their land, argues that, since TransCanada's pipeline will have only one access point -- or a place where oil can get into the pipe -- at a hub in Cushing, Okla., it does not qualify for the status, which requires the pipeline be accessible in Texas.

    "This is not about the money," said Crawford, who notes that TransCanada's final offer of $20,000 amounts to about $1 a year over 60 years, less time than her family has been on the land. "This is about the right of a landowner to control what happens on their land."

    David Dodson, a TransCanada spokesman in Houston, said the company has agreements with 60,000 landowners in North America, hundreds of them in Texas. Many have been reached easily, he said. The problems in Texas, he believes, may just be a sign of the times.

    "These days, anyone who attempts to build a linear infrastructure project, Texas, wherever it is, it doesn't matter, is facing increased opposition," Dodson said.

    David Holland's 3,850-acre rice farm and ranch in southeast Jefferson County is littered with nearly 50 pipelines. In the five years since he was first approached by TransCanada, he said he has signed contracts with two other companies. He insists he would do the same for TransCanada -- if they offered him fair value for his 10.5 acres.

    Until now, Holland said, he and other landowners had given pipeline companies a roughly 20 percent discount because it was cheaper than fighting Big Oil. TransCanada offered him more than $400,000 for his land. But that, he said, was about $200 less for every 16.5 feet than he had previously received. After Holland declined, the court allowed TransCanada to take the land for $13 for every 16.5 feet -- totaling slightly more than $20,000.

    "Every landowner in the state is furious at them," he said.

    Some landowners have reached agreements without a problem. Henry Duncan, whose 200-acre farm is across the road from the Crawford's, wouldn't say how much TransCanada paid, but feels he was fairly compensated for his seven acres. He does wish they would use American-made steel for the pipe and hire local workers. He, too, feels they bullied landowners, but is realistic.

    Pipeline money helps keep his 100 head of cattle roaming the pastures. It could help him and his wife as they age. "To be quite honest, I'd like to see another one come through because they pay good," Duncan said.

Dodger Hurler 'Pinch Hits' For Feds, Wings 'Brushback' Pitch At Energy Outfit That Allegedly Bulldozed Wildlife Habitat On His 7,000 Acre S. Texas Ranch When Clearing Corridor For Pipeline Construction

In Laredo, Texas, the San Antonio Express News reports:

  • Los Angeles Dodgers pitcher Josh Beckett is suing an Eagle Ford Shale pipeline company for destroying an endangered ocelot habitat on his ranch in La Salle County.

    According to the lawsuit, filed Tuesday in Laredo, Eagle Ford Midstream and its parent company Midstream, told the U.S. Fish and Wildlife Service, which is charged with protecting the endangered species, there was no ocelot habitat on Beckett's 7,000 acre South Texas ranch.

    The pipeline company then continued with survey work for constructing the pipeline despite ranch representatives giving it an alternative route and letting it know it would be sued in federal court if it continued.

    The lawsuit maintains the 15- to 30-pound nocturnal cat, which is famous for its spotted fur and reclusive behavior, travels along the river corridors and tributaries that cross the ranch. There are believed to be only 50 ocelots left living in the United States.

    The notice of intent to sue stated that “multiple big cat tracks” were located and photographed as recently as June, and Beckett observed ocelots on his property as recently as November.

    Michael Tewes, a large-cat expert from the Caesar Kleberg Wildlife Research Institute at Texas A&M University-Kingsville, visited the ranch after the pipeline corridor was cleared and identified ocelot habitat, including where the pipeline would be built.

    They started bulldozing for 10 days,” said environmental lawyer Jim Blackburn, who is representing Beckett Ventures, which owns the Herradura Ranch. “I think it is an arrogant move of a company that is relatively dismissing of federal law.” The company declined to comment.

    If the company is found to have destroyed habitat and harmed the species, it will be in violation of federal law and could face fines and be forced to do mitigation for harming the ocelot.

    Beckett, a 12-year major league veteran, is a two-time World Series champion and was named World Series MVP in 2003. He was born in Spring and is an avid deer hunter, winning the Muy Grande contest for deer hunting in 2002. Nolan Ryan has won the same award.

Battles Between Texans, Energy Companies Continue; Landowner Claims Trespass; Pipeline Company Alleges Encroachment

In Tyler, Texas, The Southeast Texas Record reports:

  • An Elkhart woman filed a lawsuit claiming a gas pipeline company is trespassing on her property when attempting to reach its gas pipeline easement. Mildred Brown filed suit against Gulf South Pipeline Co. on Sept. 11 in Anderson County District Court. The defendant removed the case to the Eastern District of Texas, Tyler Division on Oct. 12.

    Brown is the owner of estate in the Lake Road Addition in the city of Elkhart. In October 2010, the defendant demanded that Brown move a building located on her property because it encroached on the company’s gas pipeline easement running across her property.

    Brown states she was unaware of the pipeline as there were no visible markers or signs of a pipeline being present. According to the lawsuit, Gulf South Pipeline came upon Brown’s property to clean brush and trees from the easement and only then did markers become visible.

    The defendant is accused of trespassing on plaintiff’s property by the continued use, maintenance and operation of a pipeline.

    The plaintiff is asking the court for an injunction against defendant’s trespass and for an award of damages for the loss of use of her property, loss of market value of her property, and loss of profits from a business that was conducted on the property, interest and court costs.

Thursday, October 25, 2012

Florida Appeals Court Nixes Bank's Foreclosure Deficiency Judgment; Amount To Be Based On Property Value On Sale Date, Not Six Months Later

The Florida Banking Law Blog reports:

  • Most of you may know that, in Florida, the standard by which a deficiency is determined in a foreclosure case is the difference between the amount owed to the lender and the fair market value of the mortgage property as of the date of the foreclosure sale. This has been well established by case law over the years.

    In practice, the fair market value is typically established by presenting testimony from a real estate appraiser who is recognized by the court as an expert in property appraisal. Often, the lender has ordered the appraisal in connection with its evaluation of the property and before it takes the asset into ORE.

    In these instances, there are times when the appraisal report is dated as of a date other than that of the foreclosure sale date. What impact can this have on a subsequent motion for deficiency? A recent appellate decision by the Second District Court of Appeals addressed this question.

    In this case, decided in April of this year, the Court reviewed a $2.6 million dollar deficiency judgment entered by the trial court based in part on an appraisal dated some six months after the foreclosure sale date.

    It appears that the borrower’s trial counsel must have raised the issue that the value was not determined as of the foreclosure sale date. In response, the lender’s attorney offered only the argument that the values could not have changed much in the five month time from the foreclosure sale date to the appraisal date.

    The appellate court reversed the decision, finding that this was merely a conclusory statement that was not supported by the evidence. The case was remanded for further proceedings which means more cost and delay for that lender.(1)

    The lesson here is a basic one. You need to present evidence of fair value as of the date of the foreclosure sale or risk an unfavorable ruling, either at trial or on appeal. The best way is to make sure that the appraiser you are using as an expert has valued the property at the foreclosure sale date and that the resulting report reflects that.(2)
Source: The Importance of Having the Correct Appraisal Evidence When Seeking Deficiency.

For the ruling, see Empire Developers Group, LLC v. Liberty Bank, Case No. 2D11-1410 (Fla. App. 2d DCA, April 13, 2012).

(1) In reversing the trial court, the Florida appeals court enunciated the state law applicable in this case as follows:
  • "[T]he correct formula to calculate a deficiency judgment is the total debt, as secured by the final judgment of foreclosure, minus the fair market value of the property, as determined by the court." Morgan v. Kelly, 642 So. 2d 1117, 1117 (Fla. 3d DCA 1994). "[T]he party seeking a deficiency judgment has the burden of proving that the fair market value of the property foreclosed upon was less than the total mortgage debt owed." Estepa v. Jordan, 678 So. 2d 876, 878 (Fla. 5th DCA 1996) (citing Coral Gables Fed. Sav. & Loan Ass'n v. Whitewater Enters., Inc., 614 So. 2d 682 (Fla. 5th DCA 1993)). And "[t]he critical date the fair market value of the real estate must be established for such purpose is the date of the foreclosure sale." Estepa, 678 So. 2d at 878 (emphasis added) (citing Cmty. Bank of Homestead v. Valois, 570 So. 2d 300, 301 n.1 (Fla. 3d DCA 1990)).
(2) To add insult to injury, the appeals court threw in this tidbit:
  • We also note that the trial court erred in awarding Liberty Bank interest on the entire debt from the date of the final judgment of foreclosure through the date of the deficiency hearing. See Estepa, 678 So. 2d at 878 ("A secured party is not entitled to statutory interest on the entire foreclosure judgment following the date of the foreclosure sale.").

    Accordingly, on remand, "statutory interest may only be awarded against the remaining debtfrom the date of the foreclosure saleShaw v. Charter Bank, 576 So. 2d 907, 909 (Fla. 1st DCA 1991).

Push To Crack Down On Tax Cheats Claiming Improper Homestead Exemptions Continues

In Huntington County, Indiana, The Huntington County Tab reports:

  • Property owners in Huntington County have one last chance to keep their homestead exemptions intact. If they don't, they may see their property taxes double in 2013.

    The push is a result of the tough economic times, says Huntington County Auditor Cindy Yeiter, whose office is responsible for making sure that those who claim a homestead exemption on a property are, in fact, using that property as their primary residence.
  • The "homestead verification form" - a pink piece of paper - was mailed out to property owners along with the tax bills in 2010, 2011 and 2012. It asks them to verify that they do, in fact, live in the property for which they are claiming the deduction.

    Yeiter estimates that of the approximately 8,000 residential properties in Huntington County, about 6,150 people have returned the verification form. That leaves about 1,850 taxpayers who have not yet returned the form and are in danger of losing the deduction.
  • This is the last time that property owners will receive a homestead verification form. Property owners who are living in the home listed on the form must return the completed form to the auditor's office no later than Dec. 31. Those who do not return the form will lose their homestead exemption, which will double their property tax bill, Yeiter says.

    Yeiter says her office mailed out the 1,850 homestead verification forms on Oct. 1. The forms are printed on pink paper. They are being sent only to property owners that did not return the forms in previous years. Homeowners must return the forms even if their taxes are paid by a mortgage company, Yeiter says.
  • The verification is required to prevent fraud. The auditor may request proof that a home is the applicant's principal place of residence. If proof is not provided, the owner could be ordered to pay the amount by which property taxes were reduced over the previous three years because of the improper homestead deduction along with a 10 percent penalty.

Financially Weak High End Home Builder To Customers: Cough Up 15% More Than Contract Calls For To Finish Job Or I'm Going Belly-Up!

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • The owner of Paradise Homes, while acknowledging that his company is on the verge of collapse, is hoping to bring in another builder to complete customers' houses.

    But owner Jim Butler's plan has a catch: Paradise customers who have already purchased homes and in many cases arranged financing will have to pay up to 15 percent more than their contracts call for to finish the jobs.

    On a $600,000 house, a prospective homeowner would have to come up with another $90,000 -- half of it up-front -- before construction would begin again.
  • Donald Staley put down more than $200,000 to build a $957,000 home in the Royal Valley section of the planned community's Country Club East. Construction has yet to begin, and he said he will not pay the builder any more.

    "That is like putting bad money on top of bad money," said Staley, a part-time resident who plans to move here from Ohio. "He says there is no money in the bank account. But there should be for my house."

    Rob Nielsen, a commercial contractor from the Washington, D.C., area, was fuming after learning of Paradise's problems. He was looking to build a $700,000 home in the Lake Club, another upscale Lakewood Ranch community, and the builder was pressing him just two weeks ago to make a sizable downpayment.

    He has hired another local company to build his house.

Some Widows Now Face The Boot From Homes After Being 'Left Off The Deed' When Hubbys Obtained Reverse Mortgage Loans

The New York Times reports:

  • The very loans that are supposed to help seniors stay in their homes are in many cases pushing them out.

    Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes and not pay it back until they move out or die, have long been fraught with problems. But federal and state regulators are documenting new instances of abuse as smaller mortgage brokers, including former subprime lenders, flood the market after the recent exit of big banks and as defaults on the loans hit record rates.

    Some lenders are aggressively pitching loans to seniors who cannot afford the fees associated with them, not to mention the property taxes and maintenance. Others are wooing seniors with promises that the loans are free money that can be used to finance long-coveted cruises, without clearly explaining the risks. Some widows are facing eviction after they say they were pressured to keep their name off the deed without being told that they could be left facing foreclosure after their husbands died.
  • Joan Serioux-Forde, 72, thought that she couldn’t feel more devastated after her husband, Christopher, died last year. Then, roughly a month after the funeral, she received a letter from Generation Mortgage, a reverse mortgage lender, informing her that unless she paid $293,000, she would lose her home in San Bernardino, Calif. Ms. Forde said she was never informed that if she wasn’t on the reverse mortgage deed, she would have virtually no right to stay in her home unless she bought it outright. “It’s a nightmare,” she said. Generation Mortgage declined to comment.
  • Some solicitations reviewed by the Consumer Financial Protection Bureau present reverse mortgages as “free money” or mistakenly tell seniors that they could never lose their home. [...] Officials at the bureau, which issued a report on the industry in June, said they heard from a number of seniors who claimed that lenders encouraged them to make their older spouses the sole borrower on the loan. The brokers earn more money when they make larger loans with the older spouse as the only borrower.

    Some surviving spouses complained that brokers told them they could be added later, but they were not. The bureau says those seniors are at greater risk of losing their homes. The complaints, according to elder-care advocates and federal officials, have been rising during the past year, although there are no exact numbers.

    Linda McMahon, a 65-year-old widow, watched helplessly as the locks were changed on her home in St. Croix Falls, Wis., last month. She said that in 2005, when her husband was 82 and she was 58, a mortgage broker from Wells Fargo promised her that she could add her name to the mortgage once she turned 62. That never happened because that year, in 2009, she didn’t have time to deal with it as her husband’s health quickly deteriorated and he died from a heart condition, she said. Soon, she was unable to pay any of the property taxes and insurance. “I am devastated,” said Ms. McMahon, who is retired, living on Social Security income and now renting an apartment.

    A spokeswoman for the bank declined to comment. Reverse mortgages also have troublesome incentive structures that might encourage brokers to steer seniors toward lump-sum loans, which carry a fixed interest rate, rather than a line of credit with a variable interest rate, the bureau found. In a lump sum arrangement, the interest charges are added each month, and over time the total debt owed can far surpass the original loan.

    Brokers earn higher fees on these loans and even more money when they sell the loans into the secondary market, where they can get rates nearly double those for variable loans, according to rate sheets obtained by the consumer bureau.
  • Ms. Forde, who lives in fear of losing her San Bernardino home, said she could not afford to save her house by paying the full $293,000 debt. Now, she said, she spends much of her day standing guard by the window. Her home is already in foreclosure proceedings. With a wavering voice, she said: “I have nowhere to go.”

Wednesday, October 24, 2012

Florida Regulator Orders Title Insurer Shutdown Over Potentially Crippling Volume Of Claims, Unsatisfactory Cash Reserves; Firm Fingers Rogue Agent's Alleged Incapacitating Escrow Ripoff As Cause

In Orlando, Florida, the Orlando Sentinel reports:

  • Citing a regulatory mandate and a potentially crippling volume of claims, K.E.L. Title Insurance Group — owned by the partners of Orlando's KEL law firm — has withdrawn from the title insurance business and is trying to get into a state "rehabilitation" program for troubled insurers, the company confirmed [].

    With its cash reserves faltering, K.E.L. Title stopped issuing policies [] and severed its ties with agencies that had sold its policies and performed real estate closings, the company said. It said it had been "instructed" by the Florida Office of Insurance Regulation to take those actions.

    Company officials said the business' cash-surplus reserve had fallen below the state-required minimum; meanwhile, they were negotiating with insurance regulators over terms of entering "rehabilitation" — a sort of state-led business restructuring.
  • In the state's "Rehab and Liquidation" program, if a title insurer can't pay its claims, the state raises cash to cover them by imposing a statewide surcharge on policies sold by other title insurers. The only way an insurer can emerge from the program intact is to be acquired by another insurer, something that has not happened in the program's history, a regulatory spokeswoman said.

    Lynd blamed K.E.L. Title's woes mostly on a South Florida-based title-agency worker whom he accused of stealing hundreds of thousands of dollars in escrow money while fabricating real estate sales documents. The title company was blindsided by the scam, he said, which took place more than three years ago but was discovered only this year during certain foreclosure litigation.

    The company has paid more than $1.6 million in scam-related claims so far this year alone, according to Lynd, who said the insurer alerted state regulators about the problem.

    "It was a systemic theft by this agency's employee," Lynd said. "These incidents took place in 2008 and 2009, but it takes a long time for title claims to surface related to this kind of fraud. We're not the only ones who've been victimized; a lot of title insurers have been impacted by these kinds of scams."

    When asked why K.E.L.'s audits had not detected the theft, he insisted that conventional audits would not have turned up such a surprisingly sophisticated scam.

    "It would have been impossible to know [sooner] about this kind of theft. I mean, there were fabricated documents that made the transactions look normal on paper," Lynd said. "And there's just not an opportunity for us to review every single closing for all our agents. To some extent, you have to trust they will follow the requirements of their license, to act responsibly and professionally."

    K.E.L. Title's explanation drew criticism, however, from one long-time title insurance lawyer.

    "If a single agency is able to create enough fraud to bring down an entire company, you've obviously got a huge internal problem," said Cliff Shepard, a veteran real estate lawyer who is also legal counsel for the city of Maitland. "It tells you there weren't adequate controls in place to red-flag this kind of thing in your audits; otherwise, they wouldn't be in this mess."

Classic "Who's On First?" Battle Pits Local NY Bank, Synagogue Over Lien Priority On Failed Development; Dispute Centering Around Forged Payoff Letter Claws Title Insurer Into Fray

In Rockland County, New York, the Times Herald Record reports:

  • Empire State Bank in the Town of Newburgh has been battling an unlikely foe in court: Rabbi Harvey Waxman, the leader of one of the oldest synagogues in a Rockland County Orthodox Jewish enclave.

    Waxman and bank executives are fighting over a failed subdivision in Rockland County valued at nearly $2 million. The synagogue and the bank both claim their liens on the 11.5-acre property should be first in line for proceeds from its sale.

    The bank, working with another financial institution, and the synagogue, Congregation Beth Medrosh of Monsey, each loaned more than $1 million to developer Tovi Mermelstein, who has built homes and rehabilitated apartments across Rockland, Orange and Sullivan counties.

    Devastated by the downturn in the real estate market, Mermelstein stopped making payments on his loan to Empire State Bank by 2009. Rather than face foreclosure, he turned over the land to the bank.  As Mermelstein washed his hands of the failed project, Empire State Bank was just beginning a complex legal battle.

    Waxman's synagogue, Congregation Beth Medrosh, started its own foreclosure action in early 2010. Court proceedings took a turn for the bizarre with the appearance of a faxed letter — an apparent forgery — claiming the synagogue's loan had been paid off.

    Empire State Bank relied on the letter in making its loan, and later, in taking back the deed to the land. With the letter in hand, the bank filed a lawsuit charging its title company and a real estate firm with fraud and negligence, and seeking more than $8 million in damages. Appellate judges in Brooklyn are now weighing the facts of the case.
  • Waxman made the loan [for $1.2 million to developer Mermelstein on behalf of the synagogue in November, 2005] under a provision of Jewish law called Heter Iska, according to his deposition. Some Jews believe religious law bars them from paying loan interest to one another, but Heter Iska provides a loophole that treats loans as investments. It's the standard way of structuring business deals in the Hasidic community, Mermelstein said.

    Mermelstein repaid $450,000 to the synagogue in 2006, and Waxman released a lien the congregation held on another of his properties, but not the Chestnut Ridge land, according to court papers. Mermelstein still owed the synagogue $750,000.

    But, a mysterious fax on what appeared to be synagogue letterhead — albeit with the word "Congregation" misspelled — led Empire State Bank and its title insurance agent to believe otherwise. The letter states that Mermelstein had paid off the $750,000 balance owed to Congregation Beth Medrosh.
  • Empire State, working with an undisclosed partner bank, extended Mermelstein a line of credit totaling $3.4 million, with an interest rate of about 6 to 7 percent, Mermelstein said. The title agent and Empire State relied on the faxed letter they believed to have come from Waxman's congregation.

    Empire State took the lead in administering the loan because the partner bank was not local and construction projects need close supervision, Guarnieri said. Empire State was lending less than 20 percent of the money.

    In a key — and routine — step in making the loan, Empire's title insurance agent, Sky Abstract in Spring Valley, assured bank executives the bank had the priority position on the property, said co-CEOs Tony Costa and [Philip] Guarnieri. Having the priority, or first, position ensures a lender is made whole first if the borrower defaults.

    With the faxed letter in hand, and assurance they had first position, Empire State secured $3.4 million in title insurance, which is meant to insure a mortgage in case an abstract company like Sky makes a mistake in a records search and misses a lien.
  • By 2009, [developer Mermelstein] stopped making payments. Empire State started to foreclose and then, instead of waiting out a process that could take three to four years, took back the deed to the property.

    In early 2010, two months after Empire State took over the property, the congregation began its own foreclosure proceeding, and named Empire State Bank as a defendant.

    The bank shot back with a lawsuit seeking damages of more than $8 million from Sky Abstract and Terrace Capital, alleging fraud and negligence. Contrary to the claim in the letter, Mermelstein's mortgage to the congregation hadn't been satisfied.

    To date, no one has taken responsibility for the faxed letter, which is signed by an "I. Unger, Treasurer."

    Rabbi Waxman's wife, Esther, said in court documents that she has been the treasurer for at least 10 years and has no idea who "I. Unger" might be. She added that the letter was faxed at 9:30 p.m. on a Friday, the Jewish Sabbath. On that day, Orthodox Jews, like her and her husband do not work, so they would not have faxed the letter.

    It was faxed from Terrace Capital, a Manhattan real estate firm Mermelstein had worked with on the project, according to the letter's fax stamp. A Terrace Capital lawyer said the firm had no knowledge of the letter.

    Rabbi Waxman said in a deposition that the letter did not come from his synagogue, and Mermelstein, who also observes the Sabbath, pointed his finger at another party.

    Costa admitted in a phone interview that the letter was "obviously fraudulent." He suggests it was yet another organization's "chicanery."

    "If I did the letter, I would have at least spelled the name right," Mermelstein said.

    Waxman and representatives of Sky Abstract declined to comment.

    A judge last year dismissed most of the bank's lawsuit against Sky Abstract and Terrace Capital, explaining that Empire State Bank had the means to determine whether or not the letter was legitimate, but didn't. The bank's attorney, Jonathan Nelson, appealed the decision to the Appellate Division. A decision is expected in the next few months.
For the story, see Bank, synagogue clash over 11.5 acre, $2 million property (Both say liens should be 1st).

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

Banksters' Premature Lockouts Victimize Another Homeowner Behind In House Payments

In Jacksonville, Florida, First Coast News reports:

  • Pushpa Verma, a realtor who purchased her home in 2008 as her primary residence, has turned it into a rental to generate income after the housing market crashed. "I lost my prospective tenant," said Verma.

    Two weeks ago, Verma tried to show the property to a potential renter and discovered that the locks on her home were changed. [...] She found blue stickers everywhere from the front door to the garage that stated that the house was being winterized. [...] Winterization is a process where the bank sends in a company to secure property that has been abandoned or foreclosed on.

    Verma said she is behind on her mortgage, but does not fit into any of those categories. "My house is not in foreclosure," said Verma.

    Verma tried to get answers from the winterizing company and her lender but said no one has explained what happened, and why. [...] Verma hired a company to replace the locks, [...] and she has placed her home back on the market for rent.

    The company that changed the locks is Lender Processing Services field services.

"It Has To Be A Halloween Joke!" Says Georgia Homeowner In Response To BofA's Loan Modification Offer To Lower Mortgage Payments By $1.61/Month

In Stone Mountain, Georgia, WXIA-TV Channel 11 reports:

  • Kimberly Smith was relieved to learn that she would finally get her interest rate down so she could stay in her home. What surprised her was that the adjustment was only a mere: $1.61. Yes, only $1.61.

    Smith couldn't believe it. "It has to be a Halloween joke. They have got to be kidding.
    " Smith said. "I mean they wasted more on postage and FedEx than what I am getting as a reduction."

    Smith's mortgage modification program with Bank of America is through the federal Making Homes Affordable program.

Tuesday, October 23, 2012

LAPD Bags Eleven In Alleged Loan Modification Racket That Bilked 65 Out Of $1M+

In Los Angeles, California, the City News Service reports:

  • Eleven people were facing possible conspiracy charges in connection with a loan modification scam that allegedly bilked 65 mostly Spanish-speaking victims out of more than $1 million.

    Detectives from the Los Angeles Police Department's Commercial Crimes Division, Fraud Section and Fugitive Warrant Section, as well as investigators from the Los Angeles County District Attorney's Office, arrested the suspects around 6 a.m. Wednesday on suspicion of conspiracy to commit a crime, according to a police statement.

    The suspects were identified as Nino Vera, Tony Haschke, Franklin Marquez, Eduardo Teran, Corina Castillo, Daniel Argueta, Susana Vasquez, Jimmy Alvarez, Gustavo Vargas, Octavio Ponce and Juan Diego Perez.(1)

    Felony complaints stemming from the alleged conspiracy also were filed against David Zepeda, John Zepeda, Rene Solis and Hector Menendez, who were all already in custody, in Ventura and San Diego counties, and more suspects are in the process of being located and arrested, the statement said.

    The scam targeted primarily Spanish-speaking homeowners having difficulty making their mortgage payments during the housing market downturn. Many were induced to sign paperwork and contracts that were in English only, police said.

    The suspects, who ran their operation out of 10-12 offices in the Los Angeles County area, did virtually no work in helping the victim's save their homes and in fact placed some in greater jeopardy of foreclosure, police said, adding that most of the victims either lost their homes or have received default notices.
  • Victims were told that if they paid large large upfront fees and made monthly payments to SB Management they would be able to stay in their homes as caretakers, police said.
For more, see Loan scam that targets mostly Spanish-speaking victims nets 11 SoCal arrests.

(1) According to the story, the operation used business names that included SB Management, Financial Wellness for Homeowners of Los Angeles County Corporation, California Sky Premier, Zap Group Legal, Majestic Group, El Camino Marketing and J&E Services, police said.

Equifax, Outfit That Peddled Lists To Loan Mod Rackets Conatining Consumers' Credit Info Prescreened For Mortgage-Delinquent Homeowners Settle FTC Charges

The Federal Trade Commission recently announced:

  • One of the largest U.S. consumer reporting agencies, Equifax Information Services LLC, has agreed to settle Federal Trade Commission charges that it improperly sold lists of consumers who were late on their mortgage payments.

    In two separate actions, both Equifax and the companies that allegedly bought and resold the information from it will pay a total of nearly $1.6 million to resolve charges that they violated the FTC Act and the Fair Credit Reporting Act (FCRA).

    The two settlements are part of the FTC’s ongoing efforts to protect consumers in financial distress and to protect consumer privacy. Equifax will pay $393,000 to resolve allegations that its inadequate procedures led to the sale of lists of consumer information to firms that should not have received them.

    According to the FTC, Equifax sold more than 17,000 prescreened lists of consumers to companies including Direct Lending Source, Inc., which subsequently resold some lists to third parties, who used their data to pitch loan modification and debt relief services to people in financial distress.

    As part of a separate settlement, Direct Lending Source will pay a $1.2 million civil penalty, and will be barred from using or selling prescreened lists without a permissible purpose, or in connection with solicitations for debt relief or mortgage assistance relief products or services.
For the FTC press release, see FTC Settlements Require Equifax to Forfeit Money Made by Allegedly Improperly Selling Information about Millions of Consumers Who Were Late on Their Mortgages (In Separate Actions, Equifax and Its Customers Will Pay a Total of $1.6 Million).

Texas Appeals Court: Trial Judge "Abused Its Discretion" By Ordering Bankster To Pay Homeowner $300K In Sanctions In Ongoing Litigation Centering On Alleged Loan Modification Jerk-Around

In Beaumont, Texas, The Beaumont Enterprise reports:

  • A Fannett woman's courtroom fight with a mortgage company over her foreclosed home could end up before a jury.

    Ninth Court of Appeals justices on Thursday released an opinion saying the 58th District Court "abused its discretion" when Judge Bob Wortham sanctioned Bank of America on June 27, ordering the company to pay Trudie Crutchfield $300,000 in a breach of contract settlement.

    The company could have been fined up to $600,000 more if it did not correct Crutchfield's credit within 90 days and if she received another foreclosure notice, per Wortham's ruling. Court records show Wortham also ordered Bank of America to pay $20,000 to Crutchfield in attorney's fees.

Foreclosure Rescue Racket Requiring Homeowners To Sign Over Deeds Into Trust Ends In Guilty Pleas For Pair

From the Office of the Santa Barbara County, California District Attorney:

  • Santa Barbara County District Attorney Joyce E. Dudley announced the plea [] of Franklin David Marquez and Sisy Aragon. Franklin David Marquez pled to one felony count of violating Civil Code section 2945.4, commonly known as Loan Modification Fraud/Foreclosure Assistance Fraud.

    Sisy Aragon pled to one misdemeanor count of Penal Code section 32, Accessory After The Fact. Aragon was sentenced to three years of probation and ordered to make restitution in the sum of $27,500. Marquez will be sentenced on November 29, 2012.

    The foreclosure scheme associated with these subjects involves contacting homeowners in distress and offering to save their homes from foreclosure. To do so they require Quit Claim Deeds and Power of Attorney documents.

    They tell the homeowner that for a fee, usually in the thousands of dollars, their homes will be put into a trust. They tell the victim they no longer need to make house payments but instead make payments directly to the trust or company managing the trust. The victims are told that attorneys are aggressively working with the banks to get their homes back. These companies then file documents that potentially cloud title and slow down the foreclosure process and/or file bankruptcies to slow down the process.(1)

    While the foreclosure process is stalled, the victims continue to make payments to these companies and are assured that their homes are actually being rescued. Eventually the lenders successfully foreclose on the property but not before the victims/homeowners have paid thousands of dollars to the fraudulent companies.
For the Santa Barbara District Attorney press release, see People v. Franklin Marquez and Sisy Aragon: Loan Modification/Foreclosure.

(1) For what sounds like a similar racket that may be going on in Florida (but currently being prosecuted by the state attorney general only as a civil - not criminal - matter), see:
  1. Homeowners Lament Handing Over Their Deeds & Cash To Now-Shut Down Outfits That Peddled Programs Purporting To Eliminate Mortgages By Filing 'Quiet Title' Lawsuits
  2. Florida AG Files Civil Suits Tagging So-Called Land Trusts Peddling Schemes Purportedly Designed To Make Underwater Mortgages Disappear,
  3. Mortgage Cancellation Rackets That File Suits To Obtain Default Judgments To Wipe Out Banksters' Liens Gain Steam In Florida,
  4. Title Insurers Red-Flag Homes w/ Quiet Title Suits In Ownership History; Add'l Scrutiny Required As One R/E Operator Peddles Mortgage Elimination Plan.

Monday, October 22, 2012

DA's Office Scores Add'l Cash To Fund Probes, Prosecutions Of Local Real Estate Ripoffs

In Stockton, California, the Stockton Record reports:

  • Real estate fraud prosecution requires months of work before the schemers - more often they involve a band of perpetrators - are brought to justice, prosecutors say. And San Joaquin County's foreclosure problems certainly have made the area vulnerable to those crimes. The District Attorney's Office can handle only a few with its staff levels.

    But the backlog of pending investigations may go to court sooner than had been expected.

    County supervisors have approved allocating money to hire a deputy district attorney and an investigator to take on cases sitting on the back burner. Money for the two new positions comes from the state's $5.2 million Foreclosure Crisis Recovery Fund, the result of a settlement from Countrywide Financial Group. San Joaquin County's portion is $382,239.

    "These one-time funds provided by the settlement must be solely utilized to enhance the District Attorney's ability to investigate and prosecute real estate fraud," District Attorney James Willett said in a staff report.
  • The county combats real estate crimes with funding from the state's Real Estate Fraud Prosecution Program, and for the county, the team consists of one attorney, one investigator and one paralegal. The additional positions will allow the District Attorney's Office to trim down the backlog and carry out its work more effectively.

    Funding was generated through a lawsuit filed by the state against two ex-Countrywide Financial Corp. executives accused of predatory lending. The executives settled for $6.5 million, of which $5.2 million was to be used for homeowner education and fraud prosecution.
For the story, see S.J. gets funding to go after real estate fraud (DA gets staff from settlement of state suit against lender).

California AG Bags, Charges Pair With Grand Theft, Burglary, Conspiracy Etc. For Running Alleged Loan Mod Racket That Left Homeowners Getting The Boot

From the Office of the California Attorney General:

  • Attorney General Kamala D. Harris [] announced the arrest of two suspects who have been charged with grand theft, burglary, unlawful collection of advance fees, tax evasion and conspiracy in a wide-ranging mortgage fraud scheme. Both suspects also face special enhancements for excessive taking and aggravated white-collar crime for losses to victims exceeding $350,000.

    The arrest declaration alleges that Joana Sosa, age 54 of Gardena, and Zoila Ortega, age 31 of Gardena, ran a criminal mortgage fraud enterprise mainly against Spanish-speaking victims and targeted members of their own Spanish-speaking community. Many of the victims were often referred by other family and friends.
  • Joana Sosa and Zoila Ortega are charged with 41 criminal felony counts. If convicted, they each face 36 years in prison, including fines and restitution.
  • From 2008 to 2010, Sosa and Ortega charged their victims thousands of dollars in up-front fees and monthly payments, promising to protect their victims from eviction by purchasing their property from their lender and becoming their new "lender." Sosa and Ortega promised the victims a modified loan they could afford with the opportunity to buy back their home in the future.

    No services were rendered by Sosa and Ortega, resulting in consumers being evicted from their homes. Additionally, Sosa and Ortega instructed several consumers to stop making their mortgage payment, and in some instances, to stop paying their bills all together. Consumers were told this would allow them to qualify for a loan modification. Over the last three years, Sosa did not file corporation income taxes. Many of the victims only spoke Spanish and were instructed to sign contracts in English.

Recently-Raided Law Office Under FBI Probe For Running Illegal Loan Modification Rackets Tagged By Now-Foreclosed Utah Couple In Civil Suit

In Salt Lake City, Utah, The Salt Lake Tribune reports:

  • Following up on a raid by federal agents, a lawsuit has been filed against a group of lawyers and others alleging they defrauded a Salt Lake City-area couple in a home loan modification scheme.

    The couple sued CC Brown Law, attorney Charles Craig Brown and other attorneys and nonlawyers, alleging they participated in a scam in which homeowners facing foreclosure paid to get a loan modification only to find no legal work was done on their behalf. The couple ended up losing their home.

    In June, federal agents raided CC Brown or affiliated offices in Midvale, West Valley City and Salt Lake City as part of an investigation into the mortgage loan modification business. That investigation is ongoing, said Melodie Rydalch, spokeswoman for the U.S. Attorney’s Office for Utah.

    The lawsuit also names attorney Wilford T. Lee and the law firm WT Lee & Associates, Utah Litigation Counselors, the JL Martin Law Group, Century Law, and Sentry Law. Also included are John McCall, Chad Gettel and Kasey Rasmussen, who the lawsuit says operated the CC Brown loan modification program.

    The lawsuit alleges the law firms worked together and “basically created a scam where they would recruit people with financial difficulties with respect to their mortgages [and] get them to hand over thousands of dollars to one of the law firms,” said John Bogart, the Salt Lake City attorney who filed the suit on behalf of homeowners Jared and Vanessa Osborn.

    The law firms ran a scam where they basically had nonlawyers answering the phone and selling products, but no one actually did anything to get loan modifications.” [...] The Osborns ended up losing their home even after paying CC Brown $8,000 to $9,000, Bogart said.
  • Last year, the Maryland Commission of Financial Regulation issued a cease-and-desist order against CC Brown Law and Charles Brown, allegedly for violations of that state’s laws that included offering unlicensed credit services.

    In 2010, the Utah Division of Real Estate issued a cease-and-desist order that accused Brown and his law office of operating without a mortgage license. Brown agreed to settle the allegations with a $5,000 fine and to discontinue negotiating loan modifications without a license.
For the story, see Suit targets Utah lawyers in alleged mortgage scam (Allegations » Couple claims they paid thousands but that no legal work was performed).

Virginia AG Tags Another Loan Modification Outfit With Suit Alleging Illegal Clipping Of Dozens Out Of Upfront Fees

In Virginia Beach, Virginia, The Virginian Pilot reports:

  • Attorney General Ken Cuccinelli on Tuesday filed a civil lawsuit accusing a Virginia Beach mortgage loan modification company of charging illegal advance fees for providing foreclosure rescue services. The lawsuit alleges that National Foreclosure Solutions, with an office at 4605 Pembroke Lake Circle, has been violating the Virginia foreclosure rescue law, which prohibits fees charged "prior to the full and complete performance of the services it has agreed to perform."
  • The suit says the company collected advance fees from about 200 customers. The lawsuit, filed in Virginia Beach Circuit Court, requests that the court stop NFS from its alleged violations of the law and that any illegally collected money be returned to consumers. The suit also seeks civil penalties of up to $2,500 per violation plus the costs of the investigation of up to $1,000 per violation.
  • The Attorney General's Office and the U.S. Attorney's Office have been targeting fraudulent mortgage rescue companies since the real estate market collapsed and foreclosures skyrocketed. Many cases have resulted in civil penalties. Others have been prosecuted as criminal cases.
For the story, see Attorney general sues Va. Beach foreclosure rescue service.

For the Virginia Attorney general press release, see Attorney General Cuccinelli announces suit against Virginia Beach-based mortgage modification company (Company allegedly charged illegal advance fees for "foreclosure rescue" services).

Scammer Pinched For Running Loan Modification Racket Pleads No Contest To 12 Felony Grand Theft Charges, Three Felony Foreclosure Consultant Violations

In Santa Barbara, California, KEYT-TV Channel 3 reports:

  • The Santa Barbara County District Attorney's office announced [last week] that Jessica Lynn Orca has been convicted of 15 felony charges related to real estate fraud. The judge in the case indicated that he will sentence Orca to 7 years in prison.

    Orca violated state law by collecting fees in advance from clients who wanted loan modifications. Orca would require them to pay with a money order or cashier's check and told them the money would go directly toward house payments and foreclosure services. However, investigators for the District Attorney's office discovered that Orca embezzled the money instead for her personal use.

    Orca pleaded no contest to 12 felony counts of Grand Theft, 3 felony counts of Engaging in Prohibited Practices of a Foreclosure Consultant and 2 misdemeanor counts of Unlawfully Collecting Advance Fees.

    Although Orca will be sentenced to 7 years in prison, she will likely only serve two years in county jail and the remaining five years under supervised release because of California's new Public Safety Realignment Law.
Source: Woman Convicted of Real Estate Fraud.

For the Santa Barbara District Attorney press release, see People v. Jessica Lynn Orca: Real Estate Fraud Case.

Sunday, October 21, 2012

Central Florida Pair Pinched For Moving Into Temporarily Unoccupied Home & Claiming Ownership Thru Adverse Possession; Homeowner/Victim An Active Duty Servicemember

In Hillborough County, Florida, ABC Action News reports:

  • Squatters are getting creative in Hillsborough County. It's illegal to move into an unoccupied or abandoned home, but some have looked for a way to justify it.

    Over the weekend, deputies arrested two women, Tami Robinson and Samantha Gavin-Magras, accused of breaking into a Riverview home, changing the locks, and living there.(1)

    When the owners caught wind, investigators say they moved on to another home nearby on the brink of foreclosure. "There's always going to be those that think they can take that risk," said Larry McKinnon, spokesman for the Hillsborough County Sheriff's Office.

    Their squatters' defense: A century old law called adverse possession -- other squatters have tried it before. "It's quite rare. It's a very arcane theory of law and real property," said Charles Gallagher III, a St. Petersburg lawyer. He says the old law was designed more for farmers to claim land, not squatters to claim vacant homes.

    "You can't go ahead and trespass on somebody's property, take up residence there, pay the taxes, fill the forms out, and expect to have 7 years of uninterrupted residence there," he said.

    Seven years is how long it takes someone to take ownership of a piece of property if they filed out the paperwork and paid taxes the entire time.

    Last month, ABC Action News got a tour of a home where a squatter tried the same trick. The sheriff's office describes it as their way to put legitimacy in squatting, but it doesn't work. "No one should be able to leave their home and come back and for whatever reason find somebody living in it," McKinnon said.

    While the problem has tapered off some, the sheriff's office says it still exists, and they rely on the public's help. Anyone who sees someone move into an abandoned or unoccupied home should call police.
Source: Squatters turn to century-old law to try takeover of unoccupied home (Lawyer: Adverse Possession law meant for farmers).

For the Hillsborough County Sheriff's Office press release, see Women Try To Assume Possession Of Vacant Homes.

(1) According to the Hillsborough County Sheriff's Office press release, the pair were pinched for:
  • Invasion by False Impersonation (2 Counts),
  • Organized Fraud (2 Counts),
  • Burglary of an Unoccupied Dwelling (2 Counts),
  • Grand Theft (2 Counts).
The property owner/victim is an active member of the United States Air Force and currently on active duty, the press release states.

Lack Of Funds Forces Homeowner To Live With Squatter Who Moved Into Her Temporarily Vacated Home, Made Repairs, Filed Construction Lien On Premises & Now Refuses To Leave

In Detroit, Michigan, WJBK-TV Channel 2 reports:

  • Heidi Peterson always dreamed of living in a historical home. In May of 2010, she bought one in Detroit's Boston-Edison District for $23,000. After being away for a year, she said she returned to her house last week and found a woman living there. Peterson learned from neighbors she had been living there for a few months.

    Peterson claims the squatter changed the locks, reworked the plumbing, replaced her appliances, put a lien on the house and even changed the curtains, and now this squatter won't leave. So now they are forced to sleep one room away from each other, Peterson with her one-year-old daughter.

    The alleged squatter's name is documented all over the house as Missionary-Tracey Elaine Blair, a write-in candidate for president. We asked Peterson whether she feels safe. "I don't know what the capabilities are. We're afraid of her mindset of entitlement."

    A squatter doesn't have a legal right to the property, but under the law the homeowner cannot remove a squatter by force. In most cases, the homeowner has to file a civil action in court, prove it's their property and evict the squatter. That is what Peterson is trying to do. "She thinks that this is a program in Detroit to take people's homes and fix them up and then she gets to keep them," Peterson said.

    Since Peterson spent all of her money on the house, she said she can't afford to go anywhere else, and until she can legally kick the woman out, they are forced to live under the same roof.

    "I thought if the house is not safe, how can I come here with my child? There's an issue with that. But should I lose my house to a squatter because I don't have rights to my property or should I fight to get it back," said Peterson.

    As our story was going to air, we had a chance to talk to the alleged squatter. She denied that she was squatting and said she has a lease.

    "I have a construction lien for the repairs that I put into the house. Someone had (broken) into the house on July the Fourth and they stripped the radiators and I made a report," she added.

    "In February 2011, we had to vacate because the boiler was damaged," she continued. "I took all my books and my writings, but my (furniture was) still left in (there)."

    We also asked her whether she thinks there is a program where anybody can go into Detroit, take over an abandoned house and live there. "I'm an advocate for affordable housing. That's a part of my campaign," she said. "I've believed that since the first time I met her when I was running for state Senate (in) 2010 and she was also running for a political office, that was a part of my belief. I signed an oath pledging that I would fight for affordable homes."

    We're told Peterson leased the house to tenants in 2010, including this alleged squatter, but had to evict everyone when it was found not fit to live in.

    We're also told the alleged squatter filed papers with the city claiming the property was abandoned.

Criminal Slander Of Title Among Charges Facing Crackpot Who Found Vacant Lakefront Pool Home In Foreclosure, Filed Adverse Possession Affidavit To Claim Ownership & Moved In

In Meanasha, Wisconsin, the Appleton Post-Crescent reports:

  • A Fox Cities woman is facing criminal charges after she and her adult son moved without permission into a vacant lakefront home in Menasha.

    Marsha L. Anthony, 45, is charged with criminal slander of title as a party to a crime(1) and misdemeanor charges of criminal trespass and criminal damage to property.

    According to the criminal complaint, Menasha police were called to the residence at 822 Emily St. on Aug. 12 for a report of open windows and music at the residence on Little Lake Butte des Morts where no one was supposed to be living. When an officer arrived, he found the electricity and water had been turned on and a lock bolt used to secure a doorknob was lying on the floor.

    When Anthony arrived at the residence, she questioned the authority of officers to be there and showed them a notarized affidavit of adverse possession, which she claimed gave her legal rights to the property’s title. Anthony’s 24-year-old son also was living at the residence. The son has not been charged with a crime.

    During the course of a month-long investigation, police learned that Anthony’s 24-year-old son worked as a subcontractor for a Minnesota-based inspection firm and was given the keys to the residence to inspect it as part of a foreclosure action by Wells Fargo Bank.

    The chief executive officer of the company confirmed the son had been given keys to the residence to conduct an inspection and had not returned the keys. The company sent a second inspector to the property, who reported he was confronted by a man matching Schroeder’s description who threatened “to release the dogs on him,” according to the complaint.

    Police had asked Anthony and her son to voluntarily vacate the property several times during the investigation, but they refused. The son voluntarily went to speak to police on Sept. 13 after he and his mother got into an argument. He told officers he no longer wanted to live at the residence. He said his mother was with him the day he went to inspect the residence.

    She called it her “dream home” and said she always wanted a home on the lake with a pool, the complaint states. He told police he moved into the home on Aug. 9, one or two days after his mother gained access to the property by opening an unlocked patio door. He said he and his mother both had poor credit and had lost their previous place.

    Anthony is due back in Winnebago County Court on Oct. 18. If convicted, she faces 11 years, six months imprisonment and $30,000 in fines. Her son has not been charged with a crime.
Source: Woman, 45, faces charges for occupying Menasha foreclosure (Son given keys to inspect residence).

(1) Section 943.60 of the Wisconsin Statutes provides in part:
  • 943.60  Criminal slander of title.

    (1) Any person who submits for filing, entering or recording any lien, claim of lien, lis pendens, writ of attachment, financing statement or any other instrument relating to a security interest in or title to real or personal property, and who knows or should have known that the contents or any part of the contents of the instrument are false, a sham or frivolous, is guilty of a Class H felony.