Jury: OK For Insurer To Stiff Property Owner On $6M Damage Claim Where Latter Found Responsible For Torching Premises While On Verge Of Foreclosure Sale

In Asheville, North Carolina, The Asheville Citizen Times reports:

• A federal jury ruled that the former owner of the Richmond Hill Inn participated in the intentional burning of the historic structure nearly four years ago.
  
  The judgment in a lawsuit means the ownership group, The Hammocks LLC, won’t be able to collect on a $6 million insurance policy taken out on the property overlooking the French Broad River.
  
  U.S. District Court Judge Martin Reidinger also ruled this month the company must pay the legal bills incurred by Harleysville Mutual Insurance Co. in fighting the suit.
  
  The mansion, once the home of former congressman and ambassador Richmond Pearson, was destroyed on March 19, 2009, in a fire set by an arsonist, according to investigators.
  
  Harleysville refused to pay the insurance claim, prompting The Hammocks to sue for breach of contract. The insurance company countersued, claiming the owners violated the terms of the policy.
  
  A jury found at the conclusion of a trial in Asheville that The Hammocks was responsible for setting the fire. It also found the company did not willfully make false representations on its insurance policy application.
  
  “Based on the foregoing facts as found by the jury,” Reidinger wrote in his ruling, “the court concludes as a matter of law that the defendant has no duty to provide coverage for the claim of loss tendered by the plaintiff and that the insurance policy at issue is null and void, under the terms and conditions of the policy, as a result of the plaintiff’s intentional participation of the burning of the insured property.”
  
  William Gray, managing member of The Hammocks, declined to comment on the ruling.
  
  While investigators determined the fire that destroyed the inn was intentionally set, no arrests have been made in the case.
  
  The property was in foreclosure at the time of the blaze, and investigators said the sprinkler system had been turned off and they found evidence that a petroleum product was used to start the fire.
  
  Buddy Thompson of the Asheville-Buncombe Arson Task Force said he doesn’t know if there ever will be an arrest.
  
  “All of our leads have been run at this point,” he said. “We really have nothing else to go on unless someone comes up with some new information.”
  
  Thompson said the jury’s conclusion in the civil trial doesn’t mean there’s enough evidence to bring criminal charges.
  
  “There’s a difference in the way that evidence is looked at in a civil and a criminal case,” he said. “In a civil trial it’s the preponderance of the evidence. In a criminal trial you have to find guilt beyond a reasonable doubt.”
  
  Three days before the fire, Buncombe County officials finalized the property’s foreclosure and set the auction for a month later.

For more, see Jury: owner set Richmond Hill fire (Insurer not liable for $6M Richmond Hill claim).

Property Owner In Foreclosure Suspected Of Staging Mistaken Mob Hit, Then Torching Premises To Cash In On $500K+ Insurance Policy

In Portland, Maine, the Portland Press Herald reports:

• The owner of an apartment building in Windham that burned on Dec. 7 is now suspected of setting the fire and then tying himself up to make it look like a mob hit.
  
  Investigators with the state Fire Marshal's Office have not charged Donato Corsetti, 66, owner of the Corsetti's Market next to the apartment building. But officials say in court papers that they believe he set the fire to collect on an insurance policy.
  
  "Donato's objective was to make the event so sensational by staging an attack that investigators would not suspect him as the perpetrator," wrote Christopher Stanford, senior investigator for the Fire Marshal's Office, in an affidavit in support of a search warrant.
  
  Only Corsetti was hurt in the fire. People who were in an adjacent apartment got out safely.
  
  Corsetti's apartment building and his own home had recently been foreclosed on, and he still owed more than $174,000, according to the affidavit filed Dec. 17 in Cumberland County Unified Criminal Court.
  
  He was served with eviction papers three days before the fire.

***

• Investigators then interviewed Corsetti on the day after the fire, at the police station, where he described two attackers, one tall and skinny and the other short and stocky, though he did not offer more details.
  
  He said the men had nothing in their hands, there were no flammable liquids stored in the apartment and the lamps for the vacant apartment were kept in the closet.
  
  Investigators challenged his story, and he changed it.
  
  "He answered by telling us that he had lied the first couple of times and that it was actually a 'set up' by an organized crime group from Rhode Island that he would not identify as the Mafia," Stanford wrote in the affidavit. "He told us that they had come after him by mistake and that he was going to make some calls down in Rhode Island and have the problem taken care of."
  
  "We asked him why he was not poured with ignitable liquid if it was a hit on him, and he answered by saying they just wanted to scare him," the affidavit says. He asked them not to investigate any further.
  
  Corsetti initially agreed to a polygraph exam but then backed out, saying he had to check with his doctor because he had a heart condition, the affidavit says.
  
  Corsetti admitted to being behind on all of his debt payments except for the store, though he denied that the apartment building had been foreclosed on, according to the affidavit. Officers later learned that Corsetti's home also had been foreclosed on.
  
  At the time of the foreclosure, the properties were worth $250,000 and Corsetti owed more than $425,000. He was left owing more than $175,000 after Fannie Mae bought the property in foreclosure on Nov. 29, the affidavit says.
  
  The insurance policy on the properties was for $509,800, the affidavit says.
  
  On Dec. 11, Corsetti told police that he did not want to cooperate any more and gave them his attorney's name, the affidavit says.

***

• Stanford said he believes that Corsetti set the fire and no one was trying to kill him. "Donato did not have any trace of ignitable liquid on his clothing, which in my experience is not the case when a perpetrator is trying to kill someone with the use of such liquids and fire," Stanford wrote.
  
  Sgt. Joel Davis of the Fire Marshal's Office said Corsetti has not been charged with any crime. "We're still finishing up some things before we present everything to the district attorney."
  
  Corsetti has had two previous fires, one that destroyed the store in 1998 and one that damaged his home in 2007. Davis said investigators would take another look at the reports from those fires, which were deemed accidental, but they happened so long ago that it's unlikely any new investigation would be started.

For the story, see Windham fire explanation too 'sensational' for investigators (Court papers say Donato Corsetti staged the fire to collect on an insurance policy).

Orlando Homeowner Applies For 'Free Paint Job' To Dodge Mortgage Payments For Twelve Months

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

• Hundreds of homeowners in Orlando who want to live mortgage-free for a year have agreed to be part of an extreme and controversial marketing campaign.
  
  Tammy Valdes is one homeowner who's applied to transform her home into a neon-hued billboard to get her mortgage paid for a year. "It would be such a relief. It would be such a burden off of me to have my house that color," said Valdes.
  
  A marketing company, Brainiacs From Mars, is using such homes to advertise its creativity. After painting its first home in California, it signed several Fortune 500 companies and doubled its staff. More than 300 Orlando homeowners have applied for the program so far. The company's California CEO said his decision will be based on who needs help the most.

***

• The city of Orlando has rules that prevent signs on homes, but doesn’t have restrictions on paint -- and some neighbors have big concerns about the neon colors. They worry a neon-colored home would stick out.
  
  But the Valdes family said looking at neon paint colors would be better than looking at a foreclosure. "We love our home and want to stay here and this would definitely help us stay," Valdes said. [...] The company plans to choose an Orlando homeowner next month and will pay to have that home repainted.

For the story, see Marketing campaign offers free mortgage for select homeowners.

Michigan Supreme Court: Bankster Screw-Ups When Following Foreclosure Process As Laid Out Under State Law Result In Foreclosures That Are Merely Voidable, Not Void Ab Initio

From the Syllabus of a recent Michigan court ruling, prepared by the Reporter Of Decisions for the Michigan Supreme Court:

• Euihyung and In Sook Kim brought an action in the Macomb Circuit Court against JPMorgan Chase Bank, N.A., seeking to set aside a sheriff’s sale of their home.
  
  Plaintiffs had obtained a loan from Washington Mutual Bank to refinance their home and granted Washington Mutual a mortgage interest in the property to secure the loan.
  
  The federal Office of Thrift Management subsequently closed Washington Mutual and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver for the bank. Defendant acquired Washington Mutual’s assets, including loans and loan commitments, pursuant to a purchase and assumption agreement that it reached with the FDIC. After plaintiffs defaulted on their loan payments, defendant foreclosed on the property by advertisement and purchased the property at the sheriff’s sale.
  
  Both parties moved for summary disposition. Plaintiffs argued in part that defendant had failed to comply with the statutory foreclosure-by-advertisement requirements and that as a result the foreclosure sale was void ab initio.
  
  The court, [...] granted summary disposition in favor of defendant, finding that because defendant had acquired plaintiffs’ mortgage by operation of law, defendant was not required to record the mortgage assignment before beginning foreclosure-by-advertisement proceedings.
  
  The Court of Appeals, [...] reversed, concluding that because defendant was not the original mortgagee and had acquired the loan by assignment rather than by operation of law, defendant was obligated under MCL 600.3204(3) to record the assignment of plaintiffs’ mortgage to it before foreclosing by advertisement. The Court of Appeals determined that defendant’s failure to record the assignment rendered the sheriff’s sale void ab initio. 295 Mich App 200 (2012).
  
  The Supreme Court granted defendant’s application for leave to appeal. 491 Mich 915 (2012).
  
  In an opinion by Justice MARILYN KELLY, joined by Justices CAVANAGH, MARKMAN, and HATHAWAY, the Supreme Court held:
  
  When a subsequent mortgagee acquires an interest in a mortgage through a voluntary purchase agreement with the FDIC, the mortgage has not been acquired by operation of law and that subsequent mortgagee must comply with the provisions of MCL 600.3204 and record the assignment of the mortgage before foreclosing on the mortgage by advertisement.
  
  Any defect or irregularity in a foreclosure proceeding results in a foreclosure that is voidable, not void ab initio.(1)

For the full Syllabus, and the Michigan high court ruling, see Kim v. JPMorgan Chase Bank, N.A., Docket No. 144690 (December 21, 2012)

(1) The Michigan Supreme Court addresses this issue in the following excerpt:

• As noted earlier, MCL 600.3204 sets forth several requirements for foreclosing a property by advertisement. Subsection (3) requires a party that is not the original mortgagee to record the assignment of the mortgage to it before foreclosing. Because defendant acquired plaintiffs’ mortgage through a voluntary transfer, and given that it was not the original mortgagee, it was subject to the recordation requirement of MCL 600.3204(3). Having made that determination, we must now decide the effect of defendant’s failure to comply with that provision.
  
  With meager supporting analysis, the Court of Appeals concluded that defendant’s failure to record its mortgage interest before initiating foreclosure proceedings rendered the foreclosure sale void ab initio.
  
  It cited one case in support of its holding, Davenport v HSBC Bank USA. There, the plaintiff, who was in default on her mortgage, brought an action to void a foreclosure. The defendant, who was the successor in interest of the initial mortgagee, had initiated the foreclosure proceeding several days before acquiring its interest in the mortgage. The trial court granted summary disposition to defendant.
  
  The Court of Appeals reversed the trial court’s ruling. It held that the defendant’s failure to comply with MCL 600.3204(1)(d), which requires that a party own some or all of the indebtedness before foreclosing by advertisement, rendered the foreclosure proceedings void ab initio.
  
  But it cited not a single case in support of the proposition that the foreclosure was void ab initio as opposed to merely voidable. Davenport’s holding was contrary to the established precedent of this Court.
  
  We have long held that defective mortgage foreclosures are voidable. For example, in Kuschinski v Equitable & Central Trust Co, the Court considered a foreclosure undertaken in violation of a restraining order. The Court held:
  
  Our attention is called to a few isolated cases where under a different factual set-up, such sales have been held to be void. The better rule seems to be that such sale is voidable and not void. Plaintiff was not misled into believing that no sale had been had because of the order restraining such action. He knew of the sale and, although he was warned by defendants’ attorneys, violated the rule that in seeking to set aside a foreclosure sale, the moving party must act promptly after he becomes aware of the facts upon which he bases his complaint. The total lack of equity in plaintiff’s claim, his failure to pay anything on the mortgage debt and his laches preclude him from any relief in a court of equity.
  
  Similarly, in Feldman v Equitable Trust Co, the Court held that a foreclosure commenced without first recording all assignments of the mortgage is not invalid if the defect does not harm the homeowner.
  
  This Court, the Court of Appeals, and the United States District Court for the Eastern District of Michigan have consistently used this interpretation. We continue to adhere to it.
  
  Therefore, we hold that defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio.
  
  Because the Court of Appeals erred by holding to the contrary, we reverse that portion of its decision.
  
  We leave to the trial court the determination of whether, under the facts presented, the foreclosure sale of plaintiffs’ property is voidable. In this regard, to set aside the foreclosure sale, plaintiffs must show that they were prejudiced by defendant’s failure to comply with MCL 600.3204. To demonstrate such prejudice, they must show that they would have been in a better position to preserve their interest in the property absent defendant’s noncompliance with the statute.

DeedVoidVoidable

Void Or Voidable Foreclosure? Federal Appeals Court Reinstates Homeowner Challenge Involving Post-Sale Redemption Attempt Under Michigan State Law

In a recent ruling from a Federal Appeals Court, a homeowner's challenge to a non-judicial foreclosure action in Michigan was reinstated for further litigation.

In the case, the estate of a deceased homeowner challenged a foreclosure on the grounds that the foreclosing bank failed to provide proper notice under Mich. Comp. Laws § 600.3204(4)(a) regarding the necessity to comply with the loan-modification process when conducting a foreclosure by advertisement. Further, an issue arose as to whether the estate attempted to have redeemed the property pursuant to Michigan state law prior to the end of the statutory redemption period.

The estate contended that, because the statute wasn't followed, the foreclosure action was absolutely void (ie. void ab initio). Based on this argument, the estate asserted that the redemption period on a void foreclosure never started and, accordingly, it should be allowed to redeem the property. The lower court dismissed the estate's challenge, and the estate subsequently filed an appeal.

On appeal, the 6th Circuit Court of Appeals determined that the facts of the case were not fully developed by the lower court so as to determine whether a failure to comply with the Michigan statute rendered the foreclosure void ab initio, or merely voidable.

Accordingly, the appellate court reversed the earlier ruling and booted the case back to the lower court to further develop the facts necessary to determine whether the flaw in the foreclosure process rendered the sale void ab initio, or merely voidable.

The appeals court discusses the foregoing in the following excerpt ("Mitan" refers to the personal representative of the deceased homeowner's estate):

• As a general rule, Michigan law does not permit property owners to make claims related to foreclosed property after expiration of the redemption period. See Piotrowski, 4 N.W.2d at 517; Overton, 2009 WL 1507342, at *1. Mitan claims that this rule is not applicable here. Because the foreclosure by advertisement violated Mich. Comp. Laws § 600.3204(4)(f), he argues, it was void and the redemption period never began. We agree with Mitan's interpretation of the law.
  
  Michigan law distinguishes between foreclosures with notice defects and those with "structural defect[s] that go[] to the very heart of defendant's ability to foreclose by advertisement in the first instance." Davenport, 739 N.W.2d at 384.
  
  Notice defects render a foreclosure voidable. Jackson Inv. Corp. v. Pittsfield Prods., Inc., 413 N.W.2d 99,101 (Mich. Ct. App. 1987).
  
  Structural defects, on the other hand, render the foreclosure absolutely void. Davenport, 739 N.W.2d at 385. In Davenport, for instance, the defendant bank had no statutory authority to foreclose because it did not own an interest in the mortgage when it published its first notice of foreclosure, as required by Mich. Comp. Laws § 600.3204(1)(d). Similarly, Mich. Comp. Laws § 600.3204(4) is a statutory prohibition on foreclosure by advertisement where a lender does not take the required steps to negotiate a loan modification.
  
  Although one of the required steps is to provide notice, see Mich. Comp. Laws § 600.3204(4)(a), the failure to comply with the loan-modification process as outlined in the statute is a structural defect because it deprives the borrower of the opportunity to demonstrate eligibility for a loan modification that would avoid foreclosure altogether. See id. § 600.3204(4)(f).
  
  In contrast, the notice defect at issue in Jackson did not call into question the underlying right of the lender to foreclose once past the procedural defect. See 413 N.W.2d at 101. It follows that, as a matter of Michigan law, a lender that fails to follow the loan-modification procedures set forth by the statute has engendered a structural defect and is thus without authority to commence a foreclosure. Without a valid foreclosure, the redemption period has not begun, and the owner of the property retains an interest conferring standing to sue.
  
  The remaining question is factual. Did Wells Fargo, in this particular case, foreclose on the property in violation of the loan-modification law? On this record, we are unable to tell. Mitan alleges that Frank returned the necessary paperwork to Wells Fargo, that Wells Fargo had approved a loan modification, and that Frank qualified for a loan modification under the statutory calculations. Portions of the record bring these points into dispute. Besides this, it is altogether unclear why Wells Fargo's designated agent did not have access to communications that Frank may have sent directly to Wells Fargo. It is also unclear whether Wells Fargo or its agent ever attempted to make the calculation required under Mich. Comp. Laws § 600.3205c(1).
  
  If further factual development shows that Wells Fargo did not comply with the loan-modification law, then Mitan has standing and may pursue the merits of his claim.
  
  In sum, the district court erred when it held that Mitan lacked standing because the redemption period had expired. If Wells Fargo violated the loan-modification law, then the redemption period never began. On remand, the district court should make factual findings to determine whether Wells Fargo assessed Frank's eligibility for a loan modification as required by statute.

For the ruling, see Mitan v. Federal Home Loan Mortgage Corporation, No. 12-1169 (December 12, 2012).

Editor's Note: In unrelated litigation decided by the Michigan Supreme Court nine days after this ruling was issued (on December 21, 2012), the state high court appears to have decided whether screw-ups in the foreclosure process result in foreclosures that are either void ab initio or merely voidable. See Michigan Supreme Court: Bankster Screw-Ups When Following Foreclosure Process As Laid Out Under State Law Results In Foreclosures That Are Merely Voidable, Not Void Ab Initio.

Homeowners' Move To Foreclose On Banks Begins To Take Hold In Florida

CNNMoney reports:

• Since the housing bubble burst in Florida five years ago, more than 400,000 borrowers have had their homes foreclosed on by their lenders. But for some, it's payback time.
  
  Hundreds of homeowners and condo associations are foreclosing on banks that have failed to pay dues and other expenses on the properties they've repossessed.
  
  When banks foreclose on a home they become responsible for paying fees to the homeowners association -- both any unpaid fees going back as far as 12 months and all expenses going forward.
  
  In many cases, however, banks are failing to pay, leaving these associations short on cash, according to Miami-based attorney Ben Solomon.
  
  But now, homeowners groups are putting liens on the properties until banks pay up and foreclosing on them if they don't.
  
  So far, Solomon's firm has filed more than 1,100 liens against banks on behalf of homeowners and has pursued 131 foreclosures. In more than 90% of the cases, he said, the banks settle by paying the bills.

For more, see Payback time: Florida homeowners foreclosing on banks.

Class Action Suits Targeting Alleged Loan Modification Rackets Using Attorney Involvement To Dupe Financially Distressed Homeowners Into Sense Of Trust Continue

From a recent press release from the Lawyers' Committee For Civil Rights Under Law:

• The Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) and pro bono counsel Cooley LLP filed a lawsuit in Orange County, California, on behalf of 14 homeowners from 10 states against a network of for-profit loan modification companies.
  
  The suit alleges that these loan companies defrauded vulnerable homeowners out of tens of thousands of dollars by falsely promising—for substantial upfront fees and also monthly membership/installment payments—to obtain much-needed mortgage modifications on their behalf, but consistently failing to deliver results.
  
  “This type of scam activity continues to have a severe impact on financially distressed homeowners who are desperately trying to save their homes,” said Linda Mullenbach, senior counsel for the Fair Housing and Fair Lending Project of the Lawyers’ Committee.
  
  “This lawsuit also seeks to halt a disturbing trend of attorney involvement in the scam operations, touting the attorney’s specialized experience and using one’s status as an attorney to gain trust. As a result, these homeowners are defrauded out of thousands of dollars in illegal fees, and suffer other losses as a direct result of the scammers’ activities and deceit.”

***

• This case is the Lawyers’ Committee’s eleventh loan modification scam lawsuit filed nationwide and its fourth filed in California.

For more, see Lawyers’ Committee and Cooley LLP File Lawsuit on behalf of Loan Modification Scam Victims.

Advocate: Case Follows Disturbing Trend Of Attorneys Using Their Status As Attorneys In Attempting To Paint Their Loan Mod ‘Business’ As Lawful

From a recent press release from the Lawyers' Committee For Civil Rights Under Law:

• The Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) and pro bono counsel McDermott Will & Emery LLP (McDermott) filed a lawsuit, Culliver et al. v. Alarcon Law Group, P.C. et al., in Kings County, New York on behalf of 17 homeowners from New York and nine other states against a network of for-profit loan modification companies.
  
  The suit alleges that defendants, led by New York attorney Rory M. Alarcon, defrauded vulnerable homeowners out of tens of thousands of dollars by falsely promising—for substantial upfront fees and also monthly membership fees—to obtain much-needed mortgage modifications on their behalf, but consistently failing to deliver results.

***

• “This is our seventh case filed in Long Island, New York since 2011, targeting this type of egregious scam activity which continues to have a severe impact on financially distressed homeowners who are desperately trying to save their homes,” said Linda Mullenbach, senior counsel for the Fair Housing and Fair Lending Project of the Lawyers’ Committee.
  
  “This case follows a disturbing trend of attorneys using their status as attorneys in an attempt to paint their loan modification ‘business’ as lawful. As a result of the scam activities, homeowners are placed in an even worse position when they are defrauded out of thousands of dollars in illegal fees, incur late fees, experience damage to credit scores, and face an increased risk of foreclosure as a direct result of the scammers who falsely claim to have specialized expertise.”

For more, see Lawyers' Committee Files Suit on Behalf of Distressed Homeowners who Lost Thousands to Alleged Loan Modification Scam.

Civil Rights Group Brings Class Action Suit Against Network Of SoCal Loan Modification Outfits Alleging Upfront Fee Ripoffs

From a recent press release from the Lawyers' Committee For Civil Rights Under Law:

• The Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee) and pro bono counsel Dorsey & Whitney LLP (Dorsey) filed Williams v. Premiere Loan Services, Inc., Case Number RIC1215573, a class action lawsuit in Riverside County, California, against a network of for-profit loan modification companies and associated individuals.
  
  The case is brought by six named plaintiffs, who live in California and Nevada, on behalf of a class alleged to include over 100 homeowners. The suit alleges that the defendants, who are based in San Bernardino and Riverside Counties in California, defrauded vulnerable homeowners out of tens of thousands of dollars by inducing them to pay thousands of dollars in up-front fees for mortgage loan modification and related legal services that were never provided. Plaintiffs seek both monetary damages, including recovery of the illegal up-front fees, and injunctive relief to put an end to the deceptive practices of the defendants. The Lawyers’ Committee and Dorsey are representing the plaintiffs free of charge. (Click here to view Complaint.)
  
  The defendants named in the Complaint are Premiere Loan Services, Inc.; Raed Farraj; Nathaniel Genis; DKNZ Marketing & Media, Inc. d/b/a/ National Bailout Application Assistance; Samer J. Farraj; Ernest Auger; George Faraj; Emerge Financial Advisors, LLC; Thomas Duck; and Larry Foster.

For more, see Lawyers' Committee and Dorsey & Whitney LLP File Class Action Lawsuit Targeting Loan Modification Scam Acitvity in Riverside County, California.

Bankster Ordered To Send Company President To Court, Sends Flack Instead; Now Finds Itself In Contempt Hot Water

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• A circuit court judge found one of the largest banks in the country in contempt of court on Friday over a foreclosure case that has dragged through the system for several years.
  
  Attorneys for Dimitri Jansen, a local schoolteacher whose former home in North Port is in foreclosure, said such the contempt order against Minneapolis-based U.S. Bank, is “unprecedented.”
  
  Jansen says his mother’s name was mistakenly added to the mortgage he obtained in 2006, that the bank has ignored requests to remove her name from the foreclosure documents and thus wrecked her credit history, and that the bank held up a pending short sale.
  
  Another Sarasota judge, apparently frustrated with U.S. Bank, had ordered the bank’s president to be present in court on Friday. The bank instead sent a senior representative, who declined to comment.
  
  Sarasota Circuit Court Judge Charles Williams found the bank in indirect civil contempt. It is unclear what, if any, sanctions the bank will face at the next court hearing in February 2013.
  
  “Fundamentally, they refused to respect the court,” Jansen’s attorney, Matt Weidner, said of U.S. Bank. “What this shows is willful negligence.”
  
  Like many other foreclosure cases throughout the country, Jansen’s is a tale of paperwork mistakes.

For more, see Judge finds U.S. Bank in contempt in foreclosure case.

Maine AG Squeezes $250K+ Settlement Out Of Debt Resolution Outfit To Resolve Complaints By 300+ State Residents

In Bangor, Maine, the Bangor Daily News reports:

• [L]egal Helpers website trumpets that it is “the nation’s largest debt resolution law firm” with “offices in 50 states.” When Eric Wright went looking, he found an office in Thomaston but had a lot of trouble finding the attorney who was supposed to be there.
  
  Wright is staff attorney for Maine’s Bureau of Consumer Credit Protection. He was looking for the attorney on behalf of our southern Maine consumer, who was less than pleased with the iceberg-like progress Legal Helpers seemed to be making.
  
  Wright investigated complaints from about two dozen Mainers, most of whom had dropped their business dealings with Legal Helpers.
  
  “They didn’t appear to have done anything,” Wright told me last week. “There never seemed to be a method to the madness of what they were doing” in terms of getting clients’ debts reduced.

***

• There was also the matter of registering to operate in Maine, which the company refused to do even though Maine law requires registration by debt settlement companies. Attorneys are exempt, unless those attorneys’ sole activity is settling debts. Legal Helpers claimed it had “partnerships” with attorneys who were licensed in Maine, and so should be exempt.
  
  Wright turned the whole matter over to Maine’s attorney general, William Schneider. Last week, Schneider and Will Lund, superintendent of the Bureau of Consumer Credit Protection, announced a settlement with Legal Helpers and with The Mortgage Law Group LLP, a sister company of Legal Helpers that claimed to have a national reputation for representing homeowners in danger of losing their homes to foreclosure.
  
  Under the agreement, the firms will pay $250,000 to be equitably distributed among more than 300 Maine consumers. The companies also agreed to stop charging monthly fees to present clients and will pay the state $15,000 to cover part of its administrative and investigative costs.

***

• In July, the state of Illinois reached a $2.1 million settlement with Legal Helpers.

For the story, see Debt settlement firm settles with Maine for six figures.

Disbarred Attorney Gets Nearly Five Years For Forging Clients' Signatures On Settlement Checks, Then Pocketing $200K+

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• Disbarred attorney Scott Schieb was sentenced to nearly five years in prison Thursday and will have to pay at least $250,000 to reimburse clients for personal injury settlements he stole from them.
  
  Schieb, 55, will pay back the thefts over 10 years, said prosecuting attorney Erika Quartermaine. Schieb forged clients' signatures and took between $10,000 and $50,000 in settlement checks from each client. He was sentenced for eight counts of grand theft Thursday.
  
  Schieb stole settlements from eight clients who were all injured in car accidents from 2005 to 2008. The clients' injuries ranged from whiplash to a debilitating back injury, Quartermaine said. Schieb gave up his license to practice law in 2011 after the Florida Bar found him guilty of misappropriating more than $200,000. “This is a sad case for all of the victims, and the defendant's family,” Quartermaine said.(1)
  
  Schieb lost his home this month after US Bank won a $1.13 million foreclosure judgment against him. Shieb bought the land in 1992 and built the house two years later.
  
  Schieb borrowed the money in April 2004 against his 4,234-square-foot house in the 2900 block of Dick Wilson Drive in the Laurel Oaks neighborhood of Sarasota.

For the story, see Disbarred Sarasota attorney imprisoned for stealing from clients.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

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.

Financially Distressed Homeowners Face Criminal Prosecution For Recording Bogus Land Documents To Stall Foreclosure

In Stanislaus County, California, The Modesto Bee reports:

• Authorities' patience with people facing foreclosure — normally a sympathetic bunch, especially in the Central Valley where rates are sky high — wears thin when owners might be using illegal means to keep their homes.
  
  Fraud investigators say they are seeing an emerging foreclosure rescue scheme in which desperate homeowners record phony documents — a felony — simply to stall losing property at public auction.(1)
  
  The cost of buying time can be steep: The homeowner typically pays a bundle of money for bogus forms and learning how to use them, often loses the property anyway and then faces criminal charges.
  
  In the past couple of weeks, authorities have launched prosecutions against four Stanislaus County property owners. All were warned when investigators got wind that the owners might be up to something, but each returned later or sent someone else to try to file fake papers again.
  
  "It comes to a point where enough is enough," said Jeff Mangar, a prosecutor with the district attorney's real estate fraud unit. "How many breaks can we give these people?"
  
  They include a mortgage company owner, a gas station cashier who obtained a $648,000 loan and a woman who said her lender should pay her $2.5 million. Two told The Bee they are innocent; the others could not be reached.
  
  Some fell into schemes pushed on the Internet, they told authorities.
  
  A website reviewed by The Bee encourages owners to fight back against greedy banks engaging in unscrupulous robo-signing and refusing to renegotiate loans. The site brags that none of its 2,600 customers has made a mortgage payment in the past two years.
  
  "We essentially tie the banks up in administrative proceedings," the site says. When lenders catch on to delay tactics, "our team is counter-maneuvering to tie the bank's legal team up in administrative red tape" with more filings, the site says.
  
  Clerks at the recorder's office in Stanislaus County are getting wise to suspicious documents and tip off investigators, who rush over from a couple blocks away and sometimes arrive before people leave the recorder's office.
  
  "We are the government (too)," said county Clerk- Recorder Lee Lundrigan. "If the purpose of making a document public may be criminal, we communicate that information to the DA's fraud team and they can make the final determination."

For more, see Fake filings aim to stall valley foreclosures, prosecutors say.

(1) This "technique" for stalling the foreclosure process is an unlawful version of what is generally referred to by some real estate operators as "clouding the title."

Not to be confused with "crowding the title" - a maneuver in which an enterprising property owner conveys small fractional interests in his land title to multiple - typically controlled - entities, or to friends/relatives/business associates, each having P.O. Box addresses, addresses in far away places, etc. before a bankster files a foreclosure action, for the purpose of creating difficulty for a process server to serve a foreclosure lawsuit in a judicial foreclosure state. Note that if you use addresses that are located outside of the United States, for example, Canada, Jamaica, the Bahamas, Haiti, Central/South America, or any other continent, service of process may need to comply with the laws of that foreign jurisdiction, the Hague Service Convention, and/or possibly the Inter-American Service Convention and Additional Protocol. See generally,  American Bar Association Newsletter (October, 1999): Service of Process Abroad; U.S. State Department: Service of Legal Documents Abroad. What a cruel joke to play on the poor process server!

Atlanta-Area Counties Tag Bankster With Fair Housing Suit Over Discriminatory, Predatory Lending Practices; Similar Litigation Taken Earlier In Baltimore, Memphis

In Atlanta, Georgia, The Associated Press reports:

• Three Atlanta-area counties have filed a lawsuit claiming that British bank HSBC cost them hundreds of millions of dollars in extra expenses and damage to their tax bases by aggressively signing minorities to housing loans that were likely to fail.
  
  The Georgia counties' failure or success with the relatively novel strategy could help determine whether other local governments try to hold big banks accountable for losses in tax revenue based on what they claim are discriminatory or predatory lending practices. Similar lawsuits resulted in settlements this year worth millions of dollars for communities in Maryland and Tennessee.

***

• As in those cases, the lawsuit filed by the Georgia counties says the bank, in this case HSBC, targeted communities with high percentages of Fair Housing Act-protected minority residents, particularly blacks and Hispanics.

***

• It is the alleged targeting of minority communities that entitles the counties to seek action against HSBC for loss of tax income and other expenses, the lawsuit says.
  
  "If you can show that you yourself have suffered harm by an illegal act under the Fair Housing Act, even if you are not the target, even if you are not the intended victim, you can still sue to stop the behavior and to recover any damages that you can prove you suffered because of the violation of the Fair Housing Act," said Steve Dane, a lawyer whose firm was involved in the Memphis and Baltimore lawsuits.

For more, see Ga. counties sue HSBC claiming loss of tax base.

Businessman: Now-Dead, Once-Trusted NJ Real Estate Broker Forged My Name As Straw Buyer On Sale Leaseback Ripoff Docs That Drained 9/11 Widow's Home Equity

In North Naples, Florida, the Naples Daily News reports:

• Marie and Ronald Rotunda were eating lunch at Olde Cypress golf club in North Naples one day in January 2006 — at the time a lawsuit says he was in an office more than 1,200 miles away, signing a lease-back agreement for a New Jersey home.
  
  Court documents contend a Trenton broker forged Ronald Rotunda's signature in New Jersey that day, and that a notary swore Rotunda stood before her that day, signing a $368,000 mortgage on the New Jersey home.
  
  The home in question was owned by a 41-year-old widow whose husband died in the 9/11 terrorist attacks. The fraudulent transaction on the home, which said Ronald Rotunda would lease the home back to the widow after she paid $92,000, staved off the widow's impending foreclosure, a lawsuit alleges.
  
  The Rotundas say they had no idea what was going on in New Jersey that day in January 2006. It was two years later before the North Naples couple discovered the mortgage that Ronald Rotunda supposedly had signed and owed.
  
  "We didn't know anything because we'd been living here (in Naples) since 2004," Marie Rotunda said. "It was through a credit report that we found out."
  
  Since then, the Rotundas said, they've been hounded by two banks to pay up on the mortgage. They eventually were cleared by Countrywide Mortgage, which dropped the foreclosure against Ronald Rotunda after deciding it was a fraud. But the Rotundas were pursued again through phone calls and letters by Bank of America after it took over Countrywide.
  
  Those are among the allegations in a tangled 2009 lawsuit and countersuit expected to head to trial early next year in Gloucester County, N.J. The North Naples couple also are defendants in a pending 2010 foreclosure lawsuit filed by Bank of America.
  
  Jorge Sanchez, the Trenton broker, died in 2008. But Ronald Rotunda, Sanchez's company Landmark Mortgage Services, Sanchez's wife, and the 9/11 widow's lawyer are named as defendants in a lawsuit filed by the 9/11 widow, Charlette Thompson.
  
  Ronald Rotunda filed a countersuit, seeking damages against Sanchez's estate, the 9/11 widow's lawyer, the notary and her title agency employer.
  
  "(The 9/11 widow) is arguably a victim of a mortgage rescue scheme, but she's lived in the house for years without paying," said the Rotundas' lawyer, Daniel Graziano of Lawrenceville, N.J.
  
  "You just don't know how to resolve the case," Graziano said of the many involved who relied on Sanchez's word that Ronald Rotunda signed the mortgage, lease-back and promissory note. "The judge understands the case has to be settled because it's too difficult to present to a jury … That's why it's dragged on so long."

***

• It was after Sanchez's death that the lawsuits and countersuits began. Court records and interviews provide this account of how the Rotundas became involved:
  
  On Dec. 28, 2005, the 9/11 widow agreed to sell her home to Ronald Rotunda for $460,000 and she then signed a mortgage. She agreed to provide $92,000 in financing and Rotunda supposedly signed a promissory note on Jan. 30, 2006.
  
  The 9/11 widow alleges Ronald Rotunda failed to hold up his end of the financial deal and that she's a victim of a conspiracy between her lawyer, Rotunda, Landmark Mortgage, Sanchez and his wife, who deprived her of most of the equity in her home.

For more, see North Naples couple caught in tangled web of lawsuits involving 9/11 widow.

The Grief Continues For Surviving Widows Being Refused Loan Help & Forced Into Foreclosure Shortly After Hubby's Death

In Tampa, Florida, the Tampa Bay Times reports:

• Lawyers and legal-aid counselors call it a sad reality of the housing crisis: Widows refused loan help and forced into foreclosure in the years after their spouses' death.
  
  For distressed homeowners, the bureaucratic obstacle course of refinancing in an age of tight credit is hard enough to navigate on its own. But for grieving widows with finances already in disarray, the loan maze and its accompanying fears of losing a family home have proven a demoralizing shock.
  
  "It's a clash of circumstances that couldn't be any more devastating," said Kathleen Mullin, the executive director of St. Petersburg-based Gulfcoast Legal Services.
  
  "This problem and the web of paperwork causes so much stress that it can impact (widows') health, impact their well-being, to the point where they don't even know what to do. They're just frozen."
  
  Widows caught in this runaround, counselors said, never realized the damage it could cause if only their husband signed the mortgage note. They did not expect it would prevent them from a loan modification that could allow them to keep paying and stay in their homes.
  
  There's no public data on how many widows have faced this frustration. But attorneys and counselors say it is a growing problem for surviving spouses – predominately women – barely seen before the foreclosure crisis began.
  
  Billy Howard, the Morgan & Morgan attorney representing Jackson in a harassment lawsuit against Wells Fargo, said his firm has more than 25 widows with similar problems, up from only a few cases in recent years.
  
  "You've got people who want to be able to pay and think they could afford to stay," said foreclosure defense attorney Mark Stopa, whose firm has about 10 similar cases, up from none a few years back, "and the bank tells them it is simply not possible."
  
  The trap has proven particularly troublesome in Florida, with high rates of home distress and more than 1 million widows and widowers, according to the U.S. Census Bureau's 2010 American Community Survey.

***

• Karine Gialella, a Gulfcoast Legal Services attorney, said she worked with a St. Petersburg widow in her 80s who found the only way to avoid foreclosure was to file for bankruptcy.

***

• Though due-on-sale clauses allow lenders to demand full payment when a loan changes hands, federal law prohibits calling in a loan just because a widow took it over.(1) But banks have argued in court that they're demanding payment because of the default, not the death, said Matt Bayard, a staff attorney with Legal Services of Greater Miami. Some judges have agreed.

For more, see Widows face foreclosure due to mortgage Catch-22.

(1) For the Federal law, see 12 USC 1701j–3(d)(5) - Preemption of due-on-sale prohibitions (Exemption of specified transfers or dispositions).

Feds Wait Until Home Goes Into Foreclosure & Ex-Servicemember Dies Before Coughing Up Pension Benefits; VA Bureaucrat Declares Reversal Of Initial Denial Of Now-Dead Vet's Claim A Success

A recent story in the San Francisco Chronicle highlights the problems that former armed service members are having receiving their well-earned pension benefits from the Veterans Administration, often times with the latter waiting until after the veteran dies before making payouts. Here's a sample:

• In November, more than a year after Vietnam veteran John Conrad died of leukemia, the VA sent his widow a letter acknowledging his cancer was caused by exposure to the toxic defoliant Agent Orange.
  
  The decision marked a reversal for the agency, which had denied Conrad's claim for disability benefits for three years while the former Army specialist was still alive. The denials had come despite supporting medical opinions from a series of doctors, including the VA's own oncologist.
  
  "We went through our savings and our retirement money. And then, after he died, they said they made a mistake and sent a check for $79,000," his widow, Linda Conrad, said in an interview at her home outside Phoenix.
  
  Home in foreclosure
  
  By the time the VA reversed itself, the family home was in foreclosure. Linda Conrad, who had quit her job as a paralegal to care for her husband during his last days, found her efforts to secure a new job thwarted by the recession.
  
  Yet, in an interview, VA officials deemed John Conrad's saga a success, because the more experienced claims processors who handled Conrad's claim after his death had the authority to reinterpret the medical evidence.
  
  "That's the way it's supposed to work," said Brad Flohr, assistant director for policy at the VA's compensation service.

For the story, see Veterans die awaiting pension benefits.

Phony 'Prescription Pooch' Claims Used To Dodge 'No Pet' Prohibitions In Residential Buildings Becoming More Flagrant? Some Say Yes

In New York City, Habitat Magazine reports:

• You no longer have the right to live in a no-dog building. People with allergies, people afraid of dogs, people who don’t like dog waste and urine on the sidewalk or loud barking, or even people who’d simply rather live without dogs — sorry, but your rights and preferences are meaningless.
  
  That, at least, is the message co-op and condo boards, attorneys, and others are taking from the plethora of people falsely claiming a disability to avoid pet prohibitions. Not physical disability or psychiatric disability, for which there are specially trained service dogs, but emotional disability — which no one can see, anyone can claim, and for which your friendly family doctor will write a note, no questions asked.
  
  “It’s ridiculous,” says attorney Adam Leitman Bailey, principal in his eponymous firm. “People get a notice to remove a dog, all of a sudden they get a doctor’s note. If you need a dog for support reasons, why would you go to a psychiatrist only after you get an eviction notice?”
  
  False claims of emotional disability are probably “happening more and more often,” agrees Jennifer L. Stewart, an attorney with Smith, Buss & Jacobs who has defended disabled clients. Indeed, she adds, “I’ve seen signs posted in pet stores: ‘Do you want a dog? Do you live in no-pet buildings? Here’s what you do.’ I was a little shocked at how flagrant that was.”

For more, see "Disability Dog" Scams: NYC Explains How to Tell Them from Legitimate Claims.

NYC Public Housing Tenants Living In 'Sandy'-Ravaged Buildings Lacking Heat, Hot Water Get Slapped With Eviction Notices

In New York City, the New York Daily News reports:

• Just days after Hurricane Sandy devastated public housing in Coney Island, the Housing Authority slapped eviction notices on apartment doors for nonpayment of rent, the Daily News has learned.
  
  At the time, tenants had been ordered to evacuate, and those who stuck around had no power, hot water, heat or elevators. Elderly tenants were trapped in upper floors where toilets didn’t function.
  
  “It’s really ridiculous,” said Edward Josephson, director of litigation for NYC Legal Services. “At the very time they were unable to send people out there to see if people were dying or not, they were able to send people to serve notice of evictions.”
  
  Nearly 80,000 tenants at 400 NYCHA buildings across the city were affected by the storm, with thousands in Coney Island, Red Hook and the Far Rockaways living in miserable conditions for weeks without basic services. Tenants at developments most severely damaged by the storm complained that for more than a week, NYCHA staff failed to show up to help or let them know when services would return.
  
  Yet a mere four days after Sandy struck, a NYCHA process server traipsed out to the devastated developments at Coney Island to go after tenants, plastering eviction notices on apartment doors in the Surfside Gardens Houses.

For more, see Just days after Hurricane Sandy, NYCHA tenants with no heat, hot water or power get eviction notices.

Foreclosure Buyer Coughs Up $5K In Damages To Tenant Over Abrupt Eviction In Violation Of Federal Law; Expiring Statute A Concern To Housing Advocates

In Miami, Florida, The Huffington Post reports:

• On a Thursday evening three years ago, Sandra McCutchen found an eviction notice stuck to the door of her Miami rental apartment. The following day, she was in court fighting to get it delayed. The day after that, officers from the Miami-Dade police department forcibly removed her from her home, along with her daughter and six grandchildren, dumping their possessions in the front yard.
  
  "They was at my door to throw me out, and that’s just what they did," says McCutchen, 55, who was then living in a public housing unit. "Grandkids in diapers crying, they threw everything on the lawn."
  
  McCutchen, a single mother, was a bona fide tenant. She had lived peaceably in the house on SW 114th Street for seven years. She was never behind on her rent. But now, unbeknownst to her, the house had fallen into foreclosure and authorities were insisting she move out immediately.
  
  A federal law enacted earlier that same year was designed to protect renters like McCutchen from this very situation. Under the Protecting Tenants Foreclosure Act (PTFA), renters living in homes that land in foreclosure are entitled to stay in their homes until their lease expires or, if they have no lease, for a minimum of 90 days. McCutchen's abrupt eviction, which she described as "an emotional roller coaster" that left her clinically depressed, was a violation of this federal policy.
  
  "You don’t give nobody no one day eviction notice, you know what I'm saying?" she said. "I ain't never heard of that nowhere in my world!"
  
  With the help of Jeffrey Hearne, advocacy director of the Florida-based Tenants’ Rights Project, McCutchen was awarded $5,000 to help cover the cost of damages incurred by the eviction. (Ruined property included a television set, mattresses, and living room furniture left out in the rain.) Hearne also helped her and her family get resituated in nearby public housing, a process that took months.
  
  The federal law that allowed McCutchen to win her case is set to expire in 2014, absent Congressional action, and if it does, experts warn America could see an uptick in homelessness.

***

• Larry Rosenthal, executive director of the Goldman School of Public Policy's program on Housing and Urban Policy, said the federal law's short-term status is cause for concern.
  
  "Does it represent a genuine threat?" said Rosenthal of PTFA's expiration date. "The answer is yeah. These specific protections that are now required under federal law would disappear, but," he cautioned, "that doesn't mean that tenants go into an utterly protectionless state. We'd have to look at the state where they live, and sometimes even the city where they live, to analyze what protections they have."
  
  State and municipal laws range from more protective than federal law -- in California, for instance, where rent control regimes have been coupled with a variety of eviction controls to prevent landlords from ousting longtime tenants and driving up rents -- to considerably less protective -- in Montana, for instance, where a fully compliant tenant can be evicted without cause within the month. In some jurisdictions, state and local laws have been interpreted to prevent eviction due solely to a foreclosure.(1)

For more, see Florida Grandmother, Renter Describes Foreclosure Eviction: 'Emotional Roller Coaster'.

(1) See National Housing Law Project: State and Local Tenant Protections for a roundup of additional state and local protections for tenants in foreclosure situations.

Clauses In Existing Mortgages Create Hang-Ups For Landowners Seeking To Cash In From Natural Gas Drilling Craze

In Youngstown, Ohio, the Youngstown Vindicator reports:

• Some landowners who have signed lease agreements with oil and gas companies are running into a problem based on mortgage-contract language.
  
  “A lot of these mortgages appear to contain clauses that would give the banks first dibs on any royalty income or even bonus payments,” said Tom Carey, an attorney for Harrington, Hoppe & Mitchell, Ltd., a Youngstown-based law firm.
  
  BP has been directing lessees to have this language in their mortgage and have their bank sign a subordination agreement before completing the lease, he said. The landowner typically has 60 days to get the bank to sign the agreement.
  
  “Some banks are willing to sign; others are requiring an application and a fee; others are just refusing to sign,” Carey said.
  
  The mortgages were made to people based on collateral and their ability to repay, he said. Oil and gas leases were not something that was being considered.
  
  “I think if someone receives a big lease bonus payment they would be more likely to repay,” Carey said. “We’ve even agreed to pay the bank the next year’s payments from the lease bonus, whatever it takes to move things along.”
  
  It would be understandable if the banks were stating that allowing drilling could make reselling a property difficult in the event of a foreclosure, especially if drilling is under way on the property, he said.
  
  “The deal is that in some cases, [bank employees] don’t want to take a chance,” Carey said.
  
  Banks with local branches have been easier to work with, but bigger problems have arisen when mortgages were sold to groups based outside the area, he said.
  
  “One person’s mortgage was sold to Fannie Mae, and trying to get a real person on the phone at Fannie Mae is impossible,” Carey said. “When we did get in touch with someone, they said he would have to fill out a form, pay $295, and it would take six weeks to get a decision.”
  
  The lessee has only 60 days to get the issue taken care of for the lease to proceed with BP, Carey added.
  
  The issue with the subordination agreements is due to mortgage language that was inserted into the contracts to protect the banks, said James Thurston, communications manager for the Ohio Bankers League.
  
  The goal was to protect the bank from damage that could come to the house through it being demolished, used for drug trafficking, or a number of other issues that would diminish the value, he said.
  
  “For example, if you have a $300,000 house and something is done on the property that creates a sinkhole next to it, the property is now worth zero,” Thurston said. “A lot of these mortgages were written by small community banks that couldn’t afford to inspect each and every one of these 500 to 600 properties they have on the books, so they had to protect themselves through contract language.”
  
  The contract language has nothing to do with oil and gas development, but those lease agreements have gotten caught up in the general-protection language, he said.
  
  Banks have to take precautions in contract language because “if we don’t, we’ll get spanked by our regulators,” said Rod Alba, general counsel for the American Bankers Association.
  
  Mortgages have to contain clauses to ensure there will be nothing done to the property that makes it impossible for the bank to recoup its investment during a sale, he said.
  
  Banks have to be cautious because it’s not about what the perceived value of the property is, but what the market will pay for it, Alba said.
  
  Carey said he is not sure how widespread of a problem the subordination agreements are, but has seen 15 to 20 people come to his firm with the issue.

Source: Mortgage language delaying some oil and gas leases.