Newly-Enacted Ordinance That Forced Local Businessman To Permanently Close Down, Lose Premises To Foreclosure Found Unconstitutional; City Now On Major 'Damages' Hook For Passing & Enforcing Crappy Law

In Jeannette, Pennsylvania, the Pittsburgh Tribune Review reports:

• Cash-strapped Jeannette could be forced to pay a city businessman more than $500,000 in damages from real estate and business losses sustained because of an unconstitutional ordinance enforced in 2005.
  
  Businessman Frank Trigona testified Monday during a nonjury trial before Westmoreland County Judge Richard E. McCormick Jr. that his restaurant was forced to close permanently and a building he leased to a day care center underwent foreclosure as a result of the Jeannette law that prevented occupancy of either structure.
  
  The restaurant, which had been in operation on Clay Avenue for more than a century, was closed in May 2005 when city officials used a newly enacted ordinance to refuse to issue Trigona health permits because he owed taxes on the building. That same ordinance was used to prevent Trigona from occupying and making storm damage repairs to a building on Fourth Street that was being leased by a day care center.
  
  In 2009, Westmoreland County Judge Daniel J. Ackerman ruled the Jeannette ordinance was unconstitutional. The state Supreme Court later upheld that finding.(1)
  
  McCormick is now being asked to decide just how much money Trigona is due because of the faulty law.
  
  “The city of Jeannette enforced an improper ordinance. Under the Constitution and the laws of the commonwealth, Mr. Trigona is entitled to damages,” said his attorney, William Lightcap.
  
  Lightcap said Trigona sustained about $500,000 in damages.

***

• Trigona testified that he did not have the financial means to reopen the restaurant after the ordinance was overturned. “I was just not able to reopen,” Trigona said.
  
  Trigona said he sustained lost rent payments from Seton Hill Child Services, which rented the Fourth Street building since 1999 for the day care center. Trigona told the judge he was in the process of negotiating a new five-year deal when Jeannette enforced its illegal ordinance.

For the story, see Unconstitutional law might cost Jeannette $500,000.

(1) For the court ruling, see Trigona v. Lender, 926 A. 2d 1226 (Pa. Cmwlth. 2007); appeal denied Trigona v. Lender, 944 A. 2d 760 (Pa. 2008).

Another Clueless Private Equity Real Estate Investor Leaves 10-Building, 475 Unit Mess In Upper Manhattan; Low Income Renters, Local Pols Now Concerned With Possible Flip To New Speculator

In New York City, Crain's New York Business reports:

• City officials flagged 10 apartment buildings in the Washington Heights section of Manhattan as "at-risk properties" in danger of deterioration and falling into further distress.
  
  The buildings, which house 475 units located at 566 and 570 W. 190th streets, are among several apartment complexes across the city in which owners paid hefty sums at the top of the market in hopes of raising rents but failed to do so and defaulted on their mortgages and left the properties in disrepair. The buildings will fall under the city's Proactive Preservation Initiative, a year-old program designed to monitor properties that carry liens and a high number of housing code violations.
  
  Now, the buildings' tenant associations, city officials and local politicians are expressing concern that another over-leveraged investor may take over the Washington Heights properties.

***

• Vantage Properties bought the buildings in 2007. It defaulted on a $44 million mortgage issued by Anglo Irish Bank in August 2010.
  
  A year later, Lone Star Funds, a Texas-based private equity investment group, bought the loan through an auction of Anglo Irish's non-performing and sub-performing loans and began foreclosing on the properties in March, according to the city. Lone Star is now marketing the property for $50.75 million, or more than the current mortgage on the buildings.

For more, see City: 10 Washington Heights apt. buildings 'at risk' (Officials, politicians and housing advocates are lining up against a private-equity group trying to flip deteriorating properties it bought in foreclosure last year).

See also, Pols Join Forces To Protect Rents at Foreclosed Manhattan Apartments.

Ex-LA Public Housing Official Gets 51 Months In $500K+ Ripoff; Coordinated w/ Brothers To Set Up Sham Companies To Pocket Cash Meant For ADA-Compliant Construction For Low Income Disabled Renters

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

• A former public official who orchestrated a conspiracy involving his two brothers that stole more than $500,000 from the Housing Authority of the City of Los Angeles (HACLA) was sentenced [] to 51 months in federal prison.
  
  Victor Taracena, 41, who formerly resided in Burbank, was sentenced by United States District Judge Percy Anderson. In addition to the prison term, Judge Anderson ordered Victor Taracena to pay $526,727 in restitution to HACLA.
  
  Victor Taracena managed HACLA’s construction program for public housing units occupied by disabled residents, and the money that he and his brothers stole was intended to build accommodations that complied with the American with Disabilities Act.
  
  In June, Victor Taracena’s two brothers – Diego L. Taracena, 37, and Bennett A. Taracena, 32, both of Burbank – each were each sentenced to 21 months imprisonment.
  
  All three Taracena brothers pleaded guilty earlier this year to conspiracy charges. As part of the scheme, Diego and Bennett Taracena established four sham companies to get contracts from HACLA. After establishing bank accounts for those sham companies, Diego and Bennett Taracena accepted $526,727 from HACLA over the course of 3½ years. Despite receiving the payments, the companies did not perform any actual work.

For the U.S. Attorney press release, see Third Brother Sentenced to Over Four Years in Prison in Plot that Stole Over $500,000 Designated for Low-Income, Disabled Residents.

Fake Repo Men Use Phony Work Order, Post Bogus Foreclosure Sticker On Front Door, Then Proceed To Burglarize Temporarily-Vacated Home In Broad Daylight

In Braselton, Georgia, WFMY-TV Channel 2 reports:

• A Braselton woman is reeling after her neighbors watched burglars posing as repo men steal almost everything in her house-all in broad daylight.
  
  Ariella Guzman is living and working in Atlanta while her Braselton home is on the market. She left it furnished hoping it would sell faster.
  
  "What bothers me is how brash and bold they were. It was 2:00 in the afternoon when they took the things and they loaded up three truckloads," Guzman said. "They came back in again and again and nobody thought anything different of it."
  
  Neighbors weren't home Tuesday, but they told police they saw the burglars visit the home on four different occasions. The two men took pictures, and posted a fake foreclosure sticker on the front door. When they returned, they loaded their pickup truck with everything from flat screens to a dining room set to Christmas decorations and family portraits. Neighbors who asked what was going on were shown a fake work order.
  
  "With authority they basically told my neighbor to mind his own business because they were from the bank and they were doing their jobs," Guzman said.
  
  There were no signs of forced entry into the home, and police think the men may have visited the house through a realtor and left a window unlocked. They are planning to dust for fingerprints, and hoping to find something before talking to the neighbors. They say the complexity of the scheme means the men will be hard to catch.

For the story, see Burglars Posing As Repo Workers Steal Woman's Belongings.

Cops Tell Squatter-Victimized Homeowner Her Problem Is A 'Civil Matter', Then Quickly Change Tune & Boot Occupants After Local Media Airs Story

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

• A Detroit resident was surprised to find squatters had taken over her house she had recently put on the market. After airing the story on FOX 2, the squatters have moved out.
  
  Jacqueline Frazier was stunned upon entering what she thought would be her empty home. But instead she found a family of squatters, making themselves at home. Frazier had the house on the market and was even expected to close in a few days but the family was getting in the way.
  
  They claimed they had a lease and had paid $1,400 in rent. They had no receipt because they paid in cash. FOX 2's Ronnie Dahl checked out the situation and visited the "landlord's" address listed on the lease. To no one's surprise, no one by that name was living there.
  
  Frazier called the police but was told they did not have eviction rights so she would have to take it to court.
  
  The "tenants" eventually told Frazier they would leave this past weekend, as Frazier was planning to close on the house on Monday, October 8th. Unfortunately when she went to the home that morning, they were still inside. In fact – they had even barricaded the doors. Frazier called the police.
  
  The officer that responded saw our story and forced the family out, saying they were there illegally since they did not have a valid lease. However they came back around one in the morning, kicking the door in. Fortunately Frazier had someone watching the home.

For the story, see Detroit home squatters forced out by police.

See also, Detroit homeowner finds family living in her house for sale.

NYC Feds Clip Bronx Landlord For $75K In Fair Housing Suit Settlement; Building Super Admits Stiffing Black Prospective Renters While, On Same Day, Welcoming Apartment-Seeking Whites With Open Arms

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

• Preet Bharara, the United States Attorney for the Southern District of New York, [] announced a settlement of the United States’ lawsuit against LOVENTHAL SILVER RIVERDALE, LLC, GOODMAN MANAGEMENT, and JESUS VELASCO for discriminating against African-American apartment seekers in violation of the Fair Housing Act.
  
  The settlement, in the form of a consent decree, resolves a lawsuit filed by the United States on September 26, 2011. It enjoins LOVENTHAL SILVER RIVERDALE, GOODMAN MANAGEMENT, and VELASCO from discriminating based on race or color in the terms or conditions of renting a dwelling, and establishes a $35,000 victim fund that will be available to compensate the victims of their discriminatory practices.
  
  Defendants LOVENTHAL SILVER RIVERDALE and VELASCO must also pay a $40,000 civil penalty.

***

• According to the Complaint and the Consent Decree filed in Manhattan federal court:
  
  LOVENTHAL SILVER RIVERDALE owns an apartment complex at 3800 Independence Avenue in Riverdale, New York, which consists of approximately 72 rental apartment units. GOODMAN MANAGEMENT is the management company for the complex. Under the settlement, VELASCO, the superintendent of the complex, admits that, on repeated occasions, he informed prospective African-American tenants that there were no available apartments, while, on the same day, he informed prospective Caucasian tenants that there were available apartments in the building.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Settles Housing Discrimination Lawsuit With Owner, Manager, And Superintendent Of Riverdale Apartment Complex (Superintendent Admits that He Did Not Show Available Apartments to African-Americans).

For the lawsuit, see U.S. v. Loventhal Silver Riverdale LLC, et al. (go here for the settlement agreement).

Civil Rights Feds Tag HOA, Management Co. w/ Fair Housing Suit Over Alleged Overly-Restrictive Occupancy Limit For Homes That Reflects Bias Against Renters With Kids

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

• The Justice Department [] filed a lawsuit against the homeowners association and former manager of a 249-townhome community in Gibsonton, Fla., for violating the Fair Housing Act by discriminating against families with children.
  
  The lawsuit, filed in the U.S. District Court for the Middle District of Florida, charges that Townhomes of Kings Lake HOA Inc. engaged in a pattern or practice of violating the Fair Housing Act by adopting, maintaining, ratifying, and, along with Vanguard Management Group Inc., enforcing occupancy standards unduly limiting the number of individuals who can reside in the townhomes.
  
  The suit also charges that the defendants violated the Fair Housing Act by threatening to evict a couple and their six minor children from the four-bedroom townhome they were renting and by taking other actions to interfere with their tenancy.

***

• The lawsuit arose when the family filed a complaint with the Department of Housing and Urban Development (HUD). After the family had moved into the home, the management company and the homeowners association indicated there was a problem with the number of children living there. The defendants’ occupancy policy allowed only six individuals to occupy the home, which was far more stringent than what Hillsborough County permitted.
  
  The homeowners association also adopted similarly restrictive limitations on the number of individuals who could live in two- and three-bedroom townhomes in Kings Lake. After HUD investigated the complaint, it issued a charge of discrimination and the matter was referred to the Justice Department.

For the Justice Department press release, see Justice Department Files Fair Housing Lawsuit Against Florida Homeowners Association and Management Company for Discrimination Against Families with Children.

For the lawsuit, see U.S. v. Townhomes of Kings Lake HOA, Inc. et ano.

Disbarred NJ Attorney In More Hot Water; Pinched For Allegedly Hijacking Title To House Using Forged Deed, Then Pocketing Close To $1M Through Multi-Mortgage Refinancing

From the Monmouth County Prosecutor's Office:

• Alexander Iler, 38, of Middletown, was arrested [] on a charge of second-degree theft for fraudulently converting the ownership of a Middletown property to his own name, Acting Prosecutor Christopher J. Gramiccioni announced. Iler, formerly a licensed attorney, was disbarred from the practice of law in July 2012. He previously maintained a law practice in Red Bank, N.J.
  
  The investigation undertaken by the Monmouth County Prosecutor’s Office revealed that
  Iler fraudulently assumed ownership of a Middletown property by recording a deed, at the Monmouth County Clerk’s Office, which contained a forged signature of the purported “seller.”
  
  Though no sale of the property had actually taken place, the fraudulent deed purported to reflect a transfer of the property from the seller to Iler for a sale price of $575,000 in December 2011. Iler subsequently encumbered the real estate with multiple mortgages, totaling approximately $1,000,000.
  
  Iler was arrested on October 24 and was remanded to the Monmouth County Correctional Institution in lieu of a $250,000 bail, with no 10% option, set by Superior Court Judge Richard W. English., J.S.C. Conditions of bail also required Iler to surrender his passport and submit to a hearing on the source of any funds posted for bail.

For the press release, see Former Red Bank Attorney Arrested for Fraudulently Converting Middletown Property.

Attorney Scores 'Get Out Of Jail Free' Card After Admitting To $70K+ Theft While Acting As Fiduciary; Allowed To Walk In Exchange For Probation, 'Payback' Promise

In Braxton County, West Virginia, The West Virginia Record reports:

• A Braxton County attorney will remain a free man after admitting to embezzling nearly $75,000 from a trust account he was appointed to oversee.
  
  Thomas J. Drake on Sept. 13 was indicted via information on a single charge of embezzlement. According to the indictment, Drake converted $70,798.57 belonging to the ATS Settlement Trust between July 2009 and August 2011.
  
  No details are provided about the trust, and when Drake was made its trustee. The only other information available is that Drake’s embezzlement of the funds took place in Elkview.
  
  In exchange for agreeing to plead guilty, Assistant Kanawha County Prosecutor Rob Schulenburg offered to recommend Drake get probation for a term to be determined by Judge James C. Stucky. Also, as a condition of his probation, Drake was to make court-ordered restitution.(1)
  
  As of presstime, Stucky’s sentencing order was not available. According to his attorney William C. Forbes, Stucky placed Drake on two years probation.

For the story, see Braxton attorney gets probation for embezzlement.

(1) The victim may be able to look to the West Virginia State Bar's Lawyers Fund for Client Protection,  which was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a West Virginia-licensed attorney, for a source of recovery of the pilfered cash if the defendant stiffs it on its restitution promise.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Another Attorney Pinched For Allegedly Stealing Settlement Funds From Clients' Trust Account

In Dallas, Texas, The Southeast Texas Record reports:

• A Dallas attorney was indicted recently for allegedly stealing money from his clients.
  
  Thomas Corea faces four first degree felonies after he was indicted Aug. 27 by a Dallas County grand jury. He is accused of stealing settlement funds from clients’ trust accounts, using false information to secure loans and stealing identities to apply for various loans and credit cards.
  
  The indictments are the result of a seven month investigation by the Dallas County District Attorney’s Office.
  
  Corea is charged with theft over $200,000, misappropriation of funds over $200,000 by a fiduciary, securing the execution of a document by deception worth more than $200,000 and fraudulent use and possession of identification information. He allegedly stole the identity of another Dallas attorney and used it to apply for a variety of American Express credit cards.(1)

***

• Corea had been hosting a live call-in program, “Ask the Lawyer with Tom Corea,” at noon on Tuesdays and Thursdays on station KTVT.

For the story, see TV lawyer indicted for stealing clients’ money.

(1) If the defendant is convicted, any victims may be able to look to The Client Security Fund of the State Bar of Texas, which was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Texas-licensed attorney, for a source of recovery of the pilfered cash.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Caretaker Pinched In Alleged $400K Ripoff Of Now-Deceased Dementia Patient; Loot Included Proceeds From Reverse Mortgage Loan On Victim's Home

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

• A 55-year-old Lauderhill woman was charged with grand theft and elderly exploitation, on Wednesday, and accused of stealing an estimated $400,000 from the Deerfield Beach woman she was paid to care for, according to the Broward Sheriff's Office.
  
  Lorna Mulgrave was a home health care aide for Jean Barbara between March 2007 and March 2010 when Barbara died at the age of 93, investigators said.
  
  Barbara's grandson, Russell Markowitz, had hired Mulgrave temporarily to care for Barbara after a fall in 2006 that required 12 stitches to Barbara's knee. But, the doctor diagnosed Barbara with dementia and said she needed 24-hour care and could no longer drive, medical records showed.
  
  Markowitz arranged to pay Mulgrave $500 per week to care for Barbara. The arrangement worked for about eight months until Markowitz and his family traveled from New Jersey to Deerfield Beach for a visit. He found several cancellation notices for the electric bill and insurance coverage, according to the arrest report.

***

• Bank of America records revealed Mulgrave opened a joint account with Barbara in July 2007 without telling Markowitz. He later told detectives hundreds of thousands of dollars were funneled through the account without his knowledge.
  
  In addition to the $500 payments she received, Mulgrave paid herself an extra $157,000 over the three years she cared for Barbara. Records showed Mulgrave also gave money to her daughter Sherika Jackson and her son-in-law Shane Jackson.

***

• Markowitz said thousands worth of gold and diamond jewelry, including his grandmother's engagement and wedding rings, were missing. Her credit cards were maxed out at $30,000 as well, he said.
  
  Mulgrave also is accused of cashing out Barbara's $170,000 worth of Certificates of Deposit, despite early withdrawal penalties. She also managed to get a reverse mortgage for the house that Barbara owned outright for 30 years. Mulgrave burned through an estimated $148,000 within six months, investigators said.
  
  Barbara died thousands of dollars in debt, Markowitz said.

For the story, see Caretaker accused of stealing from elderly client (Lorna Mulgrave, 55, watched over Jean Barbara, 93).

Widow Finds Herself Facing Foreclosure After Being Duped By Racket Purporting To Provide Government-Connected Mortgage Help

In Omaha, Nebraska, WOWT-TV Channel 6 reports:

• An Omaha widow thought she had found a financial lifeline in the form of a mortgage refinancing company backed by the government. At least that's what it seemed. The woman's trust turned to tears when foreclosure papers came her way.
  
  When her husband Bud died, Cecelia Minshall lost her ability to live in the home they shared for 30 years. “Couldn't make the payments without him. His Social Security kept us going.”
  
  Cecelia turned to a refinancing program that promised to reduce her mortgage payments. “It's all set up to look like it’s government, but it's not.”
  
  She didn't realize she had been misled until after paying monthly fees totaling $5,000 to Financial Services Center. “I gave this company my mortgage money and they never sent it in to the mortgage company, so now I'm in danger of losing my home.” [...] The phone number for the Financial Services Center in California connects to a voice mail. Fact Finders called and it is full.

For the story, see Widow Scammed Out Of $5,000 Nearly Lost Home.

Elderly HOA Residents Stuck With Crappy Cable Contract; Face Lien, Foreclosure Threats Over Bills For Services They Don't Use

In Ocala, Florida, WFTV-TV Channel 9 reports:

• Some Ocala residents are taking on a cable company they say is forcing them to pay for services they don't use. The homeowners of the Palm Cay community said Cablevision has threatened them with liens and foreclosure.
  
  Some homeowners said they are still charged by Cablevision, even though they use a satellite TV company. The cable company said it doesn't matter.
  
  One homeowner's cable bill, which he said he hasn't paid in years, went up to $1,200 – and ended up in court Wednesday. Leonard and Annette Gaze, residents of Palm Cay, said they have to stand up for themselves and many of their neighbors. "They are afraid. They don't want to make waves. And they're too old to fight. So they just sit back and pay," Leonard Gaze said.
  
  Some residents don't want it. One said she didn't like the excuse she got when her cable went out. "The moon was in the wrong place and we lost our signal," Hill said. She said the company told her they have a contract in the community and she has to pay forever.
  
  When the community, for ages 55-plus, was built back in the 1980s, cable was considered one of the amenities -- homeowners had to pay for it.
  
  But the service has changed hands over the years. The Gaze's said the old rules no longer apply and they haven't paid their bill in years, so they took the case to court with dozens of their neighbors in tow.
  
  A letter from Cablevision's lawyers to the Gazes insists the homeowners are "contractually obligated" to pay their cable bill, whether they use the service or not.
  
  The Gazes said too many seniors in their community have been frightened into paying. "They're afraid their kids will inherit a problem when they die," Annette Gaze said. The court case resumes next Monday with one last witness -- the owner of the cable company.

For the story, see Cable company forcing payments, Ocala residents say.

California Regulator Hammers Underwriter Peddling Force-Placed Insurance With 30.5% Rate Reduction; Homeowner Savings Estimated At $42.7M

The California Department of Insurance recently announced:

• Insurance Commissioner Dave Jones [] announced a 30.5 percent rate reduction, for "lender-placed" (also called force-placed) homeowner insurance coverage offered by American Security Insurance Company (an Assurant Inc.-owned company). The reduction will result in an estimated $42.7 million savings to homeowners, with an average savings to policyholders of $577 annually.
  
  Force-placed insurance has been subjected to controversy because, under certain circumstances, homeowners are forced to purchase the policies. These policies are primarily intended to protect the lender's interest in the property and typically come with exorbitant costs that are often much higher than standard homeowners insurance policies.
  
  In March, Commissioner Jones contacted the state's largest "lender-placed coverage" insurers to express his concerns about apparent excessive rates. He directed insurers to submit new rate filings with the California Department of Insurance (CDI) to determine if rates could be reduced.
  
  Force-placed insurance has been the subject of national scrutiny and there have been investigatory hearings regarding this insurance in the states of New York and Florida, as well as at the annual meeting of the National Association of Insurance Commissioners (NAIC).
  
  At the Commissioner's direction, CDI carefully examined the insurers' annual financial statement data, and found many cases of low loss ratios. The low loss ratios (the percentage of every premium dollar an insurer spends on actual claims) were a flag to Department officials that rates charged by insurers may be excessive. Insurers were directed to provide a response to CDI by April 1, 2012.
  
  Today's rate reduction is a result of the efforts taken by the Commissioner earlier this year. American Security is the first insurer to lower rates based on the Commissioner's action.

For the California Department of Insurance press release, see Insurance Commissioner Dave Jones Announces $42.7 Million Rate Reduction For Policyholders Of "Force-Placed" Mortgage Insurer (Warns Consumers Not to Let Homeowners Insurance Lapse).

More Consumers Step Up, Take On Zombie Debt Buyers In Court As Credt Card Collection Lawsuits Lacking Proper Documentation Continues

In Lackawanna County, Pennsylvania, The Scranton Times Tribune reports:

• A New Jersey company recently dropped credit-card debt litigation against a Dunmore man after a Lackawanna County judge ordered the business to prove it owned the account.
  
  Velocity Investments, a collection agency near Asbury Park, had sought $1,543 in overdue credit-card debt, interest and fees from Michael Kahanic. Velocity filed suit in Lackawanna County Court in 2011 after acquiring Mr. Kahanic's MasterCard account that had originated at British banking conglomerate HSBC, court records show.
  
  Velocity's complaint included copies of Mr. Kahanic's 2004 credit-card application and a MasterCard billing statement from February 2010. The company withdrew the suit after Judge Terrence Nealon ordered Velocity to furnish documents showing it had authority to collect the debt.
  
  "Debt buyers don't usually have all the documentation to support the original agreement," said Adelle Zavada, an attorney with North Penn Legal Services(1) in Scranton who represented Mr. Kahanic. "We have had good success in being able to defend these cases."
  
  The case reflects nationwide troubles over debt-collection practices. Many companies file debt-related suits with insufficient records, faulty documents and questionable claims.
  
  "All debt collection is under the microscope," said Chris DeRitis, Ph.D., a consumer credit expert at Moody's Analytics, a West Chester economic research and consulting firm. "A lot of this debt gets traded three, four or five times. It's a messy business."
  
  The issue has similarities to abuses in the foreclosure process that led to the 2010 "robo-signing" scandal, in which banks seized thousands of homes without adequate proof of documentation. Five major banks in February agreed to pay $26 billion to settle the matter.
  
  Allegheny County Judge R. Stanton Wettick has presided over hundreds of cases in which banks sold delinquent credit-card accounts to debt buyers who filed litigation to recover the money.
  
  "There is a fair amount of chaos in all this," Judge Wettick said. "Once the paper has moved on, you really don't have anyone who knows much about the transaction. You don't know if, in fact, they are the owner of the debt."
  
  In the local case, Ms. Zavada argued that Velocity's complaint against Mr. Kahanic lacked dates of credit-card transactions, amounts charged or descriptions of items purchased. Velocity argued it needed only to provide the 2010 billing statement in order to collect.
  
  Mr. Kahanic, 51, who could not be reached for comment, never contested the alleged amount of the obligation.
  
  The company withdrew the suit after Judge Nealon in May demanded copies of the original credit-card agreement, its terms and conditions, and the assignment or sale of Mr. Kahanic's account to Velocity.
  
  "The judge asked us to produce a document that no longer exists," James Mastriani, Velocity's president, said of the demand for the original agreement. "What we had, we felt and still feel was sufficient." Mr. Mastriani said the company bought the account in December 2010 from a debt-trading concern that had acquired it from HSBC.
  
  "You have all sorts of cases where the debt buyer bought the debt and didn't get all the information," Dr. DeRitis said.
  
  The Federal Trade Commission issued a report in July 2010(2) calling the debt-collection system "broken" and urging reforms to improve fairness to consumers. The report recommended states adopt measures making it more likely for consumers to defend themselves in credit-card cases and called for states to require collection companies to include more information about the alleged debt in court filings.
  
  Ms. Zavada said she has handled more than 230 collection cases in the last five years at North Penn Legal Services, which provides free counsel to low-income citizens. Debt buyers filed many of the cases, she said. "They are playing the odds," Ms. Zavada said.
  
  Debt buyers in some cases fail to follow legal procedures, even though they have a right to collect. "Sometimes, the affidavits don't appear to be signed by the right people," Judge Wettick said.
  
  "Some companies are doing this more responsibly than others," Dr. DeRitis said. "There are cases of fraud where unscrupulous debt collectors put charges on people's accounts."
  
  U.S. consumers are delinquent on $18.5 billion in credit-card debt, about 3 percent of the total amount owed, according to the most-recent Federal Reserve statistics.
  
  Debt collectors frequently prevail easily in court because many defendants in credit-card suits do not contest the action. "People put their head in the sand. They don't know what to do," Ms. Zavada said. "If 100 get filed, 75 turn into default judgments," Judge Wettick said.
  
  Default judgments enable debt collectors to freeze a consumer's bank account or garnish wages to recover obligations.
  
  More consumers, though, are taking on debt collectors in court and fending them off by challenging the evidence, Judge Wettick said. "For a lot of companies now, if someone shows up and contests it, it may not be worth their while to pursue it," he said.

Source: More people challenging credit card debt collection.

(1) North Penn Legal Services is a regional non-profit provider of civil legal representation to low-income people in over a dozen counties in Pennsylvania.

(2) See Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration.

FDCPA Lawsuit: Bill Collector Snatched Permanently Injured Vet's Exempt Disability Payments, Refused To Give It Back, Saying "You Should Have Died!"

In Phoenix, Arizona, Courthouse News Service reports:

• After garnishing exempt disability payments from a 100% disabled Army veteran's wife, a debt collector told the vet he was "living off social security while the rest of us honest Americans work our a-- off. Too bad; you should have died," the veteran claims in court.
  
  Michael Collier and his wife, Kim, sued Gurstel Chargo, P.A., a Minnesota-based third-party debt collector, in Federal Court. Collier suffered spine and head injuries in the Army and was declared 100 percent disabled. He and his wife, a college student, receive disability payments, which are exempt from execution, according to his complaint.
  
  Nonetheless, Gurstel garnished Kim's savings account, and the credit union froze her money, to seek $6,000 from Michael's defaulted student loan. The Colliers say they "immediately filed an objection and request for hearing."
  
  At the hearing, Gurstel's attorney told the court that the frozen funds were indeed exempt, and promised the court that the money would be released "Right away," according to the complaint.
  
  "The court then issued its ruling finding that the garnished funds were exempt from execution, and entered an order quashing garnishment on the credit union effective that day, May 24, 2012," the complaint states.
  
  But in the parking lot, the Gurstel attorney told Michael Collier "he would need to get a lawyer in order to get his money back."
  
  Collier says he called Gurstel's office, and an unidentified paralegal told him he would have to sue to get the money. When he said the money was exempt veteran disability payments, "the assistant told Michael, 'F--- you! Pay us your money! You can't afford an attorney. You owe us. I hope your wife divorces your a--. If you would have served our country better you would not be a disabled veteran living off social security while the rest of us honest Americans work our a-- off. Too bad; you should have died.'" (Spelling as in complaint.)
  
  The Colliers seek actual damages, statutory damages, and punitive damages for violations of the Fair Debt Collection Practices Act, conversion, privacy invasion, and malicious infliction of emotional distress. They are represented by Floyd Bybee of Chandler.

Source: The Worst Debt Collector in the World?

For the lawsuit, see Collier v. Gurstel Chargo, P.A.

Chicago Federal Judge Gives Class Action-Seeking Suit The Go-Ahead; Complaint Alleges State Law Claims That Bankster Botched Homeowner's 'HAMP' Loan Modification Requests

In Chicago, Illinois, the Chicago Tribune reports:

• A Yorkville homeowner's lawsuit alleging that her lender botched her efforts to modify her mortgage will be allowed to proceed and seek class-action status, a federal court judge ruled this week.
  
  The [] ruling by U.S. District Court Judge Sharon Johnson Coleman, denying OneWest Bank's motion to dismiss the case filed by Stacey Fletcher, shows that the door has been opened to homeowners and former homeowners who believe their lenders mishandled applications for participation in the government's loan modification programs, according to Steven Woodrow, one of Fletcher's attorneys.
  
  "It really helps the people who are really being strung along," Woodrow said. "That person may be able to sue the bank for breach of contract."
  
  In 2009, three years after purchasing a home, Fletcher encountered financial difficulties and sought to have her mortgage payments modified by IndyMac Mortgage Services, her lender whose assets have since been acquired by OneWest. According to the suit, a bank representative suggested that Fletcher skip a few mortgage payments in order to qualify for the federal government's Home Affordable Modification Program.
  
  In February 2010 she was approved for a three-month trial payment plan and told, according to the suit, that if she was approved after making those three payments, her modification would be made permanent. Fletcher made the payments, but the bank had trouble crediting her account for the payments and reported her delinquency to credit bureaus. Conflicting letters arrived, including one that came even before the first trial payment was due. That one stated Fletcher was not eligible for a permanent modification because she hadn't made her trial payments.
  
  Two months after the trial period ended, Fletcher hadn't received any decision regarding a permanent loan modification. She filed the lawsuit seeking class action status, alleging, among other things, breach of contract and violations of the Illinois Consumer Fraud and Deceptive Businesses Practices Act.
  
  Fletcher remains in the home, and a foreclosure action has not yet been filed against her because of the pending litigation, Woodrow said. Fletcher declined an interview request.
  
  David Isaacs, a spokesman for OneWest, said the bank doesn't comment on pending litigation.
  
  In her opinion, Coleman cited a federal appellate court ruling in March that favored another Chicago-area homeowner who filed a similar case.(1)
  
  In that case, the 7th Circuit U.S. Court of Appeals overturned a lower court ruling and revived a suit filed by Lori Wigod, a Chicago resident who sued Wells Fargo in 2010. She claimed that the lender broke a promise made in 2009 to give her a permanent loan modification after giving her a four-month trial payment plan.
  
  Lenders have argued that the Home Affordable Modification Program precludes consumers from filing lawsuits alleging federal law violations. But the appellate court ruled that Wigod's state law claims of breach of contract and fraud were not barred by federal laws.
  
  Fletcher's case was put on hold until the appellate court's ruling.
  
  "There's new cases being filed all the time," said Woodrow, who also represents Wigod. "The first wave got knocked off by motions to dismiss. Since the Wigod decision, that's really opened the door for more claims to be filed, rooted in state law, more breach of contract claims."
  
  Woodrow acknowledged that such cases are complex. If it becomes a class-action complaint, the litigation will have to determine the potential class of claimants. It also will have to resolve now much a time delay constitutes breach of contract and how damages would be calculated.

Source: Judge advances suit over botched mortgage modifications (Ruling allows plaintiff to seek class-action status and could help homeowners who believe their lenders mishandled applications for government loan modification programs).

For the ruling, see Fletcher v. OneWest Bank, FSB, No. 10-cv-4682 (D. Ill. October 22, 2012), which denies the bankster's motion to dismiss the homeowner's lawsuit alleging breach of contract, promissory estoppel, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.

(1) See Wigod v. Wells Fargo Bank, NA, 673 F. 3d 547 (7th Cir. 2012). Unless ultimately reversed by the U.S. Supreme Court, the Wigod ruling supports the proposition that bankster violations of HAMP and its enabling statute, while not actionable by homeowners under Federal law, may be actionable under an applicable state consumer fraud or an unfair/deceptive trade practices statute, or through state common law claims.

See National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes for an overview of state consumer fraud, unfair/deceptive trade practices statutes throughout the states.

The binding effect of the Wigod ruling by the 7th Circuit Court of Appeals is limited to all lower Federal courts in the states of Illinois, Indiana, and Wisconsin, but may be considered for its persuasive effect by other courts. To find out which Federal appeals court has jurisdiction over appeals from the lower Federal courts in your state, check the U.S. Circuit Court of Appeals Map.

Arizona AG Squeezes $75K In Penalties, Restitution From Woman Suspected Of Running Loan Modification Racket; Refused Giving Refunds On Failed Assistance, Saying Homeowner Payments Were Donations To Her Church

From the Office of the Arizona Attorney General:

• Arizona Attorney General Tom Horne has obtained a Consent Judgment against Rosa Galope in a consumer fraud lawsuit in which the State alleged that Ms. Galope engaged in a scheme designed to defraud homeowners looking for assistance in obtaining mortgage loan modifications and forestalling foreclosure on their homes.
  
  The State alleged that Ms. Galope charged distressed homeowners thousands of dollars in advance fees for her services and, when she was unable to obtain results for her clients, refused to refund their money while claiming that their payments were donations to her church, Nation to Nation Ministries.
  
  The State also alleged that Ms. Galope instructed her clients to not communicate with their lenders and to send their mortgage payments to her so that she could forward them to the consumer’s mortgage lender, while keeping the money for her own use.

***

• The terms of the judgment require Ms. Galope to pay full restitution to consumers who filed a complaint with the Attorney General’s Office, an amount of nearly $65,000. Ms. Galope was also ordered to pay $10,000.00 in civil penalties and is prohibited from engaging in any loan modification activities in Arizona or on behalf of Arizona consumers.
  
  In entering into the Consent Judgment Ms. Galope did not admit that she violated the law nor did the court make findings that she did so.

For the Arizona AG press release, see Consent Judgment for West Valley Woman Who Claimed "Church Donations" as Part of Alleged Mortgage Modification Scheme.

Foreclosure Rescue Operator Found Guilty In Homeowner Ripoff Involving Abuse Of Bankruptcy System, Bogus Home Buyback Promises

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

• Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANDREW BARTOK, a former owner of the foreclosure remediation business Revelations Consulting (“Revelations”), which was located in New Jersey and Connecticut, was found guilty [] in White Plains federal court of charges related to a scheme to defraud distressed homeowners, commit witness tampering and obstruct federal court proceedings.
  
  BARTOK was convicted after a 15-day jury trial presided over by U.S. District Judge Cathy Seibel. He was remanded into the custody of the U.S. Marshals following his conviction.
  
  Manhattan U.S. Attorney Preet Bharara said: “Andrew Bartok dangled false promises of relief to desperate homeowners who were trying to keep their homes, but instead, he victimized them by stealing their money and forcing many of them into involuntary bankruptcy. While Andrew Bartok vacationed in tropical locales and spent his hours in casinos gambling away his clients’ hard-earned money, his clients were losing their most treasured possessions – their homes. He will now face justice for the fraud that he committed against vulnerable and needy homeowners up and down the East Coast.”
  
  According to the Superseding Indictment filed in White Plains federal court, other court documents, and the proof at trial:
  
  From 2000 through February 2011, BARTOK owned Revelations, a company which also operated under the name “Foreclosure Club of America.” BARTOK and his co-conspirators at Revelations and Foreclosure Club of America solicited individuals in New York, New Jersey, Connecticut, Pennsylvania, Georgia and Florida who were facing foreclosure proceedings on their homes. BARTOK promised those homeowners that – in exchange for fees paid to Revelations – they would be able to stay in their homes and later repurchase their homes at foreclosure auctions for a fraction of the dollar amount of their mortgage obligations.
  
  In reality, BARTOK and his co-conspirators defrauded hundreds of homeowners of millions of dollars. None of BARTOK’s clients ever bought their homes back using the methods he advocated. Instead, BARTOK and his co-conspirators filed fraudulent bankruptcy petitions and other false documents with U.S. Bankruptcy Courts, primarily in Poughkeepsie, New York, and Newark, New Jersey. BARTOK and his employees forged the names of Revelations’ clients on fraudulent filings under penalty of perjury, subjecting these clients to potential arrest and imprisonment.
  
  BARTOK and his co-conspirators also routinely instructed clients not to attend court proceedings, and not to mention Revelations if contacted by court personnel. As a result of following this advice, at least two of Revelations’ clients were arrested by U.S. Marshals and brought before a U.S. Bankruptcy Judge in Poughkeepsie to explain false documents that BARTOK filed in their names. These clients of Revelations were released after they explained BARTOK’s role in these filings.
  
  The fraudulent documents were filed by BARTOK and his co-conspirators in U.S. Bankruptcy Courts for the improper purpose of using the bankruptcy laws to forestall the foreclosure of the clients’ homes as long as possible while Revelations continued to collect its monthly fees.(1) Ultimately, the bankruptcy cases were dismissed and Revelations’ clients – who already had paid significant sums of money to Revelations – were evicted from their homes.
  
  Throughout the fraud, BARTOK collected millions of dollars in fees from his victims.

For the U.S. Attorney press release, see Owner Of Foreclosure Remediation Business Found Guilty In White Plains Federal Court For Fraudulent Scheme That Preyed On Distressed Homeowners.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a discussion of the various foreclosure rescue rackets involving the abuse of the bankruptcy court system.

Would-Be Homeowner Victimized In Rent-To-Own Racket: "If Somebody Says, 'We Finance Homes; Ugly Credit, No Credit,' Don't Buy It! Do Your Research. I Didn't, & I Got Stung!"

In Philadelphia, Pennsylvania, WPVI-TV Channel 6 reports:

• In a special consumer report, Action News helps some families who have fallen victim to a real estate scam and are now on the verge of losing their homes. Action News Consumer Reporter Nydia Han has been investigating the man they say is responsible for their troubles.
  
  It is a heartbreaking situation. They say they invested almost all of their money to own what they thought would be their dream home, but after putting in tens of thousands of dollars, they say they are at risk of losing everything.
  
  "We like it here," said one homeowner. "It's a nice little neighborhood. There are children around they can play with." The father of three, who has asked us to be identified as James, tells Action News he spent $30,000 making his house in Montgomery County a home.
  
  Deneane Grigger says she did the same thing on her home in Delaware County. "Fixing the light fixtures and all kinds of stuff with my money, my hard-earned money that I saved up," she said.
  
  Both say they responded to ads targeting people with Bad Credit, No Credit, or Ugly Credit, and then entered into Rent-to-Own agreements for their homes with Jimmy Zaspel of JimmyZHomes.
  
  "We buy and sell houses and we specialize in selling houses on rent-to-own programs and help people with less than stellar credit realize the dream of home ownership," said Jimmy Zaspel.
  
  James says he gave Jimmy Z a total of more than $50,000, first for rent and then to pay his mortgage. Deneane says she paid out $13,000. Both say their money was wasted.
  
  "I am a single mother with three kids, and I don't have money like that to be wasting," said Deneane. "I am out of everything that I had been saving, thinking that I was finally getting a house that I can fix up and call my own. I've been flim-flammed." The home Deneane lives in was foreclosed on this week.
  
  James is petrified he could lose his home, too, because he says Jimmy Z failed to pay the underlying mortgage. "We just sunk down roots and there's the very real possibility that they could move to foreclose on this property, and I don't have a say in it," said James.
  
  Deneane has filed a lawsuit accusing Jimmy Zaspel and his company, Tulip Enterprises, of negligent misrepresentation, fraud, breach of contract, and violation of the unfair trade practices and consumer protection law.
  
  "I'm just looking for my money back so I can just move on and find another house for me and my family and just be done with it," said Deneane.
  
  Deneane says her house was already in foreclosure when she entered into the Rent-to-own deal with JimmyZ. When asked about it, Zaspel said, "That's what she says. She's mistaken."
  
  Action News asked Zaspel how the home could be in foreclosure when he put it under a rent-to-own agreement? His response, "Well, that's because you're not a real estate investor, are you?"
  
  But consumer advocates say it doesn't take a real estate investor to spot this kind of trouble. Ed Magedson of RipOff Report warns that all renters and home buyers must beware. "This is a tremendous problem around the country," said Magedson. "This is going on everywhere."
  
  "If somebody says, 'We finance homes; ugly credit, no credit,' don't buy it. Do your research. I didn't, and I got stung," said James.(1)
  
  Zaspel says he stopped paying the underlying mortgage on the home James lives in only after James stopped paying him. Both Zaspel and James tell me they plan on filing lawsuits against each other.(2)

Source: Nydia Han tracks down man behind real estate scam.

(1) If the allegations made against Zaspel are true, he may make for a pretty good suspect for, at a minimum, criminal charges of theft by deception/theft by false pretenses and organized fraud, charges that could be brought by local and state law enforcement authorities. The Feds could also be interested in his antics for possible violations of federal conspiracy charges, as well as federal wire and mail fraud charges if he employed telephonic communications or mail delivery in pulling off this racket.

In a similar-sounding case, the Detroit, Michigan Feds recently criminally charged a real estate operator for allegedly using dubious 'land contract' deals to peddle illusory home ownership dreams using houses in foreclosure to unwitting, would-be homebuyers. See Detroit Feds Pinch Notorious Area R/E Operator Suspected Of Screwing Over Naive Homebuyers With Land Contracts On Homes In Some Stage Of Foreclosure. (Reportedly, the victims found the property on Craigslist ads, which in part, lead to the wire fraud charges against the real estate operator. See Real estate investor charged with wire fraud in connection to homes sold through Craig's List).

In addition, the Philadelphia, Pennsylvania Feds (prosecutors that may have jurisdiction in the case reported in the WPVI-TV Channel 6 story, above) have not been reluctant to bring prosecutions involving home ownership-related  ripoffs. See, for example:

• Philly 'Dream-Killing Slumlord' Cops Plea To Loan Fraud In Connection With Rent To Own Racket That Left Wanna-Be Homeowners Screwed Over,
• Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes.

(2) As a reminder to those who mistakenly believe that these apparent ripoff deals are nothing more than civil cases (as opposed to criminal matters), it is clear that all the sophisticated paperwork in the world (ie. business/purchase contracts, leases, closing statements, etc.) isn't enough to permit scammers to insulate themselves from criminal prosecution when they target their victims with legitimate-looking business propositions when screwing them over. Criminal prosecutors have the authority to "pierce through" such attempts to disguise a blatant criminal real estate ripoff as a common, legitimate business deal.

Clear precedent exists for such a "pierce through" approach to overcome any objections that will certainly arise when the scammers make the argument that the arrangement was just a civil transaction that, if challenged, should be done with a civil lawsuit, not a criminal prosecution. See, for example:

• People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401:
  
  The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.)
  a
• People v. Jones, (1943) 61 Cal.App.2d 608, 620 [143 P.2d 726]:.
  Defendant argues that the deal with each "seller" was a civil transaction; [...] Cloaked in the draperies of his corporation and pretending to act in its behalf, he boldly approached his unsuspecting victims.
  
  [***]a
  Although each deal in its incipiency bore the color and trappings of a normal, civil contract, yet when subjected to a postmortem it exhaled the stench and disclosed the carcass of a fraud. (People v. Epstein, 118 Cal.App. 7, 10 [4 P.2d 555].) There appears no sign of good faith at any turn. Each taking and appropriation was a grand theft.
  The use of the corporate name and the promises made in accomplishing his purpose were a camouflage of such common variety that no excess of genius was required to discern the fraud. Parol evidence of all that occurred was admissible to show the intention of defendant. (People v. Robinson, 107 Cal.App. 211, 221 [290 P. 470].)

The Looting Of The Mortgage Settlement Fund

Blogger Adam Levin writes in The Huffington Post:

• States are looting the Mortgage Settlement Fund, and the odds are good that you or someone you know is getting robbed -- for the second time.
  
  According to recent reports, politicians, not bankers, are the culprits this time around -- siphoning billions from that historic settlement and pumping it into their broken state budgets. Instead of "manning up" and changing their diet, they're taking a cue from ancient Rome: After a quick trip to the vomitorium, it's back to the banquet table. (Care for a mint?)
  
  Their willingness to play fast and loose with the settlement -- crawling through certain wiggle words in its language to circumvent the clear intent of its negotiators --- tells me they still haven't learned where "fast and loose" leads.

For more, see Back From the Vomitorium: The Looting of the Mortgage Settlement Agreement.

NYC Feds Tag BofA For $1B For Allegedly Generating Thousands Of Fraudulent & Otherwise Defective Home Loans Peddled To Fannie, Freddie

In New York City, The Associated Press reports:

• The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults.
  
  The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America’s purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
  
  The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages. “This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara said in a statement. He described Countrywide’s practices as “spectacularly brazen in scope.”
  
  He also charged that Bank of America has resisted buying back soured mortgages from Fannie Mae and Freddie Mac, which bought loans from Countrywide.

***

• Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans later sold to Fannie and Freddie. When Fannie and Freddie collapsed, investors were wiped out.
  
  Taxpayers have spent $170 billion to keep Fannie and Freddie afloat, and it could cost $260 billion more to support the companies through 2014 after subtracting dividend payments to taxpayers, according to the government.
  
  The lawsuit says that Fannie and Freddie suffered $1 billion in losses because they had to pay for Countrywide’s defaulted loans. The lawsuit also complains that Bank of America is refusing to buy back mortgages “even where the loans admittedly contained material defects or even fraudulent misrepresentations.”

***

• For at least two years, Bank of America and other banks have been sifting through so-called repurchase demands from Fannie, Freddie and other investors who bought its mortgages. The repurchase demands contend that the bank should buy back mortgages that have since gone bad.

***

• In the past year and a half, Bharara’s office has settled lawsuits against CitiMortgage, Flagstar Bank and Deutsche Bank over mortgages. Its lawsuits against Wells Fargo and Allied Home Mortgage are pending.

For the story, see US suit cites ‘brazen’ mortgage fraud at Countrywide, even after Bank of America purchase.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Sues Bank Of America For Over $1 Billion For Multi-Year Mortgage Fraud Against Government Sponsored Entities Fannie Mae And Freddie Mac.

For the lawsuit, see U.S. v. Countrywide Home Loans, Inc., et al.

Kansas Appeals Court: Existence Of Agency Relationship Between MERS, Loan Holder Enough To Defeat Homeowner's 'Split-Note/Mortgage' Foreclosure Defense

From a client alert from the law firm Goodwin Proctor:

• The Kansas Court of Appeals has rejected a challenge to a lender’s designation of MERS as nominee on a mortgage.
  
  Plaintiffs/appellants, a husband and wife who defaulted on their home mortgage loan, challenged the standing of the bank to foreclose on the property based on a so-called “splitting of the note and mortgage” that allegedly resulted from a series of assignments of the note between MERS members while MERS itself remained the mortgagee of record “as nominee for the lender and its successors and assigns.”
  
  Citing recent Kansas Supreme Court precedent affirming the operation of MERS as nominee for a series of successor lenders, the Court, applying basic principles of contract interpretation, held that the language of the mortgage itself, which designated MERS “as nominee for the lender and its successors and assigns,” was sufficient to create an agency relationship between MERS and the foreclosing bank as a “downstream assignee” of plaintiffs’ note, such that the bank could be deemed to hold both the note and mortgage for purposes of establishing its standing to foreclose under Kansas law.

Source: Kansas State Appellate Court Rejects Split-the-Note Theory.

For the ruling, see MetLife Home Loans v. Hansen, No. 106,846 (Kan. App. September 28, 2012).

NJ Appeals Court Nixes Homeowner's Attempt To Challenge Foreclosing Lender's Standing Where Former Snoozed On Raising Issue During Litigation

From a client news release from the law firm Goodwin Proctor:

• A New Jersey state appellate court held that a borrower could not challenge the standing of a bank in a foreclosure proceeding in a last ditch effort to re-litigate the case. The borrower filed an application to vacate the default judgment entered against him, arguing that because the mortgage on the property was not assigned to the bank until after the bank filed the foreclosure complaint, the bank lacked standing.
  
  The borrower sought to vacate the judgment based on a recent New Jersey state court opinion, Deutsche Bank National Trust Co. v. Mitchell, 27 A.3d 1229 (N.J. Ct. App. 2011), which held that either possession of the note or an assignment of the mortgage that preceded the complaint conferred original standing. The lower court refused to vacate the judgment; the appellate court affirmed.
  
  In reaching its decision, the Court rejected plaintiff's argument that Mitchell applied. The Court noted that unlike in Mitchell, where the "defendant actively engaged in the litigation" and challenged the bank's standing to file the foreclosure complaint "long before the end of the litigation," here, the borrower "did not raise the standing issue or contest the foreclosure in any way, until two years after default judgment was entered and three and one half years after the complaint was filed."
  
  Further, the Court held that the borrower did not "definitively" demonstrate a lack of standing, holding that the bank could have held possession of the note at the time it filed the complaint. The Court's ruling shows a general apprehension to allow borrowers to sit on their rights during foreclosure proceedings, and should serve as a reminder that courts may hold borrowers accountable for their inaction during foreclosure proceedings.

Source: New Jersey State Court Rejects Borrower Appeal Challenging Foreclosure.

For the court ruling, see Deutsche Bank National Trust Americas v. Angeles, ___ N.J. Super. ___, (App. Div. October 11, 2012) (approved for publication).

Rackets Peddling 'Contingency Fee' Help For Homeowners Seeking Share Of Nat'l Mortgage Settlement Surface On State AGs' Radar

From the Office of the West Virginia Attorney General:

• Attorney General Darrell McGraw warns West Virginia borrowers who lost their homes to foreclosure to avoid scammers offering help with the National Mortgage Settlement. McGraw reminds all consumers never to pay anyone to file a claim in a case brought by his office. Help from the Consumer Protection Division is always free.

***

• Unfortunately, unscrupulous organizations soon began offering "help" to eligible borrowers. For a hefty "contingency fee" of up to 20% of the expected payment, fringe companies offer to help consumers submit simple claim forms, but this is unnecessary according to the Attorney General’s office. "It’s not complicated," said McGraw. "The claims process is simple and easy, so don’t be fooled by outfits claiming you need their help with a settlement resulting from my office’s enforcement efforts."

***

• McGraw’s office recently learned that a San Antonio, Texas, company called Murray LLP ran TV and Internet ads directing consumers to its website, www.bringaclaim.com to charge eligible borrowers a 20% fee to submit a one-page claim form in the National Mortgage Settlement.
  
  Attorney General McGraw warns all homeowners to be aware of settlement-related scams. Do not provide personal information or pay money to anyone who advertises, calls or emails you claiming that they are providing settlement related assistance. If you believe someone is conducting a settlement related scam, contact the West Virginia Attorney General at 1-800-368-8808.
  
  For more information about eligibility and filing a claim:
  
  www.NationalMortgageSettlement.com
  
  Email: administrator@nationalmortgagesettlement.com
  
  Call toll free: 1-866-430-8358 (hearing impaired: 1-866-494-8281).

For the press release, see Attorney General McGraw Darrell McGraw Warns Against Mortgage Settlement Related Scams.

For a similar warning issued by the Office of the New Hampshire Attorney General, see Attorney General Delaney Warns Against Mortgage Settlement Related Scams - Consumer Alert.

Thanks to Mike Dillon at Stellionata Consulting, LLC for the heads-up on the press releases.

Detroit Homeowners' Fair Housing Suit: Bankster's Reverse Redlining Practices Targeted Blacks With Risky Subprime Home Loans

From a column in The Atlantic Cities:

• In the years leading up to the housing crash, public data suggest that black would-be homeowners in Detroit were 70 percent more likely than white borrowers to receive a risky subprime loan from the now-defunct lender New Century Mortgage Company. This is the central statistic embedded in a 70-page lawsuit filed [last week] in New York against Morgan Stanley, the investment bank that went on to purchase a large share of those loans for repackaging in mortgage-backed securities.
  
  The suit, filed by the ACLU and the National Consumer Law Center, alleges that a kind of "reverse-redlining" became the norm in Detroit. Fifty years ago, discriminatory housing policies prevented many blacks from obtaining home mortgages. Barely five years ago, this suit suggests that a different kind of racial discrimination was taking place in Detroit: Predatory lenders couldn’t approve enough high-risk loans to black borrowers, increasing Morgan Stanley’s profits and disproportionately leaving many of these black homeowners in financial ruin.
  
  In a twist on the ever-expanding legal fallout from the housing crisis, this case – filed on behalf of five Detroit borrowers with the hint of thousands more to come if this turns into a class-action lawsuit – accuses for the first time an investment bank elbow-deep in the housing bubble of violating federal civil rights laws.

For more, see Were Big Banks Guilty of Racial Discrimination in the Housing Crisis?

For the lawsuit, see Adkins, et al. v. Morgan Stanley, et al.

Three Metro Atlanta Counties Bring Fair Housing Suit Against Major Bankster Alleging Claims That Predatory, Discriminatory Lending Encouraged Foreclosure, Destroyed Neighborhoods

In Atlanta, Georgia, WSB-TV Channel 2 reports:

• Channel 2 Action News has learned three metro Atlanta area counties are taking on a major bank, saying predatory lending has hurt neighborhoods and cost tax revenue.
  
  Cobb, DeKalb and Fulton counties filed a lawsuit Thursday against HSBC, saying damages are in the hundreds of millions of dollars. "It is the first instance in Georgia of the local governments, on behalf of the people, saying, 'We are all victims of the mortgage foreclosure crisis,'" said Emory professor Frank Alexander, who specializes in real estate finance.
  
  Thousands of boarded up homes with overgrown lawns are signs of the mortgage meltdown still hammering metro Atlanta neighborhoods.
  
  The lawsuit alleges predatory and discriminatory mortgage lending by HSBC encouraged foreclosures, which lower values for all homeowners. The suit, filed in federal court, makes claims under the Fair Housing Act.
  
  "The lawsuit alleges that [HSBC] made loans that were racially discriminatory; that the terms of the loans they made to minorities or persons of color were different than loans they were making to other people," Alexander said.
  
  Records show HSBC owns more than 160 properties within the three counties but has taken over roughly 3,500 since 2006.

***

• Alexander said lawsuits under the Fair Housing Act are usually filed by the individuals who were wronged, not county governments. He said the plaintiffs will have to overcome that hurdle.

For more, see Atlanta-area counties sue bank for predatory lending.