Saturday, February 9, 2013

Foreclosed Homeowner Jailed On $1.5M Bond For Allegedly Torching Former Home In Blaze That Severely Injured First Responder

In Stuart, Florida, TC Palm reports:

  • A judge Friday refused to lower the $1.5 million bond that's holding a Lake Park man accused of torching a home he lost to foreclosure and critically injuring a firefighter who fought the blaze.

    Joseph Edward Haas, 47, remained at the Martin County jail after a brief appearance in court to face charges of arson, grand theft and arson resulting in injury. "I didn't burn the house down intentionally," Haas said Thursday in handcuffs as Martin County sheriff's deputies took him into custody.

    Investigators say on Dec. 27, Haas went to his former home at 1151 S.W. Blue Water Way, doused it with gasoline and set it on fire. His motive, authorities have said, was to prevent anyone else from living in the western Martin County home he built that was taken by the bank in a foreclosure action.

    The blaze severely burned Martin County firefighter Jahwann McIntyre, who remains hospitalized, and injured two other firefighters.

    Chief Assistant State Prosecutor Tom Bakkedahl on Friday said given the extent of McIntyre's injuries, Haas could have faced a murder charge instead of arson. "But for the heroic efforts of two of this young man's co-workers, he was probably seconds away from losing his life and this guy (Haas) would be facing the death penalty today," Bakkedahl said. "That's how severe this case is, and we'll go forward from there."

    Haas' public defender on Friday argued that his client's bond was "excessive," but a judge declined to lower the amount.

    In court, Haas said he has lived in Martin County for nine years, but resides in Lake Park. He said he is unemployed, and his only assets are the $2.20 in his bank account and his Ford Ranger truck. Bakkedahl though, said authorities seized Haas' truck following his arrest.

    Sheriff's reports show Aaron Grosko, who lived at the torched home with Haas' daughter, told investigators Joseph Haas was upset the house was being lost in a foreclosure and that he would "burn his house down" before Haas let the bank or anyone else take it.

    Haas' former girlfriend April Finch on Friday told WPTV NewsChannel 5 she dated Haas for 8 months and they lived together at the house for months before their relationship soured. When she learned of the fire, she said her first thought was of Haas.

    "I thought of him, because he made that comment all of the time: 'If I can't have this house, nobody will,'" Finch told WPTV.

County Seeks To Snatch Cleveland Resident's Mortgage-Free Home For Missing Payment Deadline On Back-Tax Installment Remittance By One Day

In Cleveland, Ohio, Newschannel 5 reports:

  • Ronald Hasinski owns his Cleveland home free and clear, but confusion over a delinquent property tax bill has sent his home into foreclosure, and to a Feb. 11 sheriff's sale.

    Hasinski told NewsChannel5 he arranged a payment plan with the Cuyahoga County Treasure's Office to make up for the $5,800 he owes in back property taxes. But Hasinski said everything went wrong when he was just one day late on one of the $152 payments. A notice from the treasure's office said he would be losing his home. The notice sent to Hasinski included a bill, but did not include how much he was to pay to get current with his payments.

    "I'm just devastated. I'd cry but the tears haven't sunk in yet," said Hasinski. "I've put a lot of money into this house and now I'm told it's being sold to the highest bidder."

    Hansinki claims he contacted the treasure's office several times, but said he couldn't get any answers about the confusing tax bill, or how he could save his home. Hansinski called on the NewsChannel5 Troubleshooter Unit and Cleveland Councilwoman Dona Brady.

    Brady contacted the treasure's office about Hansinki's case, promising it would conduct a full investigation within the next 24 hours. "Why would he receive a bill that says don't pay anything and you're going into foreclosure? It doesn't make any sense," said Brady. "We do not want another foreclosed home but, more importantly, we don't want Mr. Hasinski out on the streets."
For more, see Cleveland man could lose home after being one day late on delinquent property tax payment (Councilwoman Dona Brady: tax bill was confusing).

Convicted Low-Level Rent Scammer Pinched Again For Allegedly Ripping Off Prospective Tenant Out Of Upfront Lease Deposit On Home Facing Foreclosure

In Tamarac, Florida, the South Florida Sun Sentinel reports:

  • An elderly couple turned to Craigslist to find a room to rent for an adult handicapped daughter, and discovered a Tamarac residence that was being leased by Wendy Richland. They paid Richland a $50 check and art worth $325 as a deposit, the Broward Sheriff's Office says, and the tenant was to move in to the home on the 8500 block of Northwest 83rd Street on Dec. 3.

    But on Dec. 1, Richland, 57, who lived in Boca Raton and had cashed the check, told the couple the deal was off, the Broward Sheriff's Office says. She declined to return the cash and claimed the art was a gift.

    Broward Sheriff's Detective Monica Jean arrested Richland on Jan. 2, and charged her with larceny of less than $10,000 from a person 65 or older, and violation of probation. Jean hopes to hear from others who may have attempted to rent the property.

    Richland's attorneys from previous court cases could not be reached for comment. She has served brief prison terms for forgery and grand theft convictions, a Florida Department of Corrections spokeswoman said.

    In 2009, Jean arrested Richland and charged her with two counts of grand theft for taking rent deposits for the Tamarac property of $2,400 and $1,800 from two women.

    One of the victims found other tenants unpacking boxes before she could move in, and Richland told the second woman that she changed her mind and wasn't renting the house to her, according to complaint affidavits.

    In those cases, Richland received probation after pleading no contest, according to Broward County online court records.

    Richland's Tamarac property is in foreclosure, county records show. Jean asks anyone with information to call 954-720-2298.
Source: Tamarac landlord accused of cheating prospective tenants (Broward Sheriff's detective seeks other victims).

Friday, February 8, 2013

Another Elderly Couple Gets Screwed Over By Reverse Mortgage Peddlers; Now-Widowed 91-Year Old Faces The Boot From Family Home After Being Unwittingly 'Deleted' From Loan, Title Documents

Real estate columnist Kenneth Harney writes:

  • The federal Department of Housing and Urban Development has a birthday gift for widow Jeanette Ogle that should cause any senior to think twice before signing up for a government-insured reverse mortgage.

    Later this month, on Ogle’s 92nd birthday, her home in Lake Havasu City, Ariz., is scheduled for foreclosure — not because she did something wrong. Instead, she is expected to lose her house because during a refinancing in 2007, only her husband’s name was included on the reverse mortgage documents prepared by a loan broker. This was despite the fact that both her husband’s and her names were clearly listed as co-borrowers in the documents for the mortgage being refinanced, Ogle says, and the longtime married couple wanted no change in that status.

    But under a controversial policy that is drawing national scrutiny and at least one major lawsuit, HUD — the agency that runs the reverse mortgage program — now insists that when a spouse dies, and the surviving spouse’s name is not on the loan documents, the full mortgage balance becomes due and payable. If a relative or the surviving spouse cannot purchase the house and pay off the debt, the loan may be subject to a foreclosure sale.

    Ogle, whose husband, John, died in 2010, says she cannot imagine why she is facing foreclosure. “We did everything we were supposed to do,” she says. “I signed every piece of paper, we followed the rules.” Jeanette and John assumed that the loan they initially took out in 2004 would allow them to do what advertisements for reverse mortgages consistently promise: stay in their home indefinitely, with some extra money for living expenses.

    But it’s not turning out that way.

    “I just don’t understand why they are doing this to me,” she said in an interview. “I don’t want to lose my home.”

    HUD’s reverse mortgage program, run through the Federal Housing Administration, has been big business. Promoted on TV by pitchmen such as Hollywood’s Robert Wagner and former Sen. Fred Thompson, there were 582,000 loans outstanding nationwide as of November 2011, according to the Consumer Financial Protection Bureau, which issued a critical evaluation of the program last year.

    Reverse mortgages are restricted to seniors 62 years or older. The program allows homeowners to tap into equity and pull out money for use in their retirement years. As long as they pay their property taxes and hazard insurance, generally they don’t have to repay any of the money until they move out, die or sell the house.

    The policy change on surviving spouses that has snagged Jeanette Ogle was not adopted until late 2008, more than a year after the Ogles’ refinancing. That change has been challenged in a federal lawsuit filed by AARP, the seniors advocacy group.

    On behalf of two widows and one widower — Ogle was not a plaintiff — who were threatened with foreclosure, AARP charged that HUD disregarded clear statutory language that allows surviving spouses to remain in their homes even if their name is not on the documents. In an appellate court ruling last month, U.S. Circuit Judge Laurence Silberman said that the court was “somewhat puzzled as to how HUD can justify a regulation that seems contrary to the governing statute.”(1)

    HUD had no comment on that ruling, which sent the case back to a lower court, and refused to discuss Ogle’s pending foreclosure. So did Ogle’s loan servicer, Reverse Mortgage Solutions of Spring, Texas, which initiated the foreclosure action. Fannie Mae, the federally regulated mortgage investor that owns Ogle’s loan, said the foreclosure would have to proceed because the mortgage is insured by FHA and that agency’s rules effectively require it, given the absence of Ogle’s name on the documents.

    Andrew Wilson, a Fannie Mae spokesman, says the company has a document purportedly signed by the Ogles acknowledging that their refinanced mortgage lists only John Ogle as the borrower. Jeanette Ogle says she has no recollection of signing anything of the sort. “Why would we?” she asked in an interview. Wilson says that whatever the facts, Fannie Mae is “sympathetic” toward Ogle’s plight, and will seek to delay any post-foreclosure eviction.

    Jean Constantine-Davis, AARP’s senior attorney on the surviving spouse suit, called Ogle’s circumstances “pretty horrible,” and said HUD’s “current regulation has been devastating on surviving spouses.” AARP’s suit alleged that there are “hundreds” of elderly victims of the policy.

    Ogle’s son, Robert, has asked the Arizona state Attorney General’s Office to intervene and investigate how his mother’s name was left off the mortgage. But in the meantime, the clock is ticking toward Jeanette Ogle’s foreclosure. And her 92nd birthday.

Newark Feds Bag Nine In Alleged Mortgage Fraud Racket Involving Short Sale 'Flips'

From the Office of the U.S. Attorney (Newark, New Jersey):

  • Nine people involved in a long-running, large-scale mortgage fraud scheme that caused losses of approximately $10 million were charged in two Complaints with conspiracy to commit bank fraud, U.S. Attorney Paul J. Fishman announced.

    Jose Luis Salguero Bedoya, also known as Jose Salguero, 36, of Elizabeth and Verona, N.J.; Paul Chemidlin, Jr., 41, of Morganville, N.J.; Delio Coutinho, 50, of Colonia, N.J.; Joseph DiValli, 44, of Jackson, N.J.; Christopher Ju, 26, of East Brunswick, N.J.; Carmine Fusco, 44, of East Hanover, N.J.; Jose Martins, 31, of Newark, N.J.; Yazmin Soto-Cruz, also known as Yazmin Soto, 32, of Elizabeth, N.J.; and Kenneth Sweetman, 32, of Lyndhurst and Nutley, N.J., were arrested this morning by FBI special agents.
  • According to the Complaints:

    From March 2008 to July 2012, the defendants engaged in multiple mortgage fraud conspiracies targeting at least 15 properties in and around Newark and Elizabeth, N.J. The defendants mortgage frauds took several forms, including obtaining control of properties through fraudulent “short sale” transactions, short sale flips, and identity theft. They submitted materially false mortgage loan documents to lenders in order to obtain loan proceeds, which the defendants then used for their own financial gain. The defendants also obtained money through various sales to straw buyers.

    From March 2008 to June 2010, Salguero, Coutinho, Ju, and Soto conspired with each other and others to release liens on encumbered properties via fraudulently arranged short sale transactions. This allowed the defendants to profit from new fraudulent mortgage loans obtained on the properties from other mortgage lenders.

    To complete the short sale transactions, the defendants submitted materially false closing and other documents to mortgage lenders. They submitted materially false mortgage loan applications to mortgage lenders to obtain new mortgage loans on properties in and around Elizabeth, New Jersey, including a property on Fulton Street.
For the U.S. Attorney press release, see Nine Charged In $10 Million Mortgage Fraud Scheme.

Widow Files Wrongful Death Suit Against Local Sheriff, Others In Connection With Shooting Death Of Locksmith/Hubby During Forcible Eviction Of Occupant In Foreclosed Apartment

In Fresno, California, Courthouse News Service reports:

  • A widow's husband was killed because the sheriff sent him to drill open the door of a heavily armed, deranged man, who shot him to death during a forcible eviction, the widow claims in court.

    Irina Engert sued Stanislaus County, Sheriff Adam Christianson, three of his officers, and RT Financial, the owner of the apartment where Jim Ferrario, 45, lived. Engert's husband, Glendon, was shot to death on April 12, 2012, by Ferrario, who "had been subject to foreclosure proceedings since January 2012," according to the federal complaint.

    The complaint states: "On April 12, 2012, the Stanislaus Sheriffs' Office sent a young civilian locksmith, Glendon Engert, into a situation the sheriffs knew was dangerous and life-threatening.

    Mr. Engert was hired to accompany two sheriffs deputies to assist in an eviction by drilling open the door lock of a residence inhabited by a man known to sheriffs as being mentally disordered, who possessed a cache of weapons, including high-powered automatic military-style rifles, and who had military training, with surveillance cameras mounted inside and outside the residence, who had threatened others in the past, and who was a clear and present danger to himself and anyone who approached him.

    The sheriffs, as well as the property owner, gave no warning to Mr. Engert about the danger in which they were placing him, did nothing to protect him, and failed to take alternative measures that could have kept him out of harm's way."
  • Irina Engert seeks punitive damages for wrongful death, negligence, civil rights violations, and municipal liability.

Thursday, February 7, 2013

'Stay Out Of Idaho!' Says State Regulator To S. Florida Lawyer Peddling Participations In 'Mass Joinder' Lawsuit Against Lenders Alleging Deceptive Foreclosure, Lending Practices

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

  • A North Palm Beach law firm was ordered by the State of Idaho to stop soliciting residents to join a foreclosure-related lawsuit that allegedly required them to pay thousands of dollars in up-front fees and monthly payments.

    The Residential Litigation Group was given a cease and desist order by the Idaho Department of Finance after an investigation that included a department employee posing as a prospective client. The company also has a complaint against it filed with the Florida Attorney General from a New Jersey resident who said he paid $1,000 after getting information from the group in the mail.

    The firm changed its name to the Hoffman Law Group in November, according to Florida Department of State records. Its managing partner, attorney Marc H. Hoffman, is under investigation by the Florida Bar for sending out misleading mailings. Hoffman could not be reached for comment Tuesday.

    In the Idaho order, the Residential Litigation Group is accused of violating the state’s Financial Fraud Prevention Act by sending “confusing, misleading, and deceptive” information to the public in documents that purport to be a “litigation notification” but are actually an advertisement.

    A website for the group says it is suing the nation’s biggest banks and lenders for fraudulent use of paperwork in foreclosures, deceptive mortgage modification practices and deceptive loan practices. A copy of a lawsuit with the names of hundreds of defendants filed in Kings County New York on Dec. 5 is posted on the website.

    When a representative from the Idaho Department of Finance called to ask about the lawsuit, she was told it would cost a retainer fee of $6,000 to join, which would be refunded after the lawsuit is settled, and a monthly fee of $450.

Post-Foreclosure 'Eviction Rescue' Services The Latest In Schemes Designed To Squeeze Cash From Beleaguered Homeowners

In Sacramento, California, KOVR-TV Channel 13 reports:

  • Just about everyone knows a family affected by foreclosure. A West Sacramento homeowner called Kurtis, after a company swooped in, just hours after her home was foreclosed, promising to keep her in her home longer.

    We’re told it’s a common M.O.; companies claiming to “guarantee” you more time in your home, before being forced out. Our viewer didn’t buy it, and she wondered: is this even legal?

    Seventy-seven-year-old Helena Helmold is packing up everything and preparing to move. “I’ve got my son’s little memorial outside,” said Helmold.

    She’s forced to leave behind 25 years of memories after the bank foreclosed on her home. But the day her home sold on the courthouse steps, a company named Eviction Rescue came calling.

    “And she says, ‘Well we can fix it so that you can stay there at least five months and maybe longer,’” said Helmold.

    They sent emails asking for $395 up front and $395 a month for their services. The company “guarantees” five or more months in the home and tells her to not answer a summons to court.

    “They know that you’re kind of like, in shock or whatever and then they’re going to jump right on you and take your money,” said Helmold. She didn’t pay them any money, but showed the emails to Legal Services of Northern California.(1)

    “Unfortunately, a lot people come to me after they’ve already paid thousands of dollars,” said LSNC Staff Attorney Salma Enan. Enan has helped Helmold file complaints with several agencies claiming what they’re doing is illegal.

    “It is definitely misrepresentation, fraud and unfair and deceptive business practice to guarantee something that you truly can’t guarantee,” said Enan.

    One state agency has already taken action. After the State Bar learned about Eviction Rescue’s advice for Helmold, they determined it’s unauthorized practice of law and ordered the company to cease and desist.

    We asked Eviction Rescue how they can guarantee customers five or more months in homes that have already been foreclosed.

    They told us, “Effective January 1, 2013, Eviction Rescue does not offer any guarantee for 5 or more months eviction delay. While we have been quite successful in obtaining this time, there are absolutely no guarantees…”

    Really? Because a screen shot of the company’s website on January 23rd clearly states they “guarantee 5-7 more months before you have to move out.”

    Helmold saved a couple thousand dollars by not paying eviction rescue, but she’ll still have to move. “I wish I’d have been a little bit more observant a few years ago when I first got a couple of these loans,” said Helmold.

    Legal Services of Northern California helped her stay in her home for a few extra months. Helmold was living there with a tenant. Under federal law, month-to-month tenants have at least 90 days before eviction.

    California law prohibits companies offering loan modifications from taking payments up front. But, this company doesn’t do modifications. they do eviction rescues, which the law doesn’t address.
For more, see Call Kurtis: Foreclosed Homeowner Guaranteed Months More In Home; Is That Possible?

(1) Legal Services of Northern California is a non-profit law firm providing legal services on behalf of low-income individuals and families in northern California.

Man Linked To Now-Defunct Loan Modification Outfit Shut Down By State Of Georgia Opens Up Shop Under New Name

In Atlanta, Georgia, CBS Atlanta Channel 46 reports:

  • Some consumers told CBS Atlanta News they paid NAARI Housing Counseling Agency to save their homes from foreclosure, but they never got any help.

    CBS Atlanta News tracked down NAARI's former director of operations Monday.

    A tip led CBS Atlanta News to his new company on Buckeye Road in Atlanta called All American Home Assistance Services. CBS Atlanta News asked NAARI's former director if he'd resolved all issues over at NAARI since consumers are still complaining.

    "NAARI filed Chapter 7 bankruptcy and they went through the court process and that was that with them," former NAARI Director of Operations Derek Harris said.

    Harris said he is no longer affiliated with NAARI.

    This was after the Georgia Department of Banking and Finance ordered the business to stop operating when they discovered the company was involved in mortgage brokering and lending without a license.

    Harris insisted that All American Home Assistance Services is operating legally.

    "We do counseling only. We do not talk with the bank, we do not negotiate with the bank. We just work with the homeowner and what to say to the bank and how to handle them."

    So what do former NAARI customers like Magrieta Segers do? She said she paid NAARI $1,500 to save her home from foreclosure, but she never received assistance.

    Now All American Assistance Services has offered to provide counseling.

    CBS Atlanta News asked Harris how customers can trust that he's operating legally this time.

    "Well because NAARI was talking to the bank. They had processes of talking to the bank. We don't have that process. We just counsel the homeowner and the homeowner talks to the bank only," Harris said.
Source: NAARI's former director of operations opens shop under new name.

In a related story, see Woman claims she was scammed by local foreclosure assistance company:
  • CBS Atlanta News began investigating NAARI Housing Counseling Agency in Tucker on Friday after a local woman said she paid the company $1,500 to help her save her home from foreclosure, but didn't get what she paid for.

Wednesday, February 6, 2013

L.A. Feds Indict Pair In Alleged Mortgage Elimination Scam Based On Sovereign Citizen Arguments

In Los Angeles, California, the Inland Valley Daily Bulletin reports:

  • In at early morning raid at a Cello Drive home, FBI agents Wednesday arrested a Diamond Bar man in connection with a scheme that allegedly defrauded as many as 400 people who paid into a mortgage debt elimination scheme, officials said.

    Jude Lopez was taken into custody without incident, FBI spokeswoman Laura Eimiller said. [...] A woman, identified as Marcela Gonzalez, was also indicted by authorities in connection with the mortgage debt elimination scheme. She is suspected of six counts of mail fraud, Eimiller said.

    "Investigators believe approximately 400 clients were defrauded of approximately $5 million over approximately two years," Eimiller said. "(The) defendants allegedly pitched a `sovereign citizen' argument to homeowners, suggesting that the original liens were invalid."
  • Court documents indicate the FBI, the Montebello Police Department and the Los Angeles Police Department were involved in the investigation. The U.S. Attorney's Office asked that Lopez be held as a flight risk, according to court documents.

    Prosecutors allege that Lopez, working on behalf of a company identified as Crown Point, filed bankruptcy paperwork for Crown Point clients. The paperwork was intended to delay foreclosure proceedings, officials said.

    "From at least in or about September 2010, through in or about May 2012, defendant Lopez who was not a lawyer prepared and filed, and caused to be prepared and filed, legal papers including ... bankruptcy petitions on behalf of clients in order to delay foreclosure and eviction actions."

    The complaints alleges that in some cases Lopez filed paperwork without the client's knowledge. Some of the petitions contained forged signatures, according to court documents.

California AG-Led Joint Probe Bags Three In 'Mortgage Killer' Upfront Fee Debt Elimination Racket

From the Office of the California Attorney General:

  • Attorney General Kamala D. Harris [] announced the arrest of three suspects who have been charged in a mortgage fraud scheme targeting struggling Northern California homeowners. Six websites allegedly used by the suspects to advertise their scheme have been intercepted and redirected to a resource page on the California Attorney General’s website.

    The felony complaint alleges that Ronald Vernon Cupp, 58, of Santa Rosa, deceived homeowners by falsely advertising a way to “kill” their mortgage debt on six websites including

    Cupp was assisted by Randall Gilbert Heyden, 69, of San Rafael, and Angelle Wertz, 38, of Santa Rosa, a public notary who allegedly certified phony legal documents. Cupp allegedly recorded fraudulent documents, which would only delay a foreclosure, not actually satisfy the preexisting mortgage debt.
  • Cupp, Heyden and Wertz are charged in a 57-count complaint alleging theft, forgery, notary fraud and recording of false documents. They were booked at the Sonoma County Jail on Wednesday, January 23. Cupp and Heyden are being held with bail set at $500,000 and $75,000 respectively. Wertz was released but ordered to appear for arraignment on Friday, January 25.

    Through Cupp’s business, North Bay Trust Services, homeowners would often allegedly pay upfront fees of between $1,000 and $10,000 and sign a promissory note or new mortgage for a phony offer to eliminate their mortgage debt. Requiring up-front fees is illegal in California.

    The suspects would then allegedly record fraudulent documentation purporting to be the attorney for the homeowner’s actual lender and then relinquish the mortgage and record a new deed of trust in favor of North Bay Trust Services. The debt to the original lender was never actually satisfied.
  • The arrests were a result of a joint investigation by the California Department of Justice Mortgage Fraud Strike Force, Northern California Computer Crimes Task Force, Marin County District Attorney’s office, Sonoma County District Attorney’s Office and Santa Rosa Police Department.
For the California AG press release, see Attorney General Kamala D. Harris Announces Arrests in ‘We Kill Your Mortgage’ Scheme; Seizure of Fraudulent Websites.

For the formal felony charges, see People v. Cupp, et al.

(1) The websites that were shut down are:
These pages have been redirected to the California Attorney General’s website ( where individuals are able to file an online complaint form if they believe they may have been the victim of the scheme.

Extradited Scammer Who Admitted Peddling Bogus Multi-Level Early Mortgage Payoff Scheme Gets 100 Months

From the Office of the U.S. Attorney (Las Vegas, Nevada):

  • A former resident of Las Vegas who defrauded 17 individuals of almost $1.5 million in an investment fraud and marketing scheme involving early mortgage payoffs, was sentenced [] to just over eight years in prison for his guilty pleas to fraud and tax evasion charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

    “Mr. Maharaj repeatedly solicited victims through fraud and deception knowing that they would never receive the monetary rewards he pitched,” said U.S. Attorney Bogden. “Although he tried to avoid facing the reality of a conviction by fleeing to Fiji and causing the United States to extradite him, he was eventually brought to justice and will spend much of the next decade behind bars.”

    Aneal Maharaj, 65, currently in custody, was sentenced by U.S. District Judge James C. Mahan to 100 months in prison, five years of supervised release, and ordered to pay $1,473,111 in restitution. Maharaj received a greater sentence because of the significant loss amount and number of victims, and because he obstructed justice by failing to appear for trial in the case and fled to Fiji to avoid prosecution. Maharaj pleaded guilty on Oct. 18, 2012, to one count of mail fraud, two counts of wire fraud, one count of tax evasion, six counts of bank fraud, and one count of making a false declaration in a bankruptcy petition.

    Beginning in about 1990 and continuing to about October 2004, Maharaj operated a multi-level marketing program from Las Vegas wherein he promised persons that they could pay off a 30-year mortgage in five years or less by investing and becoming franchise owners in a business he called “PowerNet Marketing Systems,” and a “home loan plan” he called Systematic Mortgage Amortization Reduction Technology (SMART).

    The system required the investors to recruit additional persons into the program, which Maharaj told them would entitle them to substantial commissions and income. Maharaj knew that no individual had ever paid off a 30-year mortgage in five years or less using the SMART plan, and that he had no intention of paying the commissions and income to the participants.

    At least 17 individuals each invested a minimum of $25,000 and up to $500,000 with Maharaj to become franchise owners in his fraudulent marketing program. The plea agreement states that Maharaj convinced one victim to sign over his interest in his $100,000 life insurance benefit.

Tuesday, February 5, 2013

Recent California High Court Decision Involving Loan Modifications Resets State Law On Parol Evidence When Trying To Establish Fraud When Entering Into Written Contracts

In Fresno, California, The Business Journal reports:

  • It’s rare that a legal case originating in the San Joaquin Valley makes it as far as the state Supreme Court. It’s even more rare that the case sets a precedent changing a decades-old law for years to come.(1)

    That’s exactly what happened this month when the seven-judge Supreme Court of California ruled in favor of limiting fraud liability in contract cases and overturning a provision that has protected defendants for the last 78 years.

    At issue was an agreement signed between River Island Cold Storage of Dinuba and the company’s lenders, the Fresno-Madera Production Credit Association, to restructure more than $775,000 in debt.

    According to the deal inked in March 2007, Lance and Pamela Workman, who own River Island Cold Storage, agreed make specified payments and a pledge of eight separate parcels of land as additional collateral. In return, the credit association promised it would take no enforcement action on the debt for three months.

    Although the Workmans failed to make the required payments as stated in the written agreement, they claimed the association’s vice president approached them prior to its signing and modified the deal.

    Under that oral agreement, which was highly contested in court for the next four years, the couple believed their loan was extended for two years in exchange for additional collateral consisting of two ranches.

    Keeping in step with the written agreement’s terms, the association recorded a notice of default after the company failed to make the required payments within the three-month forbearance.

    Although eventually paying off their debt and avoiding foreclosure proceedings, the Workmans later filed suit, seeking damages for fraud and negligent misrepresentation, and including causes of action for rescission and reformation of restructuring the agreement.

    What followed was a legal can of worms that hasn’t properly been reopened for several decades...
For more, see State Supreme Court resets precedent with local case.

For an earlier post on this case, see California Supremes: Oral Promises Not Appearing In Written Contract Admissible In Court When Trying To Prove Bankster Fraudulently Tricked Borrower Into Signing Agreement.

(1) Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association, S190581 (January 14, 2013).

In actuality, this case dosesn't create new precedent, it merely resets the law back to the pre-1935 precedent, prior to the state high court ruling in Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263 ("Pendergrass"), a ruling that apparently sidetracked California law for the last 75+ years. From the recent ruling:
  • Plaintiffs, who prevailed below, not only defend the Court of Appeal's holding but, alternatively, invite us to reconsider Pendergrass. There are good reasons for doing so.

    The Pendergrass limitation finds no support in the language of the statute codifying the parol evidence rule and the exception for evidence of fraud. It is difficult to apply.

    It conflicts with the doctrine of the Restatements, most treatises, and the majority of our sister-state jurisdictions. Furthermore, while intended to prevent fraud, the rule established in Pendergrass may actually provide a shield for fraudulent conduct.

    Finally, Pendergrass departed from established California law at the time it was decided, and neither acknowledged nor justified the abrogation.

    We now conclude that Pendergrass was ill-considered, and should be overruled. stare decisis

Colo. Appeals Ct: OK For Title Insurer To Thwart Undisclosed Mortgage Holder's F'closure Attempt, Stiff It On Claim Where Payoff Funds Were Properly Paid To Authorized Servicing Agent Who Subsequently Stole The Cash; Insurer's Failure To Obtain Note, Lien Release At Closing Not Fatal

Colorado attorny Jim Flynn writes in the Colorado Springs Gazette:

  • Title insurance is a unique insurance product in that the insurance company has almost total control over the risks it insures. This is because what the title insurance company insures is the accuracy of its own search of the public records and the correctness of the closing services it provides.

    Contrast this to the company that insures, say, your car. There the insurance company has no control over people crashing into you, rocks flying through your windshield, carjackings, etc.)

    Although claims under title insurance policies are rare, when they occur, the cost of the insurance will prove to have been money well spent. A case decided in 2011 by the Colorado Court of Appeals demonstrates the point.(1)

    In this case, Brenda Armijo purchased a house from Kimberly Poladsky. Poladsky had a mortgage on the property that needed to be paid off at the closing. The mortgage was owned by a company called Dakota Lending. However, Dakota Lending had borrowed money from Citywide Bank and had used Poladsky’s mortgage as collateral for this loan. Therefore, the original of the promissory note Poladsky had signed was not held by Dakota Lending; it was locked up in a drawer at Citywide Bank.

    Dakota Lending nonetheless continued to collect the payments on the Poladsky mortgage. And Citywide had not filed anything in the real estate records showing it had an interest in this mortgage.

    At the closing of the sale from Poladsky to Armijo, Armijo paid the purchase price to the title insurance company. The title insurance company in turn paid Dakota Lending the amount still owing on the Poladsky mortgage. Dakota Lending should then have paid Citywide, obtained the original promissory note, marked the note paid and sent the note on to the title insurance company so the Poladsky mortgage could be released. Instead, Dakota Lending’s owner stole the money.

    Since Citywide hadn’t been paid and still had the original Poladsky note, it started a foreclosure against Armijo’s property. Armijo thereupon filed a claim under her title insurance policy and said: “Fix this please.” The title insurance company dutifully went into action to stop the foreclosure and Armijo’s problem was over.

    But the title insurance company’s legal work had just begun.

    The title insurance company could have simply paid Citywide what it was owed. However, its position was that Dakota Lending had acted as Citywide’s agent when it collected the payoff for the Poladsky mortgage. And a payment to an agent constitutes a payment to the principal.

    Thus, the title insurance company argued, Citywide had been paid and had no right to foreclose. The fact that its agent stole the money was Citywide’s problem, not the title insurance company’s problem. Citywide argued that, since it still had possession of the original Poladsky note, it should be protected from Dakota Lending’s fraud and it should be able to foreclose.

    Both the trial court and the Court of Appeals sided with the title insurance company and concluded that possession of an original promissory note, once a sacred concept in the law, didn’t count for much in this circumstance and the title insurance company had no duty to obtain possession of the original note before giving the mortgage payoff to Dakota Lending.

    Citywide still has a claim against the thief, but good luck with that. Since he’s in prison, his current income is quite limited.
Source: Money & the Law: The role of title insurance.

For the Colorado appeals court ruling, see Citywide Banks v. Armijo, ___ P.3d ___ (Colo. App. 10CA1458, Oct. 13, 2011) (principal may be bound by agent's actions if agent acts pursuant to either actual   or apparent authority).

(1) The background facts of the case, lifted from the appeals court ruling, are set forth below:
  • In 2003, Dakota Lending, LLC (Dakota) executed a promissory note to Bank in exchange for a revolving line of credit that allowed Dakota to borrow up to $4 million. Dakota used this line of credit to finance its business of buying, selling, and holding real estate mortgages. As security for Dakota's revolving line of credit, Bank took assignments of the promissory notes and deeds of trust that Dakota financed or acquired in its course of business.

    In 2007, Kimberly Poladsky and RE Services, LLC (collectively, RE Services) executed a promissory note (Note) payable to Jaguar Mortgage Company. The Note was secured by a deed of trust that encumbered the property at issue here. After a series of transfers Dakota acquired the Note. Dakota then assigned all of its rights and interest in the Note and accompanying deed of trust to Bank. While Bank held the Note, it allowed Dakota to service the loan and to retain for itself periodic payments made on the Note.

    In 2008, RE Services sold the property to Armijo. Title insurance was purchased from Stewart Title, which conducted the closing of the transaction. Stewart Title obtained a payoff statement from Dakota. At closing, Armijo tendered the purchase price, and Stewart Title accepted those funds as closing agent.

    Stewart Title did not demand production of the Note at closing, and did not attempt to determine the identity of the Note holder.

    Bank alleges that Stewart Title also failed to obtain a release of the deed of trust at closing.

    Stewart Title issued a check payable to Dakota for the amount listed on the payoff statement. However, Dakota never tendered the payoff funds to Bank.

    Dakota is now defunct and its managers are under criminal indictment. Bank, which still holds the Note, has declared the Note to be in default.

    Bank brought this action against Armijo to foreclose its lien on the property based on the unpaid Note balance. After a bench trial, the trial court, in a detailed and well-reasoned order, determined that Dakota was Bank's agent and had authority to receive the payoff of the Note. It therefore concluded that Bank was not entitled to foreclose on the property.

Philly Federal Judge Invokes 'Rooker-Feldman' To Boot Homeowner's F'closure Evict Challenge; Says Suit Appears To Be Improper Attempt To Invite Federal Court Review Of State Court Judgment

In Philadelphia, Pennsylvania, The Pennsylvania Record reports:

  • A U.S. District Court judge has refused to review a federal case initiated by a Philadelphia man against the city’s sheriff, acting sheriff and the attorneys who had represented a loan services company involved in an underlying case that arose from the foreclosure and subsequent ejectment of the man’s property.

    In his federal complaint, Omar Jamaladdin asserted that the federal court has jurisdiction over his case, citing various federal statutes and constitutional amendments that were allegedly violated through the defendants’ actions.

    Judge Thomas N. O’Neill, Jr., of the Eastern District of Pennsylvania, however, noted in a Jan. 29 memorandum that it appears as though the plaintiff is seeking to have the federal court review the propriety of a state court ejectment action, which the jurist stated is barred by the Rooker-Feldman doctrine that says a district court lacks subject matter jurisdiction to conduct a review in this type of case.

    “Stated another way, the Rooker-Feldman doctrine bars claims where entertaining the federal claim would be the equivalent of appellate review of the state court Order,” O’Neill wrote.(1)
  • The two lawyers had represented Aurora Loan Services in its mortgage foreclosure action filed against Jamaladdin, the plaintiff in this case, back in September 2010, the court docket sheet in the state case shows.

    The record further shows that in mid-November of this year, Philadelphia Common Pleas Court Judge Idee C. Fox denied a motion by Jamaladdin to vacate the judgment.

    In dismissing the federal action with prejudice, O’Neill wrote that it is apparent from reading the complaint that it is “nothing more than an improper attempt by plaintiff to avoid the judgment of eviction rendered by the Court of Common Pleas of Philadelphia County.” O’Neill’s ruling comes after the defendants in the federal action all filed motions for dismissal.
For the story, see Federal judge refuses to review state court action arising from foreclosure and ejectment.

For the ruling, see Jamaladdin v Dietterick, No.12-4686 (January 29, 2013).

For prior posts applying the Rooker-Feldman doctrine in foreclosure cases, see:
(1) The Rooker-Feldman doctrine applies to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005); see also In re Madera, 586 F.3d 228, 232 (3d Cir. 2009) ("The Rooker-Feldman doctrine is implicated when, in order to grant the federal plaintiff the relief sought, the federal court must determine that the state court judgment was erroneously entered or must take action that would render that judgment ineffectual.").

Trial Pressure Forces Accused Scammers To Cop Guilty Pleas After Testimony Begins In Mortgage Fraud Case That Included Ripping Off Unwitting Lenders, Underwater Homeowners By Profiting Off 'Simultaneous Closing' Short Sale 'Flips'

From the Office of the U.S. Attorney (Columbus, Ohio):

  • Deborah L. Kistner, 50, and her husband, Mark A. Kistner, 52, both of Hilliard, pleaded guilty three days after their trial started on a $7 million mortgage fraud scheme they carried out between June 2006 and July 2010.
  • Deborah Kistner pleaded guilty to three counts of conspiracy to commit bank fraud, three counts of conspiracy to commit money laundering, and one count of bank fraud. Mark Kistner pleaded guilty to one count of conspiracy to commit money laundering.

    Deborah Kistner operated Premiere Title Company in Hilliard. She deceived lenders in connection with the purchases of real estate in Ohio and Florida. Evidence presented during the first three days of the trial showed that she conspired with others to secure inflated loans for real estate and kept the excess proceeds or used them to pay others involved in the conspiracy. Deborah Kistner intentionally failed to provide lenders with critical purchase contract language and accurate settlement statements.

    Deborah and Mark Kistner also schemed to defraud lenders and launder the money they received through simultaneous “short sale” closings where the lenders would agree to absorb losses on existing mortgage loans while Deborah Kistner actually sold those properties on the same day for a profit and laundered the profits through bank accounts controlled by Mark Kistner. The government was prepared to show that they secured as much as $7 million in fraudulent loans through their schemes.
For the U.S. Attorney press release, see Hilliard Couple Plead Guilty In $7 Million Mortgage Fraud Scheme.

Monday, February 4, 2013

LPS To Cough Up $127M To 46 States, D.C. To Resolve Allegations It Fraudulently Manufactured Legal Documents Used To Foreclose On Homeowners

Bloomberg reports:

  • Lender Processing Services Inc. (LPS) reached a multistate settlement to resolve claims of improper foreclosure practices, including the “robosigning” of documents used to repossess homes.

    The $127 million settlement involves 46 states and the District of Columbia, LPS said [] in a statement. The settlement also will require LPS to reform practices and correct faulty foreclosure paperwork, Illinois Attorney General Lisa Madigan said in a separate statement.

    “LPS and its subsidiaries became a sort of document factory, literally rubber stamping thousands of foreclosures with no regard to fairness and accuracy in the process,” Madigan said.

    State attorneys general came together in 2010 to investigate claims of improper foreclosure practices by mortgage servicers, including robosigning, in which people rapidly signed documents without verifying facts. Five mortgage servicers, including JPMorgan Chase & Co. (JPM) and Bank of America Corp., last year reached a $25 billion settlement with 49 states and the federal government.

    “This settlement reflects the efforts of the states to work together to remedy the widespread abuses occurring in the residential mortgage industry in the past few years,” Florida Attorney General Pam Bondi said in a statement.

    Previous Agreements

    LPS, based in Jacksonville, Florida, said the agreement resolves a probe into document preparation, verification, signing and notarization practices. The company’s shares rose 7.5 percent to $24.08 at 2:04 p.m. in New York.

    LPS said it reached previous agreements with Missouri, Delaware and Colorado, leaving a complaint filed by Nevada as the only unresolved attorney general inquiry. LPS Chief Executive Officer Hugh Harris said the settlement is “another major step toward putting issues related to past business practices behind us.”

    The states’ investigation found an LPS subsidiary engaged in “surrogate signing,” which is the signing of documents by an unauthorized person in the name of another and notarizing those documents as if they had been signed by the proper person, Madigan said.

    New York Attorney General Eric Schneiderman said in a statement that the settlement will prohibit signatures by unauthorized people or those without first-hand knowledge of the facts attested to in foreclosure documents.

Ex-Michigan High Court Justice Cops Guilty Plea To Illegal 'Short Sale Shuffle' As Feds Drop Related Pending Forfeiture Snatch On Her Florida Home

In Ann Arbor, Michigan, The Detroit News reports:

  • U.S. Attorney Barbara McQuade says her office will pursue prison time for former state Supreme Court Justice Diane Hathaway, who pleaded guilty Tuesday to a felony bank fraud charge stemming from personal real estate transactions.

    Whether U.S. District Court John Corbett O'Meara gives Hathaway jail time could depend on how much he determines she defrauded mortgage lender ING Direct by hiding assets and misleading bank officers to secure a financial hardship and unload a $1.5 million Grosse Pointe Park home for $850,000 on a short sale.
  • Hathaway appeared Tuesday morning before O'Meara in his Ann Arbor courthouse just eight days after stepping down from the high court. [...] O'Meara set a May 28 sentencing date. Depending on how much the judge rules Hathaway defrauded her bank in a scheme to get a short sale, she'll pay up to $90,000 in restitution, according to her attorney, Steve Fishman.

    Federal prosecutors have accused Hathaway of concealing assets and transferring homes to stepchildren in a scheme to get mortgage lender ING Direct to forgive $600,000 owed on a $1.5 million Grosse Pointe Park home and unload the lakefront property in a November 2011 short sale.

    Outside the Ann Arbor courthouse, Hathaway attorney Steve Fishman could not explain why his client shuffled the homes around, resulting in the fraud. "It was dumb," Fishman told reporters. "There wasn't any reason for it. It made no sense."

    Prosecutors are letting Hathaway keep her posh second home in Florida she transferred to a stepchild in an effort to conceal her assets from the bank while applying for the short sale.

    Fishman said Tuesday he'll argue Hathaway and her husband, attorney Michael Kingsley, saved the bank $150,000 by negotiating a short sale of their home rather then letting it be sold at a foreclosure auction.

    But prosecutors have tripped up Hathaway on a fraud charge because she and Kingsley deeded the Windermere, Fla., home, valued at $664,000, to one of Kingsley's daughters while applying for the short sale — and then got the house back after selling the Grosse Pointe Park home.
  • During the short sale process, in 2010 and 2011, Hathaway also acquired two other homes in Grosse Pointe Park on Windmill Pointe and Balfour Street and transferred them to her stepchildren. Hathaway's stepdaughter, Sarah Kingsley, transferred the Balfour Street back to Hathaway after the short sale of the home on Lakeview Court, public records show.
  • Kingsley, whose name was on the Lakeview Court mortgage in question, was not charged and neither were his children who participated in the housing shuffle.

    "The government determined there is insufficient evidence to charge anyone else but Justice Hathaway," Assistant U.S. Attorney Daniel Lemisch. told the judge. [...] During the Detroit press conference, McQuade said Hathaway was the only person involved in the scheme who had "criminal intent."
  • McQuade had sought to seize the Florida home Hathaway and Kingsley own that prosecutors allege was transferred to Kingsley's daughter, Kathryn Sterr, to hide the asset from ING Direct during the short sale application process. The U.S. Attorney's office is dropping the forfeiture case contingent upon the restitution being paid, McQuade said.

    Until the sentencing date, Hathaway is free on her own recognizance and able to travel to her Florida home. The judge gave her one guideline, though.

    "The defendant will not transfer ownership of any property unless authorized by the court," O'Meara said.

Closing Agent Gets Two Years For Illegally Dipping Into Escrow Accounts, Pocketing $1.5M+ Intended To Satisfy Prior Liens, Pay Recording Fees, Insurance Premiums; Title Underwriter Left Holding The Bag

From the Office of the U.S. Attorney (Baltimore, Maryland):

  • U.S. District Judge William D. Quarles, Jr. sentenced Harriet M. Taylor, age 57, of Ellicott City, Maryland, [] to two years in prison followed by five years of supervised release for wire fraud in connection with a scheme to use over $1.5 million in mortgage closing funds for her personal use and to operate her title companies. Judge Quarles also ordered Taylor to pay restitution of $1,256,635.70 to Old Republic and $253,750.84 to CAN Surety, the insurer on Taylor’s errors and omissions policies.
  • According to her plea agreement, Taylor co-owned and managed two title insurance companies, Regal Title Company, LLC and Loyalty Title Company, LLC, located in Columbia, Maryland. Pursuant to an agreement with a national title insurance underwriter, and as required by Maryland state law, escrow accounts for Regal and Loyalty were established, separate from company operating accounts, for the purpose of holding and disbursing funds received from lenders for real estate closings.

    Beginning in 2009, however, Taylor caused some mortgage lenders to wire their funds entrusted for real estate settlements to Regal’s operating account, rather than to the escrow accounts. Taylor also caused funds in Regal’s and Loyalty’s escrow accounts to be transferred back and forth to the companies’ respective operating accounts. By using commingled funds throughout 2009, Taylor kept her two businesses afloat, while enriching herself with both company and escrow funds. From January through December 2009, Taylor paid herself $477,877.50 from three company operating accounts.

    As shortfalls in the escrow accounts increased, Taylor failed to remit insurance premiums to the title insurance underwriter, Old Republic National Title Insurance Company (Old Republic), pay recording fees for deeds and pay off prior liens, including four of which belonged to the government sponsored entities, Fannie Mae and Freddie Mac.

    Old Republic learned of the commingling of escrow and operating funds during a 2009 audit of Regal. They directed Taylor to stop the practice. Five months later during a further audit of both companies, Old Republic discovered that in nine cases Taylor used the payoff checks that were supposed to pay prior lien holders, and immediately terminated her as an agent.

    Old Republic was obligated to satisfy the prior liens against the properties affected by the misuse of settlement funds and to complete other transactions Regal and Loyalty failed to perform. Accordingly, in January 2010, Old Republic incurred a total loss of $1,518,532 which resulted from paying off prior liens, paying recording fees, and for insurance premiums collected by Regal and Loyalty but not forwarded to Old Republic.
For the U.S. Attorney press release, see Title Company Owner Sentenced in $1.5 Million Fraud Scheme.

Sunday, February 3, 2013

S. Florida County Official Calls For End To State Adverse Possession Law; Points To Recent Bogus Crackpot Claims On Temporarily Unoccupied Homes To Justify Changes

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

  • The attempted takeover of a $2.5 million Boca Raton mansion using an obscure real estate law now has copycat cases — including one involving a $4.6 million oceanfront mansion complete with tennis court and pool.

    Broward County Property Appraiser Lori Parrish — whose office accepted three more filings for "adverse possession" Tuesday — said she's had enough.

    She's started asking the area's state legislators to strike the law from the books, once and for all. "It's not a 21st century law — they ought to abolish it," Parrish said, pointing out that it was passed when Florida was vast swaths of agricultural land that sometimes fell into disuse.
  • Parrish says that in most cases — and Broward now has 22 of them — the filing is not worth the paper it's printed on, particularly in one case of a filing on a beach house that is not in foreclosure.

    "Why should someone take possession of a house that money isn't even owed on?" she said. "What this is doing is legitimizing breaking and entering."
  • A Sun Sentinel investigation found that in Broward County in April, there were an estimated 8,000 dormant foreclosure cases in which there had been no movement for 120 days or more. In Palm Beach County at the same time, about 7,100 foreclosure actions showed no activity for a full year.

    But one of Broward's most recent adverse possession cases, at 1333 N. Atlantic Blvd., is not part of that backlog. It's for sale and it's empty.

    So someone named Tommie L. Milton Jr. filed an adverse possession form on the 4-bedroom oceanfront home that's listed for $4.6 million.

    Milton did not return a call seeking comment. But he was caught by police on the property on Friday, the day after he filed for adverse possession, according to Mila Schwartzreich, co-counsel for the property appraiser.

    Fort Lauderdale attorney Max Hagen, who represents the property owner, said he would have needed to file a civil suit to eject Milton — if he hadn't been caught. A security guard has since been posted at the home, Hagen said.

    For Property Appraiser Parrish, this case is another indication of just how absurd adverse possession is. "In 1876, it served a purpose it doesn't serve in 2013," said Parrish, who said her own neighborhood was bedeviled by a squatter. "Why should people have to spend money on asserting their property rights because of an antiquated law that doesn't belong on the books?"
For the story, see Broward Property Appraiser moves to repeal squatting law ("Loki Boy" copy cats bedevil Broward County).

Kentucky Joins Hit Parade Of State, Local Governments Suing MERS For Allegedly Illegally Dodging Recording Fees When Making Mortgage Assignments

In Frankfort, Kentucky, WFPL Radio 89.3 FM reports:

  • Claiming they committed fraud, Kentucky Attorney General Jack Conway has filed a suit against a mortgage company.

    Mortgage Electronic Registration Systems, or MERS, provides a marketplace for banks to trade mortgages and mortgage-backed securities.

    Conway says it was set up by banks to avoid the fees that must be paid when mortgages are sold and to hide the true owners of those mortgages.

    Conway's suit alleges MERS did not pay the proper fees in Kentucky. He's also suing under the Consumer Protection Act, because MERS foreclosed on many homes.

    “About 300,000 mortgages in Kentucky are MERS mortgages right now," Conway said. "We are able to fine up to $2,000 per violation of the Kentucky Consumer Protection Act.(1) We have that avenue of damages. And we also have the avenue to go after the recording fees that have been dodged as a result of this mortgage transfer scheme.”

    New York, Delaware and Massachusetts have also filed suit against MERS.
For the story, see Conway Alleges Mortgage Swapping Company Violated State Law.

(1) The Kentucky Consumer Protection Act is the state's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (commonly known as state UDAP statutes).

For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

Fannie, Freddie To Begin Deed-In-Lieu Program Allowing Eligible Homeowners With On-Time Mortgage Payments To Walk Away From Underwater Homes

Bloomberg reports:

  • Fannie Mae and Freddie Mac will let some borrowers who kept up payments as their homes lost value erase their debts by giving up the properties, helping Americans escape underwater loans while adding to losses at the mortgage giants bailed out with $190 billion of taxpayer money.

    Non-delinquent borrowers with illness, job changes or other reasons they need to move will become eligible in March to apply for a so-called deed-in-lieu transaction that erases the shortfall between a property’s value and the size of its mortgage.

    It follows a change in November that lets on-time borrowers sell properties for less than they owe, known as short sales, wiping out the remaining mortgage debt. Normally, the lenders could pursue people to recoup their losses.
  • The deed-in-lieu transactions, which require homeowners to leave properties in good condition, preserve the value of homes by preventing owners from abandoning them to take a new job or cope with an illness, Gordon said. Vacant and dilapidated real estate drags down values of nearby houses, increases expenses for Fannie Mae and Freddie Mac, and reduces the amount they’ll recover when the property is sold, she said.