Saturday, April 27, 2013

Florida Attorney Who Went Missing With Million$ In Client Trust Funds Was Facing State Bar Action For Conduct Surrounding Quiet Title Suit Scheme Used In Effort To Dodge Foreclosure

In West Palm Beach, Florida, the Palm Beach Post reports:

  • Missing Lake Worth attorney Timothy McCabe was facing disciplinary action from the Florida Supreme Court prior to his disappearance for trying to end-run a foreclosure lawsuit against one of his properties.

    McCabe, who is alleged to have taken millions of dollars from his firm’s bank accounts before going missing April 2, filed a lawsuit in 2011 attempting to remove other claims to the property through a quiet title action.

    McCabe’s law partner, Steven Samiljan, is also named in a formal complaint sent by the Florida Bar to the supreme court on March 27. The Bar confirmed Wednesday that Samiljan is also under investigation for the quiet title action and accounting issues revealed by McCabe’s disappearance. Samiljan could not be reached for comment Wednesday.

    According to the Bar complaint, a foreclosure was filed against McCabe’s property in the 1200 block of 17th Avenue North in Lake Worth in December 2010. McCabe and his wife, Donna, bought the multi-family complex in March 2006 for $415,000.

    In September 2011, McCabe filed a separate quiet title lawsuit against his original lender in an attempt to cancel the bank’s claims on the property. The request was denied by Palm Beach County Circuit Judge Jack Cox, who said McCabe and Samiljan “intentionally put in motion a plan or scheme” to get the court to issue an order that would end the foreclosure action.

    “Samiljan and McCabe both knew and had facts and information that they intentionally attempted to withhold from this court and each made material misrepresentations to this court,” Cox said.

    McCabe, 55, sent his wife and colleagues emails on April 2 saying he had made financial mistakes.

    “You never knew what I was doing, but after the bank took our properties, I made a series of very bad business decisions,” McCabe wrote to his wife.

    As much as $4 million is missing from his firm’s accounts. Clients are now trying to figure out if they can regain any of their deposits.

    The Florida Bar has a Clients’ Security Fund that will pay out up to $250,000 for misappropriated or embezzled money. For more information on the fund, go to the consumer information section on or call (850) 561-5834.(1)
Source: Lake Worth lawyer faced disciplinary action prior to disappearance.

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

State Bar Slaps Dethroned Foreclosure Mill King With 17 Charges Over Alleged Robosigning Practices

In Orlando, Florida, The Associated Press reports:

  • The body that regulates Florida attorneys has forwarded a complaint to the state Supreme Court against a South Florida lawyer whose firm handled tens of thousands of foreclosure cases.

    The Florida Bar on Wednesday filed a 17-count complaint against David Stern, whose firm operated out of Broward County.

    The complaint said Stern failed to properly supervise his staff and that led to allegations of misconduct, including missed hearings, improperly filed court documents and hundreds of attorneys handling thousands of foreclosure cases.

    Documents submitted in court by his firm often were incomplete, contained inaccuracies and were improperly notarized, the complaint also said.

    Several of the allegations were made by judges.

    "In David J. Stern's capacity as managing attorney and sole shareholder in charge of all activities and functions of the Stern law firm, David J. Stern either knew or should have known that inaccurate and/or improperly executed documents were regularly being provided to courts throughout the state of Florida and took insufficient action to investigate the activity or to stop or prevent the improprieties," the complaint said.

Friday, April 26, 2013

Midwest Real Estate Operator Cops Bank Fraud Plea In Scheme That Duped Investors Into Straw Buyer Scam To Peddle, Finance 'Contract For Deed' Racket Targeting Wanna-Be Homeowners With Crappy Credit

In Springfield, Missouri, KY3-TV reports:

  • A co-owner and president of a closed real estate company that defrauded dozens of residents of new homes pleaded guilty in federal court for bank fraud on Thursday. Under terms of a plea agreement with the U.S. attorney’s office, Scott Dasal of Springfield likely will get a three-year federal prison sentence.

    On Tuesday (postponed from Friday morning), Dasal is scheduled to appear in Greene County Circuit Court to plead guilty to state charges resulting from a grand jury indictment in February 2011.

    Dasal was a co-owner of Greenleaf Companies and its subsidiaries, including The Real Estate Company. From 2006 through May 2008, the companies advertised heavily in southwest Missouri that they could get people with bad credit records into new homes.

    They also sponsored seminars for potential investors in which company officers outlined a scheme for people to invest in mortgages on homes that would be occupied by other people.

    Investigators say the scheme was fraudulent and deceived a bank that held the mortgages by disguising the source of the money paid to the bank. It turned out that people moved into Greenleaf’s homes and thought that they were mortgage holders. The residents later found out differently when they started getting foreclosure and eviction letters from the bank.

    Investigators said Greenleaf took the residents’ payments but didn’t always pay the bank. The mortgages were actually held by investors that Greenleaf drew into its scheme.
  • People who moved into Greenleaf's homes and thought they were making mortgage payments likely will get no restitution from Dasal and his companies, at least from the federal court plea agreement, which only relates to defrauding the bank, not the homes' residents. They might get some restitution from the state cases against Greenleaf and its officers.

    The Greene County grand jury indicted Dasal on 19 charges: 10 charges of fraud and nine charges of unlawful merchandising practices. In the 26 months since then, the case was proceeding towards a two-week trial that was postponed a couple times but was then set to begin this week, according to online court records. Last week, that trial was canceled and a plea hearing was scheduled for Friday morning at 8:30 before Greene County Circuit Judge Dan Conklin. On Friday, that hearing was postponed for three days.

    When Dasal was indicted, the grand jury also indicted four other people with similar charges. They are Eric Gagnepain of Springfield, a former part-owner of Greenleaf; Misty Perkins of Highlandville, former director of Investor Relations for Greenleaf; William Strong of Springfield, former vice president of finance and daily operations for Greenleaf, and Robert Batchman, former real estate broker for The Real Estate Company.

    Gagnepain pleaded guilty to the state charges in March 2012 but has not been sentenced because he subsequently filed a motion to withdraw his guilty plea.

    A Greene County judge convicted Strong last August and sentenced him to five years of probation, and ordered him to pay $25,000 in restitution; less than $1,000 of that restitution has been paid.

    Perkins is scheduled for trial in August.
For the story, see Co-owner of Greenleaf real estate firm pleads guilty to bank fraud (Scott Dasal also apparently plans to plead guilty to some state charges).

Go here for earlier posts on the Greenleaf Companies straw buyer / 'contract for deed' racket.

Federal Judge Revives Previously Dismissed Claim In Lawsuit That BofA Execs Engaged In Fraudulent Conduct When Concealing Risk That Bankster Would Have To Buy Back & Eat Huge Plate Of Crappy Home Mortgages

In New York City, Reuters reports:

  • A federal judge has revived a securities fraud lawsuit accusing Bank of America Corp Chief Executive Brian Moynihan, his predecessor Kenneth Lewis, and others of misleading shareholders about the risk the bank might have to buy back large amounts of soured mortgages.

    U.S. District Judge William Pauley in Manhattan in July had dismissed various claims against the executives by shareholders led by the Pennsylvania Public School Employees' Retirement System, while letting their case against the second-largest U.S. bank proceed.

    But Pauley said the new allegations in an amended lawsuit "plausibly establish fraudulent conduct and a culpable state of mind as to all executive defendants" for allegedly concealing the buyback potential when certifying the bank's financials.

    He also said Moynihan could be liable for statements that were inconsistent with a May 13, 2010, letter sent on his behalf to the Financial Crisis Inquiry Commission regarding the bank's securitization practices.

    The other individual defendants include former chief financial officers Joe Price and Charles Noski, and Chief Accounting Officer Neil Cotty.

    Jay Kasner, a lawyer for the individual defendants, was not immediately available for comment. Bank of America spokesman Lawrence Grayson declined to comment. Mark Rosen, a lawyer for the plaintiffs, was not immediately available for comment.

    The shareholders alleged they had been misled into buying shares of Charlotte, North Carolina-based Bank of America in 2009 and 2010.

    They claimed that Bank of America knew at the time it faced capital shortfalls and large mortgage buybacks, and that recordkeeping in Merscorp Inc's private Mortgage Electronic Registration Systems registry was so poor that it would not be able to legally foreclose on thousands of delinquent mortgages.

    Mortgage finance giants Fannie Mae and Freddie Mac and several large banks had established MERS in 1995 to circumvent the often unwieldy process of transferring ownership of mortgages and recording changes with county clerks.

    Earlier on Wednesday, Bank of America Corp announced a $500 million settlement with investors who claimed they were misled by its Countrywide unit into buying risky mortgage debt. That settlement was the largest to resolve federal class-action litigation over mortgage-backed securities.

    The case is Pennsylvania Public School Employees' Retirement System et al v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 11-00733.

Homeowner Facing Foreclosure Faces Felony Charges For Allegedly Forging Ex-Hubby's Signature On Loan Modification Paperwork

In Westland, Michigan, the Observer & Eccentric reports:

  • A Westland woman has been ordered bound over for trial on felony charges that she forged her former husband's name on mortgage modification paperwork.

    Tonya Cramier-Oncza, 45, waived her preliminary examination in Westland 18th District Court Thursday. She is charged with forgery, uttering and publishing and being a fourth-degree habitual offender. A not guilty plea had been entered and she is free on a $200,000 cash/surety bond.

    Divorced six years, Cramier-Oncza is charged with signing her ex-husband's name on documents to modify a home loan. Cramier-Oncza's former husband doesn't live at the former marital home on Merritt and currently resides in Garden City.

    The former husband thought Cramier-Oncza was going to lose the home to foreclosure, police said, then became curious when she continued to live there. When he checked into the situation, the former husband found loan documents were signed with his name but not his signature and contacted police.

    Cramier-Oncza is scheduled for Wayne County Circuit Court arraignment on April 25.

    The habitual offender charge is the result of prior charges for forgery against Cramier-Oncza which resulted in probation.

    In 2007, Cramier-Oncza was charged with forging a signature and cashing a check belonging to a client she was assisting through the federal Family Self-Sufficiency Program at Westland's Dorsey Center. The client complained that Cramier-Oncza, who worked for an outside agency, had kept part of the money from the check.

    While on probation for that case in 2008, Cramier-Oncza and one of her sons were charged with forging checks belonging to a neighbor.

Thursday, April 25, 2013

7th Circuit OKs Student Loan Discharge For Bankrupt Debtor; Failure To Score Employment Related To Her Financed Paralegal Education Despite Filing 200 Job Applications Established "Undue Hardship" Needed To Ditch Debt

From a client information release from the law firm Goodwin Proctor LLP:

  • The United States Court of Appeals for the Seventh Circuit ruled that a borrower can discharge her student loans under the bankruptcy code. Generally, the bankruptcy code prevents discharge of student loan debt unless the debtor shows that requiring her to repay the loan constitutes "undue hardship."

    The bankruptcy court ruled that the debtor who incurred student loans to finance her paralegal education showed "undue hardship"—she applied for over 200 jobs over a 10-year period without success, after which she moved to a rural area with few jobs available to live with her retired mother. The student loan servicer appealed arguing that the debtor had failed to diligently search for work and that she did not apply to any non-paralegal jobs. The district court agreed and reversed.

    In deciding to reverse the district court's ruling and reinstate the bankruptcy court's ruling, the Court started by recognizing that the bankruptcy code did not strictly forbid discharge of student loan debt—as the code does for crime- or fraud-related debts—but instead allowed discharge upon a showing of hardship.

    The Court agreed with the bankruptcy court in concluding that the debtor's situation was "hopeless"—a burden, according to the Court, "more restrictive than the statutory [showing of,] undue hardship."

    Finding there was no basis to reverse the bankruptcy court's discretionary determination that the debtor showed no ability to pay, and no realistic chance of ever repaying the debt despite her good-faith efforts, the Court reinstated the bankruptcy court's ruling and held that the debtor's educational debt was dischargeable.

Federal Consumer Watchdog Takes Action Against Four Nat'l Mortgage Insurers Over Alleged Kickback Racket

From the Consumer Financial Protection Bureau:

  • The Consumer Financial Protection Bureau (CFPB) [] announced four enforcement actions to end what the Bureau believes to be improper kickbacks paid by mortgage insurers to mortgage lenders in exchange for business. The CFPB filed complaints and proposed consent orders against four national mortgage insurance companies in order to stop these practices, which have been prevalent for more than 10 years. The proposed orders require the four mortgage insurers to pay more than $15 million in penalties to the CFPB.

    “Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers,” said CFPB Director Richard Cordray. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade. The orders announced today put an end to these types of arrangements and require these insurers to pay more than $15 million in penalties for violating the law.”

    The CFPB alleges that four mortgage insurance companies violated federal consumer financial law by engaging in widespread kickback arrangements with lenders across the country. The CFPB believes the mortgage insurers named in today’s enforcement actions provided kickbacks to mortgage lenders by purchasing captive reinsurance that was essentially worthless but was designed to make a profit for the lenders.

    The four companies named in today’s actions are Genworth Mortgage Insurance Corporation, United Guaranty Corporation, Radian Guaranty Inc., and Mortgage Guaranty Insurance Corporation. In exchange for kickbacks, these mortgage insurers received lucrative business referrals from lenders. These types of kickbacks were a common practice in the years leading up to the financial crisis. These four companies were key players during that time.
For more, see The CFPB takes action against mortgage insurers to end kickbacks to lenders (Four Companies to Pay $15.4 Million in Penalties).

FTC Issues Warning To Website Operators Providing Landlords With Tenant Rental Histories That They May Be Subject To FCRA

From the Federal Trade Commission:

  • The Federal Trade Commission has warned the operators of six websites that share information about consumers’ rental histories with landlords that they may be subject to the requirements of the Fair Credit Reporting Act (FCRA).

    The letters inform the recipients that if they meet certain criteria, namely collecting information on tenants and their rental history and providing that information to landlords so they can make judgments about renting to those tenants, they are considered credit reporting agencies and are subject to certain legal requirements.

    Among the requirements cited in the letter are the companies’ obligation to protect the privacy of tenants whose information they collect, including ensuring that those requesting information about tenants have a legitimate reason to acquire it.

    The letter reminds the companies of their obligation to ensure that the information they provide is accurate, to give consumers a copy of the information about them on request, and to allow consumers to dispute information they believe is inaccurate. The letters also note that the companies must notify landlords of their requirements if they use the data to deny housing to a tenant, and to notify the sources of their information of the requirement that they provide accurate information.

Wednesday, April 24, 2013

Attorney Gets 15 Years For Swindling $1.29M From Clients

In Jefferson County, Texas, The Southeast Texas Record reports:

  • Beaumont attorney Kip Lamb, 57, was sentenced to 15 years for swindling more than a million dollars from two separate clients.

    Court records show that on April 14, 2008, Lamb received $1,094,611 into a trust account as his client’s (New Life Tabernacle Church) portion of a hurricane insurance settlement.

    Lamb later transferred the funds to other bank accounts for his own personal use and his law firm’s use, according to court documents.

    Last year, Lamb was charged with two counts of misapplication of fiduciary property. He pleaded guilty in February.

    The second charge accused Lamb of taking a female client’s trust of more than $200,000.

    Criminal District Judge John Stevens also ordered Lamb to pay restitution for the theft, according to a Channel 6 news report.

    The judge sentenced Lamb to 15 years for stealing the church’s funds and 10 years for stealing the woman’s money. The judge suspended Lamb’s sentence for taking the woman’s money, meaning his final sentence is 15 years in prison.

    Following the May 2012 indictment, Judge Stevens issued a warrant for Lamb’s arrest; however, the attorney fled. Authorities found Lamb in Arkansas on May 8, 2012.

    As previously reported, in September the Commission for Lawyer Discipline, an arm of the State Bar of Texas, filed a letter notifying Jefferson County district judges of Lamb’s suspension.

Attorney Disbarred For Ripping Off Clients' Insurance Settlement Proceeds Finally Gets Pinched; Held On $420K Bond On 22 Theft, Fraud-Related Charges

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

  • A disbarred Pembroke Pines lawyer is behind bars after authorities say he stole more than $800,000 from people and companies he was representing.

    Wearing jail garb instead of a lawyer's suit, Mark Foster Dickson, 64, appeared in a brief bond court hearing on Thursday, where he was issued a $420,000 bond on 22 charges related to theft and fraud.

    Most of the victims listed in the case are insurance companies he did work for, according to an arrest affidavit. In most of the cases he negotiated settlements on behalf of the companies, but he kept the funds without telling clients about the payouts, according to an affidavit.

    "He used his bar license to conduct these thefts," said Assistant State Attorney Catherine Maus.

    Authorities said Dickson deposited the stolen funds into his practice's operating account and then drew the funds for personal use. The claims ranged from as little as $8,000 to a $165,000 settlement check he allegedly stole from Florida Intercoastal Underwriters.

    On several instances, he advised his clients that a settlement on a claim would be difficult and recommended closing the file. However, Dickson still allegedly negotiated and settled claims, keeping the funds for himself.

    In one case, Dickson was representing ACE American Insurance Company on a claim related to an engine failure on a man's yacht caused by contaminated gas. Dickson told company officials to close the file because experts determined the gas was not contaminated.

    Dickson reportedly settled the matter anyway for $20,000 and deposited the funds in his firm's operating account. He then made multiple withdrawals from the account from several locations in Broward, according to the affidavit.

    At the bond court hearing, the prosecutor told Broward Court Judge John "Jay" Hurley that it was unclear where all of the allegedly stolen funds are. Defense attorney Mitchell B. Polay asked Hurley to consider Dickson's lack of criminal history and his long tenure as a lawyer when setting a bond.

    "He's been a member of the Florida Bar for a number of years, your honor, no problems with the Bar. Obviously something has come about," Polay said. "Mr. Dickson has never had any problems with the law. This is an anomaly."

    Hurley declined to lower the bond amount, saying the funds allegedly stolen are large enough to put Dickson at risk of fleeing the country. Dickson now will be required to prove that the funds used to post his bond come from a legitimate source.

    Polay declined to comment after Thursday's hearing.

    A 1974 graduate of St. John's University School of Law, Dickson was admitted to the Florida Bar in 1975, records show. Dickson's law license was suspended in February 2012. The Florida Supreme Court disbarred Dickson last month.

South Florida Attorney Reported Missing ... Along With At Least $6M Cash From Law Firm's Firm's Trust & Title Company Accounts

In Boca Raton, Florida, the South Florida Sun Sentinel reports:

  • Police are investigating the mysterious disappearance of a Palm Beach County real estate attorney who was last seen 11 days ago.

    Also missing, according to the attorney's partner: at least $6 million from the firm's trust accounts.

    Timothy P. McCabe, 55, of Boca Raton, was last seen on April 2, according to a missing person's report made to Boca Raton police on April 5 by McCabe's wife Donna.

    His friends and family say they don't know what to think about his disappearance, or if it is related to the Lake Worth firm's missing money.

    Boca Raton police spokesman Mark Economou said McCabe's wife told police she grew concerned after she heard from a friend of McCabe's on April 5. The friend said he had heard from McCabe by phone, who said it would be the last time they talk.

    According to reports from the Palm Beach County Sheriff's Office, McCabe told the friend, "this is the last time we talk."

    McCabe's wife filed the missing person report that same day.

    Up until she received that phone call, Economou said, McCabe's wife assumed her husband had been away on a business-related trip to Tampa and Orlando. Boca Raton police investigated McCabe's cellphone records and discovered that when he had called the friend on April 5, he was in South Carolina.

    Still, police had no obvious reason to believe that McCabe was anything other than an adult who had gone somewhere on his own accord.

    "It was determined at that point that he wasn't in any harm," Economou said, adding the case is still open. "Until any more information comes in, he's basically an adult that left."

    McCabe's law firm partner at McCabe and Samiljan LLC, Steve Samiljan, said Friday that he estimates that "at least$6 million is missing from the firm's trust and title company accounts. But he also added he is concerned about McCabe's well-being.

    "We're concerned about him," Samiljan said Friday. "He's a son, he's a husband and he's a father and I've known him for 17 years."

    Samiljan said that since April 5, he has spent most of his days talking to clients who have come by the office asking questions about the missing money. He said he contacted the sheriff's office, the Florida Bar, and has been working with title insurance underwriters to "figure out the extent and damage."

    "I can tell you that a lot of money is missing and that a lot of clients are hurt," Samiljan said. "It's been devastating for the clients, for my employees and for myself."(1)
For more, see Palm Beach County attorney missing, as is at least $6M from firm.

(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:

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

Tuesday, April 23, 2013

Absent "Clear Showing Of Fraud," Or Irregularity In F'closure Procedure Itself, 6th Circuit Boots Post-Redemption Period Attempt To Set Aside Michigan Foreclosure Sale Over Forged, Robosigning Claims Where Screw-Up Would Render Process Merely Voidable, Not Void Ab Initio

From a From a client information release from the law firm Goodwin Proctor LLP:

  • The United States Court of Appeals for the Sixth Circuit affirmed a lower court's decision dismissing plaintiff's action to set aside a foreclosure sale based on alleged violations of the non-judicial foreclosure process in Michigan.

    After plaintiff defaulted on his mortgage loan,his property was foreclosed upon and sold at a sheriff's sale through Michigan's non-judicial foreclosure process, which provides for a six-month redemption period. Plaintiff subsequently initiated an action seeking to set aside the non-judicial foreclosure asserting that the mortgagee could not foreclose on him because the mortgagee was not the note-holder, mortgage holder, or servicer as required by Michigan law.

    Plaintiff's claim was based on the assertions that the mortgage assignment was either forged or "robo-signed" and MERS had no authority to assign the mortgage to the foreclosing mortgagee.

    Since the six-month redemption period had expired, under Michigan law, plaintiff was required to meet a heightened standard by making a "'clear showing of fraud, or irregularly' . . . 'related to the foreclosure procedure itself.'"(1)

    Relying on Kim v. JP Morgan Chase Bank, NA, 825 N.W.2d 329 (Mich. 2012) and Davenport v. HSBC Bank USA, 739 N.W.2d 383 (Mich. Ct. App. 2007), the Court determined that any violation of the foreclosure law is only actionable when there is a showing of prejudice.(2)

    Since plaintiff would not be subject to additional liability, would not have been in a better position if defendant was the owner of the indebtedness or the owner an interest in the indebtedness, and did not show he was prejudiced in any other way, the Court determined plaintiff's claim was not actionable and affirmed the lower court's dismissal.
Source: Sixth Circuit Upholds Dismissal Of Suit To Set Aside Foreclosure Sale.

For the court ruling, see Conlin v. Mortgage Electronic Registration Systems, Inc., No. 12-2021 (6th Cir. April 10, 2013).

(1) On this point, the federal appeals court observed:
  • Michigan's foreclosure-by-advertisement scheme was meant to, at once, impose order on the foreclosure process while still giving security and finality to purchasers of foreclosed properties. See Mills v. Jirasek, 255 N.W. 402, 404 (Mich. 1934) (citing Reading v. Waterman, 8 N.W. 691, 692 (Mich. 1881)); see also Gordon Grossman Bldg. Co. v. Elliott, 171 N.W.2d 441, 445 (Mich. 1969).

    To effectuate this interest in finality, the ability for a court to set aside a sheriff's sale has been drastically circumscribed. See Schulthies v. Barron, 167 N.W.2d 784, 785 (Mich. Ct. App. 1969); see also Senters, 503 N.W.2d at 643.

    Michigan courts have held that once the statutory redemption period lapses, they can only entertain the setting aside of a foreclosure sale where the mortgagor has made "a clear showing of fraud, or irregularity." Schulthies, 167 N.W.2d at 785; see also Sweet Air Inv., Inc. v. Kenney, 739 N.W.2d 656, 659 (Mich. Ct. App. 2007) ("The Michigan Supreme Court has held that it would require a strong case of fraud or irregularity, or some peculiar exigency, to warrant setting a foreclosure sale aside." (internal quotation marks omitted)).

    Whether the failure to make this showing is best classified as standing issue[3] or as a merits determination,[4] one thing is clear: a plaintiff-mortgagor must meet this "high standard" in order to have a foreclosure set aside after the lapse of the statutory redemption period. See El-Seblani v. Indymac Mortg. Servs., No. 12-1046, 2013 WL 69226, at *4 (6th Cir. Jan. 7, 2013).

    It is further clear that not just any type of fraud will suffice. Rather, "[t]he misconduct must relate to the foreclosure procedure itself." Id. (citing Freeman v. Wosniack, 617 N.W.2d 46, 49 (Mich. Ct. App. 2000)); see also Williams, 2012 WL 6200270, at *3 (citing Heimerdinger v. Heimerdinger, 299 N.W. 844, 846 (Mich. 1941), and Sagmani v. Lending Assocs. LLC, No. 302865, 2012 WL 3193940, at *1 (Mich. Ct. App. Aug. 7, 2012)).
(2) On this point, the federal appeals court observed:
  • Recently, in Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329 (Mich. 2012), the Michigan Supreme Court made clear that failure to comply with the conditions set forth in Michigan's foreclosure-by-advertisement statute does not render flawed foreclosures void (i.e., void ab initio) but merely voidable.[6] Id. at 337.

    The precise issue in Kim was whether the mortgagee's failure to record its interest before the initiation of foreclosure proceedings, as required by Mich. Comp. Laws § 600.3204(3), rendered the subsequent sheriff's sale void ab initio.[7] Id. at 331, 336.

    However, in the course of holding that a subsection (3) defect rendered a foreclosure merely voidable, the Michigan Supreme Court rejected the analysis of a case that dealt with a subsection (1)(d) defect, Davenport v. HSBC Bank USA, 739 N.W.2d 383 (Mich. Ct. App. 2007)—the same defect that Plaintiff is claiming in this case. Kim, 825 N.W.2d at 336-37.

    In Davenport, the Michigan Court of Appeals held that the fact that the foreclosing defendant "had initiated the foreclosure proceeding several days before acquiring its interest in the mortgage . . . rendered the foreclosure proceedings void ab initio." Id. at 336 (citing Davenport, 739 N.W.2d at 347-48).

    Interpreting Davenport in Kim, the Michigan Supreme Court bluntly stated that "such a holding was contrary to the established precedent of this Court. We have long held that defective mortgage foreclosures are voidable." Id. at 336.

    Therefore, the Michigan Supreme Court broadly held that "defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio." Id. at 337. It then explained that to prove foreclosure-defect claims, "plaintiffs must show that they were prejudiced by defendant's failure to comply with [Mich. Comp. Laws. §] 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." Id. (citing Sweet Air, 739 N.W.2d at 662, and Jackson Inv. Corp. v. Pittsfield Prods., Inc., 413 N.W.2d 99, 101-02 (Mich. Ct. App. 1987)).

    Kim's holding makes § 600.3204 defects actionable to the same extent that notice defects under Mich. Comp. Laws § 600.3208 are—only on a showing of prejudice. We explained the actionability of notice defects under § 600.3208 in Lessl v. CitiMortgage, Inc., No. 11-2285, 2013 WL 610904 (6th Cir. Feb. 19, 2013): "When `the mortgagor would have been in no better position had notice been fully proper and the mortgagor lost no potential opportunity to preserve some or any portion of his interest in the property,' courts uphold a completed foreclosure sale." Id. at *1 (quoting Jackson, 413 N.W.2d at 101) (citing Sweet Air, 739 N.W.2d at 662).

    Lessl involved a mortgagor's claim to set aside a sheriff's sale based on an alleged failure to post notice on his property. Id. We affirmed the district court's dismissal of the claim because the mortgagor had received actual notice of the foreclosure in the form of a letter from the foreclosing party. Id. at *2.

    Consequently, we found the mortgagor, who had allowed the statutory redemption period to lapse, incapable of "demonstrat[ing] prejudice from the non-posting." Id. Post-Kim, Michigan mortgagors seeking to set aside a sheriff's sale under § 600.3204 will have to demonstrate prejudice (e.g., double liability), cf. Livonia Properties, 399 F. App'x at 102, in the same way that those seeking a set-aside based on § 600.3208 (e.g., lack of actual notice) already must do.

Major Player In Banksters' Force Placed Insurance Racket Agrees To Cough Up $10M In Penalties, Plus Homeowner Restitution To Settle NYS Regulator Probe

From the Office of New York State Governor Andrew Cuomo:

  • Governor Andrew M. Cuomo [] announced that a New York State Department of Financial Services (DFS) investigation has produced an additional settlement with a major force-placed insurer, QBE, which requires the company to implement New York’s nation-leading reforms to help better protect homeowners from abuse in this industry.

    The QBE settlement includes restitution for homeowners who were harmed, a $10 million penalty paid to the State of New York, and a set of reforms – first agreed to last month by Assurant, Inc., the nation’s largest force-placed insurer, in a DFS settlement – that will save homeowners, taxpayers, and investors millions of dollars going forward through lower rates.

    Together with DFS’s previous settlement with Assurant, today’s agreement with QBE means that companies responsible for at least 90 percent of the force-placed insurance market in New York have signed onto the Cuomo Administration’s nation-leading reforms. (QBE has been the second-largest force-placed insurer both nationally and in New York since it acquired Balboa Insurance Company’s -- a subsidiary of Bank of America – force-placed insurance business in 2011. Bank of America insurance holding company is also a signatory to the settlement.)
For more, including all the key settlement terms, see Cuomo Administration Settles With Country's Second Largest 'Force-Placed' Insurer, Leading Nationwide Reform Effort and Saving Millions for Homeowners and Investors (New York Settlement with QBE Includes Restitution for Homeowners, a $10 Million Penalty, and Industry-leading Reforms; Settlement Comes On Heels of Deal with Assurant, the Nation's Largest Force Placed Insurer; Companies Responsible for More than 90 Percent of the 'Force-placed' Market in New York Have Now Signed onto Reforms).

80-Year Old Widow Scores Court Win Over Notorious Bankster In 3-Year Struggle To Save Home Of 46 Years From Foreclosure; Purported Missed Mortgage Payments Were Actually Sloppy Servicer's Bookkeeping Screw-Ups; Victim's Lawyer Vows More Litigation

In Tualatin, Oregon, ABC News reports:

  • A woman in Tualatin, Ore., is breathing a sigh of relief after a three-year battle to prove Wells Fargo had wrongfully moved to foreclose on her home, saying she had missed mortgage payments.

    A judge ruled Wednesday that Wells Fargo failed to prove she was actually behind in her payments, which Delores Dingman, 80, attributes to the bank's simple "accounting errors." "I just praise God for it all because I kept praying so many times about this, because I knew I had made the payments, but their accounting errors made it hard," she said.

    The judge heard six hours of testimony and then ruled to cancel the judicial foreclosure.

    Dingman and her late husband moved into their four-bedroom home in 1967, 46 years ago. After her husband, Leland, died in March 2008, Dingman took out a new mortgage with Wachovia while she paid off his medical bills, never missing a payment. Court records show she promised to pay $308,000 plus interest June 16, 2008.

    The next year, after Wells Fargo's acquisition of Wachovia was completed in Jan. 2009, Dingman began receiving foreclosure notices. She believes the bank did not correctly process her payment since around October 2009.

    But her bank records show her mortgage payments have been deposited by Wells Fargo. Despite efforts to clear up the mistake and paying more than $12,000 in attorney fees, her home went into judicial foreclosure.

    She had been employed by the local Kmart since it opened 40 years ago but stopped working when the store closed last year. She continued to pay her monthly mortgage amount of more than $2,300 while paying her attorney, Terry McLaughlin, to help her clear up the mistake.

    "There is going to be more litigation," McLaughlin said, declining to comment further.

Monday, April 22, 2013

Minnesota High Court Slams Banksters By Voiding Foreclosure By Advertisement Where Strict Compliance With Technical Requirements Were Not Followed

In Minneapolis, Minnesota, the Star Tribune reports:

  • Minnesota’s Supreme Court has tightened the screws a bit on home foreclosures.

    In a ruling out Wednesday, the state’s highest court decided unanimously that a foreclosing party must strictly comply with a state law requiring all the different banks and parties that have held a mortgage be clearly documented and filed before a foreclosure-by-advertisement can be initiated.(1)

    The case involved Doris Ruiz, a woman whose south Minneapolis duplex was foreclosed on by 1st Fidelity Loan Servicing. The court voided her foreclosure because 1st Fidelity filed its paperwork on the same day that it began advertising for a sheriff’s foreclosure auction on her home.

    Her lawyer, Jonathan Drewes, said the decision sets a strict standard that could impact “hundreds” of potentially defective or illegal foreclosure sales in the state. “I anticipate that many more lawsuits will arise in Minnesota over the coming year,” Drewes said.
  • Prentiss Cox, a consumer law expert at the University of Minnesota law school, said the new Supreme Court decision gives homeowners who find problems in their foreclosure paperwork a new avenue to argue in court.

    “This is the first decision from [the]Minnesota Supreme Court that suggests strict compliance really means strict compliance,” Cox said. “This is an industry that has had extraordinary problems putting one foot in front of the other to comply with legal requirements when they foreclose.”
For more, see Foreclosure papers must be in order, Minnesota Supreme Court rules (The state Supreme Court decision could boost homeowners fighting defective sheriff’s sales).

For the court ruling, see Ruiz v. 1st Fidelity Loan Servicing, LLC, A11-1081 (Mn. April 17, 2013).

(1) From the syllabus in the court's ruling:
  • Under Minn. Stat. § 580.02 (2012), all assignments of a mortgage must be recorded before the mortgagee begins the process of foreclosure by advertisement. Absent strict compliance with this requirement, a foreclosure by advertisement is void. Affirmed.

Bankruptcy Debtor Fails In Homestead Claim To Shield Home Equity From Creditors' Claws Where He Left Premises 15 Years Earlier, Rented It Out, Testifying To A Lack Of Intent To Return

From an Opinion Summary from Justia US

  • Debtor appealed from the bankruptcy court's order granting summary judgment in favor of the Chapter 7 Trustee on his objection to debtor's claimed homestead exemption

     The Bankruptcy Appellate Panel affirmed the bankruptcy court's conclusion that debtor had abandoned the property at issue as his homestead by removing himself from the property with no fixed or actual intent to return, and was not, therefore, permitted to claim a homestead exemption.(1)
Source: Opinion Summary - Paul v. Allred.

For the ruling, see Paul v. Allred, No.12-6068 (Bankr. App. 8th Cir. February 28, 2013).
(1) From the court ruling:
  • [The Chapter 7 Trustee] stated that the Debtor testified at the § 341 meeting that he has owned the Spark Street property since 1997 or 1998; that he did not live in the property on the date of filing; that he has not lived in the property for 14 or 15 years; and that he had no intent to live in the property.

    Further, the Debtor testified that the subject property was rented out, generating $550 per month of gross rental income, which, we note, was consistent with what was reported on Schedule I. The Debtor also testified he owns no other interests in real property.

    The Trustee asserted that entitlement to exemptions is determined on the date of filing and that, under South Dakota law, real property not actually occupied by the debtor on the date of filing can be claimed as an exempt homestead only if the debtor has, on the date of filing, an intention to occupy the property.

    Because the Debtor testified that he had no intent to occupy the property, the Trustee asserted that he was not entitled to the homestead exemption claimed in it.
  • While the Spark Street property may have once been the Debtor's homestead, the Trustee asserts that it no longer continues to possess the character of a homestead because he left the property and has no intent to return. In Yellowhair v. Pratt, the South Dakota Supreme Court stated the following standard regarding abandonment of a homestead:

    The main question in all cases of this nature is the intent of the party who has ceased to occupy the homestead.

    No general rule can be laid down as a guide for a court in determining intent, but each case must stand upon its own facts. Actual removal without intention to return is a forfeiture of the homestead right.

    If one removes from homestead property without any present intention of returning, but with a mere possible, or at most probable, future purpose to do so, contingent upon the happening or not happening of a particular event, the homestead is abandoned.

    Long absence, while not conclusive proof of intent to abandon, is a circumstance which may indicate such an intent in absence of a showing of intent to return.

    The real question is: Did the party have a fixed and actual purpose or intent to return and reside on the property, and did that purpose or intent continue to exist to the time in question?[16]
  • And, in Hewitt v. Carlson, the South Dakota Supreme Court said:

    While a party leaving a homestead must, in good faith, intend to return to it at some future date, such date need not be "fixed or definite" as to time; neither need such intent be an intent to return regardless of all possible contingencies; but, if there is an honest belief that at some time in the future the party will reoccupy the property as a home, and such party does no act inconsistent with such belief and intent, the homestead right is not forfeited.[17]
Editor's Note: It appears that the court didn't really seem concerned that the homeowner was gone from the home for 15 years, nor did it really seem concerned  that the premises was rented out.

The crucial issue here, as far as the court was concerned, was simply whether or not the Debtor had "an honest belief that at some time in the future the party will reoccupy the property as a home, and such party does no act inconsistent with such belief and intent, ...".

According to the Debtor's own testimony, the answer was no. So the court's ruling was quite predictable.

1st Mortgage Foreclosure Sale: IRS Succeeds In Squeezing 2nd Mortgage Holder For $100K To Release Its Right Of Redemption On Federal Tax Liens, Despite Its Subordinate Lien Priority

From the blog

  • A secured junior lender who purchased property at a senior lender’s foreclosure sale paid $100,000 to the Internal Revenue Service to induce it to release a right of redemption in connection with its tax liens on the property.

    After a bankruptcy court held that the junior lender had priority over the IRS but would not address the settlement payment, the junior lender sued the IRS in the U.S. Court of Federal Claims. It sought return of its $100,000 settlement payment, ... asserting that the settlement agreement was void for lack of consideration based on an argument that the right of redemption was illusory because it was later held to be invalid.

    After losing in the Court of Federal Claims, [the junior lender] appealed to the Federal Circuit Court.
For more, see Trying To Undo A Settlement: Bad Liens Don’t Make Bad Settlement Payments.

For the Federal appeals court ruling, see Road & Highway Builders, LLC v. United States, 702 F.3d 1365 (Fed. Cir. 2012).

Sunday, April 21, 2013

Foreclosure Fraud Settlement Update: Banksters Begin Making Their Paltry Payments To Homeowners With Rubber Checks

ABC News reports:

  • Some of the foreclosure checks bounced.

    A bunch of big banks agreed to a $3.6 billion legal settlement a few months ago to halt a review of improper foreclosures. Under the settlement, checks will be sent to more than 4 million homeowners who lost their homes to foreclosure in 2009 and 2010.

    The first wave of checks was sent Friday. And, according to the Federal Reserve, at least some of them bounced. The Fed phrased it this way: "Some early recipients of checks informed the Federal Reserve's consumer helpline on Tuesday that they were told their checks could not be cashed."

    The Fed says the problem has been solved.

    Screwing up for fun and profit

    This is the latest episode in a long tragicomedy in which banks, regulators and consultants rival the Keystone Cops in ineptitude. Those banks, regulators and consultants have excelled at only one thing: protecting one another. Meanwhile, borrowers are abused repeatedly.

Homeowner Facing Foreclosure Gets 3 Months For Lying To Score Loan Modification; Small-Fish Suspect Snagged By Broad Investigatory Fishing Net Targeting Sibling-Pol's Campaign Activities

From the Office of the U.S. Attorney (Washington, D.C.):

  • Che M. Brown, 45, of Washington, D.C., was sentenced [] to three months of incarceration on a federal charge of bank fraud stemming from a scheme in which he submitted false documents to a mortgage lending service to win approval of a modification on a mortgage for his residence. [...] Upon completion of his prison term, Brown will be placed on five years of supervised release. During that time, the judge ordered that Brown perform 200 hours of community service.

    According to a statement of offense signed by the government as well as the defendant, Brown fell several months behind on his monthly mortgage in 2009. GMAC Mortgage LLC, a mortgage lending and servicing business, informed him that the mortgage was in default. GMAC also sent a letter to Brown in June 2009 that advised him that he should consider whether he was eligible for a loan modification that would make his monthly mortgage payment more affordable.

    From September 2009 through September 2010, Brown schemed to defraud GMAC by submitting documents that made it appear that he had received $35,000 in income that he, in fact, had never received. Based on those and other representations, Brown was deemed qualified for the mortgage modification, which ultimately reduced his payments by $717.44 a month, to $1,499.

    This marked the second time that Brown has been convicted of bank fraud. In 1995, he was convicted in the U.S. District Court for the District of Columbia of conspiracy to commit bank fraud in a scheme involving credit cards that resulted in $58,500 in losses.

    The current prosecution arose from a broader investigation into the campaign activities of Brown’s brother, Kwame R. Brown, the former chairman of the Council of the District of Columbia.(1) That investigation also led to the conviction of Kwame Brown in another bank fraud matter.

    Kwame Brown pled guilty in June 2012 to a federal charge of bank fraud stemming from false documents that he used to secure a $166,000 home equity loan, as well as a $55,335 loan that he used to purchase a boat.
For the U.S. Attorney press release, see Che Brown Sentenced to Three Months in Prison for Bank Fraud, Used False Documents to Modify His Mortgage (Claimed Income That He Didn’t Actually Receive).

(1) This incident serves as a reminder to take caution with who you hang around with (especially if you're up to no good and, in this case, have a criminal history of no good), lest you end up getting snagged in law enforcement's 'investigatory fishing net' intended for someone else. The cops may not have set out to look for you, but once they bag you (even for something unrelated to that which triggered the probe), they're not about to throw you back into the water.

Feds, Consumer Advocates Kick Off National Media Campaign To Education Public, Housing Providers On Rights, Duties Under Fair Housing Act

From the U.S. Department of Housing and Urban Development:

  • The U.S. Department of Housing and Urban Development (HUD) and the National Fair Housing Alliance (NFHA) today launched a national media campaign to educate the public and housing providers about their rights and responsibilities under the Fair Housing Act.

    The campaign, titled “Fair Housing Is Your Right. Use It,” includes English, Spanish, and Chinese radio and print public service advertisements (PSAs) that feature examples of actions which violate the Fair Housing Act and let the public know what to do if they experience housing discrimination. In addition to radio and print public service announcements, the campaign will use the latest digital and social me-dia to amplify the outreach effort.
  • One of the campaign’s print ads features a woman in a wheelchair and her service animal, drawing attention to persons with disabilities who often face housing discrimination. Another print ad featuring a woman wearing traditional Muslim headdress highlights the persistence of discrimination based on religion. Each PSA encourages anyone who experiences discrimination to call HUD’s hous-ing discrimination hotline (1-800-669-9777), contact a local fair housing agency, or visit HUD’s fair housing Web site:
  • In conjunction with the new PSA campaign, HUD and NFHA are also unveiling videos featuring people who experienced housing discrimination discussing how HUD or one of its partners provided assistance. One woman talks about how she was discriminated against because she was hard of hearing, while another shares her story of how a landlord denied her an apartment because she has children. These videos can be viewed on HUD’s YouTube channel.
For the HUD press release, see HUD Kicks Off Fair Housing Month With Launch Of National Media Campaign (HUD, National Fair Housing Alliance Campaign Will Address Housing Discrimination).