Empty Nesters: The Latest Group Finding Themselves Feeling The Squeeze By Delinquent Student Debt

The Wall Street Journal reports:

• After years of facing all sorts of financial pressures they never expected, from adult kids moving back home to their own parents needing help to retire, empty nest parents are struggling with a new headache.
  
  Thinking it was only natural to want to help children and grandchildren, many co-signed student loans. Now, they're becoming the latest victims of the nation's mounting problem with student-loan debt, which surpassed the $1 trillion mark last year.
  
  At a growing rate, young graduates who are either out of work or who didn't land high-paying jobs find themselves unable to pay their loans. When primary borrowers stop paying, co-signers are expected to pick up the tab—and soon find themselves fending off debt collectors.
  
  "People are confused about what it means to co-sign, and their ongoing obligation," says Deanne Loonin, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, a consumer-advocacy group in Boston. "When they come to understand that they are equally liable, the regrets set in."

***

• It is almost impossible for someone who co-signed a private student loan to escape the debt. A bankruptcy-code change in 2005 made it much tougher for borrowers or co-signers to discharge private student loans in bankruptcy. The main avenue for ending the payments is to prove "undue hardship," and the hurdles are high, says William Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys, a trade group in Washington, D.C. "The court can take the position that all you need to do is sell your house," he says.

For more, see New Peril for Parents: Their Kids' Student Loans (May require paid subscription; if no subscripton, GO HERE, then click appropriate link for story).

Early-Arriving Craigslist Crowd Breaks Into & Ransacks Temporarily-Unattended Home In Response To Foreclosed Couple's 'Free Yard Sale' Ad

In Woodstock, Georgia, WXIA-TV Channel 11 reports:

• A family in Woodstock, who just lost their home of 20 years to foreclosure and are preparing to move out, lost even more [...]. And it was all because they inadvertently triggered what they now call "mayhem" when they posted a craigslist ad [...].
  
  Their online post was just a well-meaning ad for a giveaway of furniture and other household items in their driveway outside the small house, a giveaway scheduled to begin at 10 a.m. Wednesday.
  
  But big crowds showed up early, while the family was out, breaking into the house and taking practically everything inside, in part because the way that the craigslist ad was written gave them the idea that everything on the property was up for grabs.
  
  Wednesday night, Michael Vercher walked 11Alive's Jon Shirek through his family's almost empty soon-to-be former home.
  
  "Well, when we got to the house, I mean, pretty much -- this," he said as he stepped from the foyer into the living room. Their home -- ransacked, ravaged, raked over. Almost everything inside -- gone. "They came in and just tore the place up," he said.
  
  People who responded to the family's craigslist ad showed up at the house earlier than 10 a.m., before Vercher arrived there from work to supervise the giveaway. And when he drove up to the house, he said, they had already broken into it, helping themselves to almost everything inside.
  
  And as the family was calling 911, he could not stop them. "Everyone was inside the house; they were taking out items," he said. "There were cars around the block. It was like ants in and out of the house."
  
  He spoke of how they took, from inside the house, the only items that the family wanted to take with them as they moved out -- family keepsakes, and all their clothes -- everything but a few of their books, which were left scattered across the carpet.

For more, see Foreclosed family watches helplessly as craigslist crowds strip house bare.

Gun-Wielding Cops Disregard Court Order, Storm S. California Home To Carry Out Eviction Of Wheelchair-Bound Cancer Victim

In Orange County, California, OC Weekly reports:

• On the morning of October 10, Niko Black was alone and ill when deputies from the Orange County Sheriff's Department arrived to evict her from her Garden Grove home on Shannon Avenue. "I'm in my bed and I see them storming my property," she tells the Weekly. "I crawl to my wheelchair."
  
  The 37-year-old Mescalero Apache woman, who suffers from a rare, malignant and metastatic form of cancer, refused to open the door, saying that they had no legal right to be there. On the other side was a taped copy of a court order obtained from Federal Bankruptcy Judge Theodore C. Albert in late August that she firmly believes should have prevented the OCSD from carrying out the eviction. The deputies acted anyway.
  
  "They break down my door," Black recounts. "I'm sitting there in my wheel chair. I'm about 100 pounds of shriveled-up cancer and a threat to no one."
  
  What came next, she says, was much more harrowing. "Sergeant Bob Sima puts a gun to my face, finger on the trigger, no safety and walks around me," Black states, pausing to emotionally gather herself. "There's no reason, except for to threaten my life, for an intimidation factor, to put a gun to my head."
  
  With neighbors lining up outside watching, Black's health began to worsen. "I needed my medication, I couldn't breathe and I was having a seizure," she said, claiming that deputies were unresponsive to concerns about her condition; one officer even remarked that she 'looked good' to him. An ambulance finally arrived at her friend's behest and she was forcibly removed from her home and hospitalized.
  
  Sheriff's officials claim they originally arrived to Black's home on September 19 and that she served them legal documents at the time. County counsel allegedly instructed the deputies to carry out the eviction. Following the events of October 10, though, Judge Albert has ordered Wells Fargo and county officials to appear in court on November 13 to explain why they should not be held in contempt for violating the stay and be made to pay punitive damages.
  
  "Wells Fargo filed a motion about an inch thick all the reasons why they should be allowed to evict me," Black said about the court order. "The federal judge denied them and stated very clearly they are not to. The bank illegally acquired an unlawful detainer, an eviction, without due process. They did it with fraudulent paperwork."

For more, see Sheriff's Deputies Barge Into Cancer-Stricken Disabled Woman's House with Guns Drawn to Evict Her.

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

Use Of 'Cash Register Justice' By Financially-Strapped Municipality Leads To Arrest Over Unpaid Administrative Fee For Ex-Offender Long After Probation Term Ended

In Augusta, Georgia, NBC News reports:

• Kathleen Hucks was walking her dogs down the dirt road that leads out of Mim’s Rentals, a small trailer park in rural Augusta, Ga., when a police officer in a cruiser stopped her on Labor Day weekend.
  
  The officer asked the slight 57-year-old for identification and ran her name through the system. Nothing came up for Richmond County, where she lives. Then the officer ran one more search.
  “He says, ‘Ma'am I have to place you under arrest -- Columbia County’s got a hold on you for violation of probation,’” Hucks remembered.
  
  When her husband, 64-year-old James Hucks, saw his wife getting arrested even though she was no longer on probation, he thought there had been an error. “I said, ‘Look here, don’t y’all realize this case is dead?’”
  
  It was no mistake. A warrant for Hucks’ arrest had been issued in 2010, long after she completed a 24-month probation term arising from a 2006 conviction for drunken driving, possession of marijuana and driving with a suspended license. The reason: She hadn’t paid all the fees she owed to the for-profit company that supervised her probation.
  
  Even though the company’s ability to collect the debt had expired when her probation did, she was arrested. Hucks spent 20 days in jail before a judge freed her.
  
  Last week, Hucks filed suit against Sentinel Offender Services alleging that the Irvine, Calif.,-based company violated her civil rights. The outcome has implications beyond the case of one woman in Augusta because it claims that the Georgia law that allows for a for-profit company to act in a judicial capacity violates the due process clause of the state Constitution.
  
  Hucks’ case is the latest of several lawsuits filed in Georgia and elsewhere challenging private probation companies, which operate in about 20 states.

For more, see 'Cash register justice': Private probation services face legal counterattack.

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

Big Banksters In Need Of More Profit Begin Easing Into Offering High Cost, Short Term Loans To Cash/Credit Challenged Clients; Create Competition With Storefront, Online Payday Loan Peddlers

Bloomberg reports:

• Banks facing lower revenue from debit-card and overdraft fees are ramping up marketing of small short-term loans, prompting regulators to question if they carry the same risks to borrowers as other forms of payday lending.
  
  The high-cost loans offered by firms including Wells Fargo & Co. (WFC) and U.S. Bancorp (USB) are meant for people who can’t access other forms of bank credit, similar to the clients of storefront or online payday lenders.
  
  Scrutiny of the loans increased on Sept. 21, when North Carolina Attorney General Roy Cooper asked Regions Financial Corp. (RF) to provide data showing its loans don’t violate the state’s interest-rate cap. That followed a decision in May by the Federal Deposit Insurance Corp. to investigate payday-like products offered by banks, joining an inquiry by the Consumer Financial Protection Bureau.
  
  “They lend money at a high interest rate and get it paid back at the next paycheck,” Cooper said in an interview. “We want to come at this from all angles to prevent these kinds of loans in North Carolina.”
  
  The matter also has found its way into the judicial system. In August, a private lawsuit was filed in U.S. District Court in Ohio, claiming that Fifth Third Bancorp (FITB) deceived customers about the true costs of its short-term loans.
  
  Traditional storefront payday loans are secured by a check, post-dated to a borrower’s next payday. Online versions require clients to have payments directly debited from their bank account. Consumer groups have charged that the loans prey on low-income people by concealing costs and ensnaring them in an expensive debt cycle.

For more, see Banks Pushing Into Small Loans Compete With Payday Shops.

'Phantom' Online Lead Generators Using Sneaky Ways To Peddle Payday Loans

The Los Angeles Times reports:

• The envelope looked official enough. "Confidential materials enclosed," it said on the outside. "Unauthorized use strictly prohibited."
  
  Evelyn Potter, 81, could feel something the size of a credit card within. Opening the envelope, she found a plastic card with her name and a "reservation number" printed on it. The card invited her to "get up to $500 in your checking account by tomorrow."
  
  Unsure what to make of the offer, the Valley Village resident handed an accompanying letter to her husband, Brent, who'd been a banker for about 30 years. "Did you know you can use this cash any way you like?" the letter said. "You can. It's your money."
  
  Not really.
  
  What we're actually talking about is a sneaky way of pitching payday loans that can come with annual percentage rates as high as 700%. We're also talking about a cunning ploy to get people to disclose sensitive information that can end up in the hands of marketers.
  
  "I've never seen anything like this before," Brent Potter told me. "They're not even disclosing an interest rate. Someone who needed money could very easily get into a terrible situation."
  
  In the Potters' case, the pitch was from a website called NeedRapidCash.com, which makes clear in its fine print that it doesn't actually give loans. What it does is "submit the information you provide to a lender."
  
  Or to whomever is willing to pony up the most money for your Social Security number, bank account number and other personal info.
  
  "They're auctioning off completed loan applications to the highest bidder," said Jean Ann Fox, director of financial services for the Consumer Federation of America. "Some might be real lenders, some might not. It's very dangerous."
  
  NeedRapidCash.com and similar sites serve as so-called lead generators for payday lenders, which pay about $100 for people's loan applications, regardless of whether they end up making the loan.
  
  Fox said online payday lenders are proliferating as their storefront counterparts shrink in number amid more aggressive regulation by state and federal regulators. Frequently, it's unclear what state online payday lenders are operating in — or even whether they're in the country.
  
  The NeedRapidCash.com website offers no clues about its whereabouts. Nor does it provide any way to contact the company other than an email address buried deep in its privacy policy. My email to the address went unanswered.
  
  The site's Internet Protocol address, which marks its real estate in cyberspace, leads to a data center in Las Vegas, where employees told me they'd never heard of NeedRapidCash.com. They figured the site must be based on one of the various Internet services using the data center's equipment.

For more, see Don't be tricked into applying for an online payday loan (So-called lead generators have sneaky ways of pitching payday loans with annual interest rates as high as 700%).

Denver-Area Foreclosed Home-Snatching Suspect's Spouse Faces Felonies In Foreclosure Scheme; Hubby Faces Similar Allegations

In Denver, Colorado, The Denver Post reports:

• The wife of a man already indicted by a Denver grand jury for violating Colorado's racketeering law now faces similar charges for her role in a scheme where the couple falsely bought and sold homes that didn't belong to them.
  
  Maria Carrillo, 50, is now charged with violating the Colorado Organized Crime Control Act and faces other felony counts of forgery, conspiracy to commit forgery and attempt to influence a public servant.
  
  Her husband Alfonso Carrillo, 50, now faces seven new counts for a total of 25 counts of theft, burglary and criminal trespass among others, according to the District Attorney's Office.(1)
  
  The indictment alleges that Alfonso Carrillo found homeowners facing foreclosure and convinced them to relinquish their property for a fee, misrepresenting it as a way to avoid foreclosure.
  
  Then he and Rudy Breda, 54, would falsify a sale of the properties to others, taking their money for the "purchase" even though later those "buyers" were forced to vacate the properties when mortgage lenders or actual property owners found them living in the homes.
  
  The scheme was targeting Spanish-speaking home buyers, often undocumented and reluctant to work aith investigators out of fear.
  
  Jose Caraveo and Veronica Fernandez-Beleta were originally named as co-defendants in the indictment, but charges have been dropped and they are now listed as victims of theft. Breda remains at large.

Source: Wife of man accused in real estate scam is indicted as well.

(1) See Indictments Filed Against Pair Accused Of Duping Homeowners Into Giving Up Control Of Homes To Avoid F'closure, Illegally Snatching Vacant Homes.

WV AG Tags Out-Of-State Law Firm For Allegedly Duping Consumers Into Thinking They Must Pay Fees To Collect Benefits From Nat'l Mortgage Settlement

In Charles Town, West Virginia, The Associated Press reports:

• West Virginia Attorney General Darrell McGraw is suing a Texas company for allegedly charging fees to receive benefits from a national mortgage settlement.
  
  Claim forms already were sent to more than 5,000 West Virginians who lost their homes to foreclosure eligible for payments under the settlement between lenders and states.
  
  But McGraw said Thursday that some companies have sought to profit from the settlement by misleading consumers into thinking they must pay a fee to obtain their checks.
  
  The attorney general's office sued Murray LLP and four individuals in Jefferson County Circuit Court. The suit asks the court to block Murray from taking 20 percent of consumers' money as a fee for completing the claim form.
  
  The company's phone number does not allow callers to leave a message.

Source: W.Va. AG sues law firm for exploiting consumers.

For the West Virginia Attorney General press release, see Attorney General McGraw Sues Texas Firm, Murray LLP, to Halt Exploration of Consumers Who Lost Homes Through Foreclosure (Suit Seeks To Block Murray From Charging Fees For Benefits From National Mortgage Settlement Intended To Be Free).

C. Florida Real Estate Operator Bagged Again For More Dubious Dealings With Homeowners; 3rd Arrest Since June, Now Held Without Bail

In Brooksville, Florida, the Tampa Bay Times reports:

• A Brooksville man accused of trying to sell foreclosed properties he never legally owned to unsuspecting buyers(1) is in jail again, this time on a charge of selling real estate without a license, authorities said.
  
  Gaetano Antonelli, 62, was arrested Thursday after a detective, following up on a tip, witnessed Antonelli showing a home on Fairlawn Street in Spring Hill, the Hernando Sheriff's Office said in media release. During a traffic stop immediately afterward, Antonelli admitted he was there to show the property.
  
  His real estate sales license expired in 1999, investigators said.
  
  The woman who owned the home said she contacted Antonelli after seeing his "we buy homes" ad in a coupon booklet. She signed a contract with Antonelli to work for a profit, the Sheriff's Office said.
  
  This is Antonelli's third arrest since June. He already faces six counts of organized fraud and was out on bail at the time of his arrest Thursday.
  
  Investigators say Antonelli targeted homeowners facing foreclosure, telling them he could relieve them of their mortgages by suing their mortgage company. Antonelli told them they could walk away and maybe even get money back if they signed their deeds over to him by a power of attorney agreement, detectives say. Then he would list the houses for sale on Craigslist without the knowledge of the homeowners.
  
  But Antonelli's scheme was based on a false premise, detectives say: Once the foreclosure process begins, as it had in these cases, the owner has no legal right to sign over the deed to him.
  
  He remained in the Hernando County jail without bail Thursday. His vehicle and cash are being seized by the Sheriff's Office.

Source: Brooksville man accused of selling real estate without a license.

Go here for the Hernando County, Florida Sheriff's Office press release, see Gaetano Antonelli Back In Jail.

(1) See Cops Bag R/E Operator Accused Of Duping Strapped Homeowners Into Signing Away Deeds To Avoid Foreclosure, Then Looked To Flip Them On Craigslist.

Bulk Tax Lien Purchaser Faces Threat Of Being Foreclosed Out From Under By City Over More Recent Delinquent Property Taxes

In Albany, New York, Courthouse News Service reports:

• A Florida company asked a federal judge to bar the city of Schenectady from foreclosing on tax-delinquent properties, claiming it paid the city $43 million for the right to do so.
  
  American Tax Funding, of Jupiter, Fla., says city foreclosures would thwart its own foreclosures in Schenectady and threaten its livelihood.
  
  American Tax Funding is a collections company that buys tax liens in bulk from municipalities that lack resources to recover back taxes from homeowners. American Tax pays cash up-front, then recoups its money from the property owners through repayment plans or foreclosure.
  
  The company paid more than $43 [million] to Schenectady for its tax liens between 2004 and 2009, American Tax claims in its federal complaint.
  
  But in September the city said it would conduct its own foreclosures on tax liens from 2010 and 2011.
  
  American Tax Funding claims that "would render numerous liens that the city sold to ATF worthless," because they could involve some of the same properties.
  
  "The city's threatened foreclosure action would preclude ATF's foreclosures, would preclude ATF from collecting on the payment plans that it has in place with numerous property owners, and would also preclude ATF from purchasing subsequent tax liens pursuant to its right of first refusal under the contracts," according to the complaint.
  
  "Not only would ATF be left unable to recoup its investment in the tax liens if the city were permitted to proceed, these actions on the part of the city will result in the demise of ATF, as AFT would not be able to repay its bank loans obtained to finance the purchase."
  
  ATF's website describes the company as "the nation's leading bulk sale purchaser and servicer of delinquent property tax liens."

For more, see Tax Farmer Sues NY City Over Tax Liens.

California Homestead Exemption: Automatic vs. Declared

California attorney Marlene S. Cooper writes in The Pasadena/San Gabriel Valley News Journal:

• In these days of rampant debt faced by many of us, protecting the family home through a declaration of homestead could take on new significance.
  
  When financial obligations go unpaid, a person's creditor can go to court to seek payment of the debt. If a judgment is obtained against the debtor, the creditor can then file a judgment lien against the person's real estate, including the debtor's personal residence.
  
  Many times unsecured creditors simply wait for the house to be voluntarily transferred (or re-financed) and collect on the debt from the escrow proceeds; however, sometimes the house is sold involuntarily in foreclosure by the holder of a trust deed on the property or a sale is forced in execution of a money judgment.
  
  Homestead laws are designed to protect the sanctity of the family home against a loss caused by a forced sale of the home by creditors. It can ensure that insolvent debtors and their families are not rendered homeless by virtue of an involuntary sale of the residential property they occupy.
  
  The [California] homestead exemption can be obtained in two ways: (1) the automatic homestead exemption granted as a matter of law to every homeowner, and (2) an express declaration of homestead by the homeowner which is notarized and recorded with the county recorder.
  
  The amount of the exemption may be $50,000, $75,000 or $150,000 according to which statutorily-defined class of persons the homeowner falls into. The amount of equity protected is the same for each type of homestead exemption; however, they operate quite differently in terms of the protection afforded.
  
  The declared homestead provides much greater protection for the property owner than the automatic homestead.
  
  With the automatic homestead, the homeowner['s equity] is protected in the event of a forced foreclosure sale but not a voluntary sale. With the declared homestead, however, the exempt proceeds from a voluntary sale may be reinvested within six months, thus allowing the debtor to invest in another residence.
  
  With the automatic homestead, judgment liens attach to all interests in the property that are subject to the enforcement of money judgments. For the declared homestead, however, a judgment lien filed after the declaration of homestead can only attach to equity in an amount greater than the homestead exemption and any preexisting liens on the property.
  
  Another important distinction is that the declared homestead survives the death of the homestead owner whereas the automatic homestead does not.
  
  A Declaration of Homestead form can be purchased at office supply or legal stationery stores. For those who are internet savvy, the form can also be downloaded from the Registrar-Recorder's website in the real estate section (www.lavote.net). The fee to have the Declaration notarized and recorded is approximately $25.00. There is certainly nothing to lose but much to gain by taking the simple step of filling out and recording the declaration.

Source: The Homestead Exemption.

Tampa Federal Jury Convicts Trio In Short Sale "Flopping" Racket That Targeted Financially Distressed Houses & Duped Unwitting Homeowners Into Participating

From the Office of the U.S. Attorney (Tampa, Florida):

• U.S. Attorney Robert E. O'Neill announces that a federal jury [] found John Lebron (33, Tampa), Patricia Lebron (36, Tampa), and Paul Gogolewski (31, Tampa) guilty of conspiracy to commit wire fraud and wire fraud. John Lebron was also found guilty of making false statements to financial institutions. All three individuals face a maximum penalty of 30 years imprisonment. Their sentencings are scheduled for January 18, 2013.
  
  According to the testimony and evidence presented at trial, the individuals conspired together to "flop" houses. "Flopping" is a form of short sale fraud involving conducting a short sale on a property and then "flipping" the property in a non-arms' length transaction.
  
  John Lebron was a Florida-licensed realtor and worked as a loan officer. Patricia Lebron is a Florida-licensed realtor. Paul Gogolewski was the President of Synergy Solutions.
  
  Together, they targeted unsophisticated, low income homeowners, who were in financial distress and convinced them to sell their houses to a straw purchaser, in a non-arms' length transaction.(1)
  
  For a brief period of time, the conspirators would pay the mortgage payments but then stopped. They then arranged a short sale of the property from the straw purchaser to one of the conspirators. In that short sale, the lender to the straw purchaser suffered an immediate loss of approximately 80% of the original loan.
  
  Then, six days later but using deeds recorded simultaneously, the properties were re-sold to another straw purchaser for approximately 350% more than the short sale amount.
  
  In these deals, the conspirators pocketed the money that should have gone to the original distressed home owner,(2) received the mortgage broker commission for arranging the first straw purchaser's loan, and got the difference between the short sale amount and the new loan. The straw purchasers were all paid $5,000 for their role. In all, this case involved at $1.5 million dollars in loans.

For the U.S. Attorney press release, see Federal Jury Convicts Three Of Mortgage Fraud "Flopping".

(1) I suspect that, in this non-arm's length transaction, the homeowners may have been duped into participating in the ripoff with promises that they could save their homes from foreclosure by engaging in a purported sale leaseback arrangement.

(2) Ibid.

C. Fla. Real Estate 'Land Trust' Operator Cops Guilty Plea In 'Reverse Staging' Short Sale Flipping Scam; Intentionally Trashed Homes To Drive Down Appraisals Prior To Purchase, Then Flipped For Profit

From the Office of the U.S. Attorney (Orlando, Florida):

• Guerard Wallace Howard (63, Melbourne) pleaded guilty [] to one count of wire fraud, he faces a maximum penalty of 20 years in federal prison. His sentencing hearing is scheduled for January 16, 2013, before Senior U.S. District Judge G. Kendall Sharp.
  
  According to the plea agreement, between November 2007 and August 2011, Howard operated an illegal real estate short sale flipping business, Provincial Real Estate Administrative Services, Inc. (“Provincial”).(1)
  
  Using Provincial, Howard made properties appear to be in poor condition during appraisals, through a scheme known as reverse staging.
  
  Reverse staging is a process wherein someone manipulates the short sale price by intentionally downgrading a property's appearance and falsely representing the condition of a property in advance of bank appraisals. Reverse staging is done in an effort to acquire the property at below market price.
  
  In this case, it included Howard removing receptacle plates and pulling wires from the walls to falsely represent to an appraiser that the house required rewiring; falsely representing that the house needed electrical service upgrades, and repair work.
  
  In some instances it also involved spraying the house with a foul-smelling prank product, and falsely representing to an appraiser that the odor was due to mold or other potential biohazard issues that required expensive remediation costs.
  
  The reverse staging effectively caused the lender to agree to the below market offer made by Howard through Provincial. The property was then immediately resold at a profit.

For the U.S. Attorney press release, see Melbourne Man Pleads Guilty To Short Sale Mortgage Fraud.

For the factual basis and plea agreement, see U.S. v. Howard.

(1) According to the factual basis filed in this prosecution:

• Howard and Provincial, doing business as a real estate management company, approached and/or were approached by distressed sellers and negotiated a land trust agreement with the Provincial as trustee.
  
  Howard then had the seller execute a warranty deed to the trustee, Provincial. The deed effectively transfened title of the property to Provincial. However, rather than record the deed immediately, Howard waited to record it until just before closing the short sale transaction.
  
  When negotiating the short sale with the lender, Howard did not inform the lender of the land trust agreement nor provided the warranty deed to trustee, but acted under the auspices of representing the  seller. This tactic concealed from the short sale lender the fact that Howard, through Provincial, was contracting to purchase property for which he already held the title.

***

• Howard scheduled both closings for the same day, or as close together as possible, and paid cash-obtained through investor funds-for the short sale purchase. Howard then resold to the end buyer who financed through one of two end buyer lenders who calculated the seasoning period in Howard's favor.

Michigan Supreme Court Justice Faces FBI Probe For Reportedly 'Dancing' The 'Short Sale Shuffle' While Trying To Unload Underwater Home; Speeds Off In 'Getaway' Car To Dodge Local TV News Reporter's Questions

In Grosse Pointe Park, Michigan, WXYZ-TV Channel 7 reports:

• State Supreme Court Justice Diane Hathaway is under investigation by the FBI, according to law enforcement sources.
  
  The probe comes as a result of a 7 Action News investigation into a dizzying property shuffle Hathaway made prior to her bank granting a short sale.
  
  Hathaway's lawyer Steve Fishman said [] by phone that he was unaware of any federal investigation.
  
  Justice Hathaway had previously refused multiple requests for comment about the property transfers, and ultimately sped away in her car when approached by 7 Action News Investigator Ross Jones last May. She may have a harder time dodging the feds' questions.
  
  A short sale allows a homeowner to sell his or her property at a loss rather than go into a foreclosure. It can save the owner hundreds of thousands of dollars in mortgage payments, but he or she needs to prove a hardship to their bank, like a loss in income.
  
  But prior to Hathaway’s short sale, she shuffled two homes out of her name: a Florida home valued at almost three-quarters of a million dollars went to her stepdaughter, and one in Grosse Pointe Park went to her stepson.
  
  After the bank agreed to the short sale on Hathaway’s Lake St. Clair home, that Florida house went back into Hathaway’s name.
  
  The home where the Justice currently lives was recently put into her name, but its first owner was Hathaway’s stepdaughter. According to records, she bought it for $195,000 cash around the same time Hathaway’s bank was mulling over the short sale that they ultimately approved. Hathaway won’t say whose cash was used to buy that home.
  
  "It raises questions," said Howard Young, a Bingham Farms attorney who reviewed the timing of the property transfers without knowing they were Hathaway's.
  
  "It just sounds like, listen I’m going to park these assets in your name for a while, there’ll be deeds recorded, you’ll own them for all intents and purposes but our deal is, because you’re my child…when the trouble passes, you’re going to transfer the property back to me," he said.
  
  It’s not clear when the FBI's investigation began, but 7 Action News has learned that grand jury subpoenas have already been issued. Even though the feds are investigating, it does not mean that charges are imminent.
  
  A call to Hathaway for comment was not returned.

Source: State Supreme Court Justice Diane Hathaway under FBI investigation (Probe sparked by 7 Action News).

For the earlier WXYZ-TV Channel 7 story, see Did a Michigan Supreme Court Justice play a shell game to get out from her underwater home?

Federal Judge: Pennsylvania Law Requires, Not Merely Permits, Recording Of All Mortgage Assignments; Refuses To Dismiss County Suit Tagging MERS For Failing To Cough Up Associated Recording Fees

From a client alert from the law firm Ballard Spahr:

• A Pennsylvania federal court recently refused to dismiss a putative class action filed against Mortgage Electronic Registration Systems (MERS) by a county recorder of deeds seeking to compel MERS to record past, present, and future mortgage assignments and pay the associated recording fees.
  
  In Montgomery County, Pennsylvania, Recorder of Deeds v. MERSCORP, Inc., and Mortgage Electronic Registration Systems, Inc., the court interpreted Pennsylvania's recording statute to require, rather than merely permit, the recording of all conveyances.
  
  Although a mortgage is recorded naming MERS the mortgagee as nominee for the lender and its assigns, no assignment is recorded when the note secured by the mortgage is transferred to a new owner who is a MERS system member. Instead, the change in beneficial ownership is registered in the MERS electronic database.

For more, see Pennsylvania County Recorder Can Sue MERS for Failure to Record Mortgage Assignments, Federal Court Rules.

Jury-Convicted South Florida Pair Who Ran Sale Leaseback, Equity Stripping Foreclosure Rescue Racket Get Multi-Year Prison Sentences

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

• Lisa Wright, 46, and Cathy Saffer, 52, of Pompano Beach, Fla., were sentenced [] to serve 66 and 60 months respectively for defrauding homeowners and mortgage lenders as part of a foreclosure rescue scheme, the Justice Department announced. The two women were sentenced by U.S. District Judge Kenneth A. Marra in the Southern District of Florida.
  
  Wright pleaded guilty on March 27, 2012, to one count of conspiracy to commit mail and wire fraud, one count of mail fraud and one count of wire fraud. Saffer was convicted of one count of conspiracy to commit mail and wire fraud, three counts of mail fraud and two counts of wire fraud, following a two week jury trial in July.
  
  According to the indictment and evidence presented at trial, Wright and Saffer operated Foreclosure Solution Specialists (FSS) from 2006 to 2009. Through FSS, Wright and Saffer targeted homeowners facing foreclosure, advertising that FSS could assist those homeowners in remaining in their homes.
  
  When contacted by distressed homeowners seeking assistance, Wright and Saffer misrepresented to those homeowners that their homes would be sold to investors. They also claimed that customers could remain in their homes after the sales and promised them an opportunity to repurchase the homes at a later date. Rather than selling the homes to legitimate investors, Wright and Saffer designed sham sales to straw purchasers whom they paid to participate in the scheme.
  
  According to the indictment and evidence presented at trial, Wright and Saffer paid Florida Certified Public Accountant Barrington Coombs to write a fraudulent letter which falsely vouched for the fraudulent information on various loan applications. Coombs, who was also convicted by the jury, is scheduled to be sentenced Dec. 7, 2012.
  
  Mortgage transactions completed by FSS drew equity out of the homes, which Wright and Saffer pocketed for their own purposes. After doing so, Wright and Saffer allowed the loans to go into foreclosure. Homeowners ultimately lost all of the equity in their homes, and most of the victims were forced to move out of their homes.(1)

For the Justice Department press release, see Two Florida Residents Sentenced for Roles in Foreclosure Rescue Scheme (As Part of Scheme Lied to Homeowners Facing Foreclosure They Could Stay in Their Homes).

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

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Sacramento, Antitrust Feds Score 26th Guilty Plea In Ongoing N. California Foreclosure Sale Bid-Rigging Probe

In San Francisco, California, the San Jose Mercury News reports:

• A Concord man has agreed to plead guilty to a conspiracy to rig bidding at public real estate auctions in the Bay Area, authorities said.
  
  Norman Montalvo, a real estate investor, was charged with four felonies Thursday in the U.S. District Court for the Northern District of California, according to an FBI news release. Montalvo is the 26th person who has admitted to a role in the conspiracy to rig bidding and fraud at the foreclosure auctions.
  
  Montalvo was also charged with using the mail to fraudulently acquire title to properties sold at auctions, to send and receive payoffs, and to send money to co-conspirators. Montalvo's role in the scheme began as early as June 2008 and lasted until about September 2010, according the FBI.
  
  By conspiring to purchase properties at non-competitive prices, Montalvo and others were preventing mortgage holders from getting fair prices for their properties, and in some, cases, keeping money out of the hands of defaulting homeowners, according to the FBI.
  
  Montalvo is charged with bid rigging and fraud at auctions in San Francisco and San Mateo counties, but the Department of Justice's antitrust investigation also covers auctions in Contra Costa and Alameda counties.

Source: Concord investor will plead guilty to foreclosure fraud, authorities say.

For the U.S. Department of Justice press release, see Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Has Yielded 26 Plea Agreements to Date).

California Appeals Court Belts Borrowers With Personal Liability On Non-Recourse Mortgage For Committing 'Bad Faith' Waste

From a client alert from the California law firm Farella Braun & Martel LLP:

• Borrowers and their constituents generally benefit from certain limitations on personal liability for indebtedness secured by California real property. California’s one action and anti-deficiency rules require a lender faced with a borrower default to proceed against the real estate first and prohibit a deficiency judgment following a nonjudicial foreclosure or in the case of a purchase money loan.
  
  In addition, various corporate forms generally provide principals and employees with comfort that they will not be personally liable for an entity’s debts. A recent California appellate court decision, however, delivered a sobering reminder that, despite these protections, even the well-intentioned may face unexpected (and involuntary) liability.
  
  In Fait v. New Faze Development, Inc., 207 Cal. App. 4th 284 (2012), the appellate court considered whether a borrower corporation, its sole owner and certain of its key employees could be held liable to a foreclosing purchase money lender for a deficiency relating to nonpayment of a loan where the borrower demolished a building prior to securing construction financing for the redevelopment.
  
  The trial court had granted summary judgment in favor of the defendants with respect to all claims. The appellate court reversed, holding that there were triable issues of fact as to whether the borrower, as well as its representatives, could be held liable to its purchase money lender for “bad faith” waste.
  
  The court relied, in part, on the California Supreme Court’s decision in Cornelison v. Kornbluth¸ 15 Cal.3d 590 (1975), holding that the anti-deficiency rules (i.e., California statutory rules barring a deficiency judgment following a nonjudicial foreclosure or in the case of a purchase money loan) would not bar recovery against the borrower where the borrower has committed “bad faith” waste as opposed to waste resulting from “the depressed condition of the general real estate market.”
  
  In ruling that the borrowers (and its owners and representatives) could be liable, the Fait court adopted a more expansive interpretation of “bad faith” waste, stating that “‘bad faith’ waste . . . is any waste that is not the result of economic pressures of a market depression” and noting that it did not require a showing of reckless, intentional or malicious conduct.
  
  The court found that the developer’s decision to demolish the building before it had the financial means to complete development or repay the promissory note was not comparable to a mere decline in property value due to market forces.

***

• The Fait case serves as an important reminder to real estate professionals that the risk of personal liability to lenders for property damage should not be taken lightly.

For more, see Hidden Liability Traps in Real Estate Loans.

Ohio Supremes: Standing-Lacking Lender Has No Authority To Foreclose; Status Cannot Be Remedied Post-Filing; Suit Requires Dismissal, But Not A Judgment On The Merits

In Columbus, Ohio, Court News Ohio reports:

• The Supreme Court of Ohio ruled [Wednesday] that a party’s standing to initiate a mortgage foreclosure lawsuit is determined on the date the complaint is filed in court, and a party that lacked standing at the time a suit was filed cannot remedy that defect by receiving assignment of a mortgage and promissory note after the filing of the foreclosure action but prior to the entry of judgment.
  
  Applying that analysis to a Greene County case, the court dismissed a decree of foreclosure granted to the Federal Home Loan Mortgage Corporation (FHLMA) against the home of Duane and Julie Schwartzwald of Xenia because FHLMA did not have standing as an actual party in interest at the time it filed the foreclosure action.
  
  The court’s 7-0 decision, authored by Justice Terrence O’Donnell, reversed a decision of the Second District Court of Appeals.

***

• Writing for a unanimous court in [Wednesday]’s decision, Justice O’Donnell explained that in order to invoke the jurisdiction of a trial court, a party initiating a lawsuit must have “in an individual or representative capacity, some real interest in the subject matter of the action.”
  
  Justice O’Donnell wrote: “We recognized that standing is a ‘jurisdictional requirement’ in State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, (1973), and we stated: ‘It is an elementary concept of law that a party lacks standing to invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the subject matter of the action.’ ... And recently, in Kincaid v. Erie Ins. Co., (2010), we affirmed the dismissal of a complaint for lack of standing when it had been filed before the claimant had suffered any injury.”
  
  Citing the U.S. Supreme Court’s 1992 holding in Lujan v. Defenders of Wildlife that “standing is to be determined as of the commencement of suit,” and state court decisions supporting that same conclusion from Oklahoma, Vermont, Maine, Connecticut, Florida, Mississippi, and Nebraska,(1) Justice O’Donnell pointed out that in this case “Federal Home Loan concedes that there is no evidence that it had suffered any injury at the time it commenced this foreclosure action. Thus, because it failed to establish an interest in the note or mortgage at the time it filed suit, it had no standing to invoke the jurisdiction of the common pleas court.”
  
  The justices rejected the Second District’s finding that FHLMA’s lack of initial standing to sue had been remedied by the assignment of the Schwartzwald’s mortgage and promissory note from Wells Fargo to FHLMA after the foreclosure action had been filed.
  
  Justice O’Donnell wrote that Ohio Civil Rule 17(A) allows an authorized representative of a real party in interest, such as the executor or administrator of an estate, the trustee of a trust, or a party with a shared contractual interest in disputed property to initiate a lawsuit on behalf of the real party in interest, but does not “allow a party with no personal stake in a controversy to file a claim on behalf of a third party, obtain the cause of action by assignment, and then have the assignment relate back to commencement of the action.”
  
  Noting that its dismissal of FHLMA’s April 2009 complaint based on lack of standing was not a judgment on the merits of the case, and did not preclude the pursuit of a future foreclosure action, the court concluded: “It is fundamental that a party commencing litigation must have standing to sue in order to present a justiciable controversy and invoke the jurisdiction of the common pleas court. Civ.R. 17(A) does not change this principle, and a lack of standing at the outset of litigation cannot be cured by receipt of an assignment of the claim or by substitution of the real party in interest.”
  
  “Here, it is undisputed that Federal Home Loan did not have standing at the time it commenced this foreclosure action, and therefore it failed to invoke the jurisdiction of the court of common pleas. Accordingly, the judgment of the court of appeals is reversed and the cause is dismissed.”

For the story, see Supreme Court Holds Foreclosure Action Void If Party Filing Suit Did So Before Becoming Actual Party in Interest (Assignment of Note After Suit Filed Does Not Cure Lack of Standing).

For the ruling, see Fed. Home Loan Mtge. Corp. v. Schwartzwald, Slip Opinion No. 2012-Ohio-5017 (Ohio October 31, 2012).

See also, The Columbus Dispatch: High court limits foreclosure filings (Ohio justices rule lender must have paperwork in order, in its possession before taking a home).

(1) For the cases:

• Oklahoma: Deutsche Bank Natl. Trust v. Brumbaugh, 2012 OK 3, 270 P.3d 151 (Ok. 2012);
• Vermont: U.S.Bank Natl. Assn. v. Kimball, 190 Vt. 210, 2011 VT 81, 27 A.3d 1087 (Vt. 2011);
• Maine: Mtge. Electronic Registration Sys., Inc. v. Saunders, 2010 ME 79, 2 A.3d 287 (Me. 2010);
• Connecticut: RMS Residential Properties, L.L.C. v. Miller, 303 Conn. 224, 229, 232, 32 A.3d 309 (Conn. 2011);
• Florida: McLean v. JP Morgan Chase Bank Natl. Assn., 79 So.3d 170 (Fla.App. 4th DCA, 2012);
• Mississippi: Burley v. Douglas, 26 So.3d 1013 (Miss.2009); and
• Nebraska: In re 2007 Administration of Appropriations of Water of the Niobrara, 278 Neb. 137, 768 N.W.2d 420 (Neb. 2009).

Lenders' Role In Deal Beyond That Of Traditional Creditor May Land It In 'Fiduciary' Hot Water With Borrowers Seeking To Stiff Them

From a client alert from the North Carolina law firm Poyner Spruill LLP:

• In the wake of the collapse of the real estate market, banks across the country have seen a significant increase in cases brought by developers and individual buyers alike seeking to avoid their loan obligations on their failed real estate investments.
  
  Many of these claims rely on the argument that the appraisal on which the loan was approved over-valued the property, and that the lender knew or should have known the appraisal was inflated and breached a duty to advise the borrower of that fact.
  
  North Carolina’s courts routinely have rejected these claims, relying on long standing authority that the mere existence of a debtor-creditor relationship does not make the lender the borrower’s fiduciary and that, absent a fiduciary relationship, a lender is only obligated to perform those duties expressly provided for in the loan documents, which generally contain no obligation to advise the borrower about the appraisal.
  
  A recent decision from the North Carolina Business Court illustrates the risks a lender faces when it assumes a role in a transaction beyond that of a traditional creditor.
  
  In WNC Holdings, LLC et al. v. Alliance Bank & Trust, et al., the Business Court denied a lender’s motion to dismiss a developer’s breach of fiduciary duty claim because the lender allegedly acted as a “financial and development advisor” to the developer by completing “financial feasibility pro forma statements” on behalf of the developer; reviewing property development agreements and making suggested changes; and performing inspections of the property and development.
  
  After concluding a breach of fiduciary duty claim was sufficiently supported by the allegations, the Business Court also allowed to stand the developer’s claims of negligence, fraud by misrepresentation, fraud by concealment, constructive fraud, breach of the covenant of good faith and fair dealing, unfair and deceptive trade practices, and punitive damages.
  
  Those claims were based on allegations that the lender, as a fiduciary of the borrower, had an obligation to but failed to tell the developer that the initial appraisal of the property was defective, and allegations that the lender misled the borrower into believing the property needed to be reappraised because of the economic downturn rather than because of defects in the first appraisal.

For more, see Lenders Beware: The Risks of Creating a Fiduciary Relationship With Your Borrower.

For the ruling, see WNC Holdings, LLC v. Alliance Bank & Trust Co., 2012 NCBC 50 (October 2, 2012).

Bay State High Court: Uncontroverted 'Affidavit Of Sale' OK In Moving Forward With Carrying Out Post-Foreclosure Boot; 100-Year Old Process Still Viable In Mass.

In Boston, Massachusetts, The Boston Globe reports:

• The Massachusetts Supreme Judicial Court [] affirmed a lower court decision in favor of mortgage giant Fannie Mae that removes a legal challenge for borrowers fighting foreclosure.
  
  The state’s top court ruled that a so-called “affidavit of sale [under Power of Sale in Mortgage]” is enough for a lender to prove it has the right to seize a home. The affidavit is used by a lender during the auction process to prove it has complied with foreclosure laws.
  
  Christopher Pitt, president of the Real Estate Bar Association for Massachusetts, said the process has been in place since 1912. A decision against the affidavits could have put the validity of tens of thousands of foreclosures into question, he said.

***

• The case was first heard in housing court where a judge ruled in favor of Fannie Mae, which was trying to evict tenant Oliver Hendricks of Roslindale who challenged the seizure claiming the affidavit was “outdated.” The top court said Hendricks’s challenge “offered nothing to show the existence of a genuine issue of material fact.”

For the story, see State’s highest court rules for lender in foreclosure affidavit case.

For the ruling, see Fed. Nat'l Mortgage Ass'n v. Hendricks, SJC-11234 (Mass. October 26, 2012).

Maryland High Court: Centuries-Old 'Self-Help' Remedy OK When Booting Holdover Homeowners Post-Foreclosure Sale, But Handle Occupants' Personal Property With Care

An opinion summary from a recent Maryland Court of Appeals reported at Justia US Law:

• At issue in this case was whether Respondents, a property management company, law firm, and mortgage servicer, committed an impermissible forcible entry when they enforced, through lock-out, the foreclosure purchaser's lawful possessory interest in a dwelling by the means of the common law remedy of self-help,(1) as opposed to receiving first the issuance of a statutory writ of possession from the circuit court.
  
  The circuit court granted Respondents' motions to dismiss, and the intermediate appellate court affirmed.
  
  The Court of Appeals affirmed in part and reversed in part, holding (1) the common law right of peaceable self-help permits a foreclosure purchaser to surreptitiously enter a residential property and change the locks while the resident is out; and (2) the court of special appeals erred in dismissing Plaintiff's conversion claim and in holding that Plaintiff had abandoned all personal property in the residence, as there was no adequate basis from which to conclude that Plaintiff abandoned his personalty or that Respondents acted reasonably in disposing of his belongings.

Source: Opinion Summary: Nickens v. Mt. Vernon Realty.

For the ruling, see Nickens v. Mt. Vernon Realty Group, LLC, No. 7, Sept. Term (October 19, 2012).

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

(1) Buried in footnote 2 of the ruling, the Maryland high court comments on the common law remedy of self-help when carrying out a post-foreclosure boot which, apparently (at least in Maryland), is still a viable method to obtain actual possession from any occupants in foreclosed-upon property (provided, of course, those occupants do not otherwise have a legal right to reside there):

• Originating in fourteenth-century England, peaceable self-help is a common law remedy that provides title owners with the right to repossess their real property from a possessor who has no legal right to reside on that property. See, e.g., Laney v. State, 379 Md. 522, 543, 842 A.2d 773, 785 (2004) ("The right of peaceable self-help, therefore, is a viable mechanism for a title owner of property to obtain actual possession of real property from a holdover mortgagor."); see also 1 Julian J. Alexander, British Statutes in Force in Maryland 247 (Ward Baldwin Coe ed., 2d ed. 1912) (explaining the common law background of the causes of action that gave rise to the self-help remedy).

Homeowner Could Face 'Force-Placed' Foreclosure Squeeze By Filing Casualty Claim On Home Insurance Policy; "A Real Life Halloween Trick" That Screws Consumers: Florida Consumer Advocate

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

• Florida's insurance watchdog Tuesday called for an investigation into companies that she says deny claims by alleging that customers misrepresented their finances when applying for policies.
  
  Insurance Consumer Advocate Robin Westcott cited repeated complaints against Fort Lauderdale-based Universal Property & Casualty in asking Florida regulators for the probe.
  
  Westcott said insurers should verify applicant's financial information within 90 days of coverage — not take premiums for years before checking credit reports and then later cancel policies and deny claims.
  
  "This tactic threatens homeowners' financial well-being as well as the state's economy and must be addressed swiftly and appropriately," Westcott said in a news release.
  
  "This is a real-life Halloween trick that does not treat consumers fairly. We must give consumers relief from this game of 'gotcha.'''
  
  Universal executives did not return phone calls or emails late Tuesday.
  
  Westcott said insurers appear to be using bankruptcy, liens, judgments and "perhaps" foreclosures as a reason to find Floridians ineligible for certain homeowners policies.
  
  When those policies are canceled, homeowners may be bound by terms of their mortgage to retroactively buy coverage under a lender-placed program [ie. force-placed insurance]. If they can't afford that program, they could lose their homes.
  
  In addition, cancellations will drive more to the state-backed insurer of last resort, Citizens Property Insurance Corp., which is trying to trim the number of its policyholders, she said.
  
  Westcott asked regulators to work with insurers on "reasonable standards" for underwriting that recognize
  
  "Florida's unique circumstance with regard to the foreclosure crisis." Almost half of the mortgages in Florida are "upside down," with more owed than homes are worth, and Florida is among the hardest hit nationwide in foreclosures and bankruptcies, she said..

Source: Insurers under fire once again (Watchdog says Universal cancels policies improperly).

For the Florida Insurance Consumer Advocate's press release, see Florida Insurance Consumer Advocate Westcott Calls for OIR Investigation into Insurance Company Post-Claim Underwriting Tactics.

Go here for the Florida Insurance Consumer Advocate's letter to the state Insurance Commisioner requesting the probe.

Freddie's Mortgage Refinance Resistance Kept Homeowners Locked Into High-Rate Handcuffs; Some Regarded Relief As Nothing More Than Backdoor Economic Stimulus

ProPublica reports:

• Freddie Mac, the taxpayer-owned mortgage giant, made it harder for millions of Americans to refinance their high-interest-rate mortgages for fear it would cut into company profits, present and former Freddie Mac officials disclosed in recent interviews.
  
  In closed door meetings, two Republican-leaning board members and at least one executive resisted a mass refi policy for an additional reason, according to the interviews: They regarded it as a backdoor economic stimulus.
  
  Freddie's policy was financially brutal: During the worst years of the Great Recession, when homeowners most needed the savings they could have gotten from refinancing to lower interest rates, Freddie helped keep millions of borrowers locked in high-interest-rate mortgages.

***

• Freddie's resistance to refis highlights a central conflict of interest that plagues both Freddie and Fannie. That conflict is even more pronounced now that they are owned by taxpayers. The companies, which own or back about 60 percent of U.S. home mortgages, have a mandate to help expand homeownership and also to generate profits. These goals can work at cross purposes.

For more, see Why Freddie Mac Resisted Refis.

Bankster Attaches 'Liability Release' As Condition To Homeowner Mortgage Resolution Refund Checks

Blogger David Dayen writes in Firedoglake:

• The failings of the 49-state foreclosure fraud settlement have by now become so obvious that even traditional media cannot ignore it. When half of the $2.5 billion earmarked as a hard-dollar penalty to states for aid and relief for struggling homeowners just gets sucked up into filling state budget holes, you can hardly make any excuses.
  
  And the other 90% of the settlement isn’t exactly destined to flow into the hands of homeowners, either; as we know, banks will probably honor up to 1/4 of their “penalty” by doing things they already do as a routine part of their business.
  
  There’s another potential element to this that we’re already starting to see. In relation to a resolution outside the settlement, Wells Fargo has been sending along refund checks to homeowners who overpaid for loans that the bank steered them into. Just one thing, though: the refund checks, if cashed, serve as a legal claim of liability release.

For more, see The Banks Devise a New Deal for Homeowners: Token Relief for Liability Waivers.