Saturday, May 25, 2013

Illinois Family Facing Imminent Foreclosure Dodges Boot After Cleaning Out Kitchen Cookie Jar & Finding $4.85M

In Geneva, Illinois, WBBM-TV Channel 2 reports:

  • The timing couldn’t have been better for a family from north suburban Geneva when they hit the jackpot after finding some old Lotto tickets stuffed in a cookie jar.

    Earlier this month, Ricardo Cerezo said his wife was cleaning the kitchen in the home they were about to lose to foreclosure. She told him to take the old Lottery tickets out of the jar and have them checked, or toss them out. “It was either take them, get them checked, or she was going to trash them that night,” he said.

    So he took the tickets to a local gas station to get them scanned. The first 8 or 9 tickets weren’t winners. “The following one was $3, so I was excited. I get to pay for my Pepsi. And then the last one said file a claim,” he said.

    Cerezo went online to check the ticket, and couldn’t believe it when the numbers matched the Feb. 2 Lotto drawing.

    “As each number kept matching, the smile kept going higher and higher, and when I realized we had all six numbers, it was that shocking moment of ‘Whoa, can this really be?’” he said. “Fast forward to the next day, Monday; called in sick from work, went down into Chicago. It’s one of feelings where it’s okay if they fire me.”

    He visited the Lottery offices in Chicago, and learned he’d won $4.85 million.

    Just three months before finding the winning ticket, Cerezo stood before a judge at a foreclosure hearing for their home. He was given a few more months to find a new home before they would be evicted.

    “That was on February 12th, so we were sitting on $4 million at that time in this jar,” he said. Cerezo said the family plans to pay off their home loan, get new cars, and give some of the winnings to charity.

200+ Attorneys, Support Staff That Represent Low-Income New Yorkers At NYC Non-Profit Public Interest Firm Conduct Mass Walkout Over Salary, Benefits Squeeze

In New York City, The Wall Street Journal reports:

  • More than 200 attorneys and support workers with Legal Services NYC, which aids impoverished New Yorkers, walked off the job Wednesday in a dispute over salary increases and retirement and health-care benefits.

    Legal Services NYC is the largest provider of civil legal services in the country and receives about a third of its funding from the federal government. The group expects that by 2015, it will have lost half of the federal funding it had in 2010, in part because of widespread spending cuts known as the sequester, said Executive Director Raun Rasmussen.

    The organization works with more than 45,000 low-income clients on issues such as eviction and foreclosure, domestic violence and unemployment insurance. Mr. Rasmussen said unless it reduces costs, as many as 50 employees would have to be laid off by the end of next year.
For more, see Lawyers Who Aid Impoverished New Yorkers Walk Off Job (Workers at Legal Services NYC Protest in Dispute Over Salary, Benefits).

See also:

S. Florida Feds Pinch Tax Preparer On Charges Relating To Alleged False Claims Of Entitlement To 1st Time Home Buyers Credit On Behalf Of Himself & Some Of His Customers

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

  • Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and Michael J. DePalma, Acting Special Agent in Charge, Internal Revenue Service, Criminal Investigations (IRS-CI), announced that Efrain Felipe, 41, of Hallandale Beach, was charged in a two count Information with making and subscribing a false tax return on behalf of a client, and aiding and abetting, in violation of Title 26, United States Code, Sections 7206(1) and 7206(1).
  • According to the charges, Felipe operated a tax preparation business in Broward County, and prepared fraudulent tax returns on behalf of his customers by claiming that some customers were entitled to a First Time Home Buyers Credit (FTHBC) of $7,500.00, for properties they did not own or for properties that were purchased years earlier. Felipe also falsely claimed the FTHBC on his own personal tax return.

Woman With Two Foster Children Faces Foreclosure Evictions Despite Protections Under Federal Law; Bankster Says Existing Lease Not "Bona Fide"

In Wilmington, North Carolina, WECT-TV Channel 6 reports:

  • Sheree Harrell, a woman who fosters children with autism, is facing eviction. The home she rents in Landfall was foreclosed on by the bank after the homeowner fell behind on his mortgage payments.

    Right now, Harrell has two foster children living with her. She said it would be disruptive to the children's progress if she's forced out of the house.

    The company the bank hires to handle foreclosures, Brock and Scott, sent Harrell an eviction notice.

    Under the Protecting Tenants at Foreclosure Act of 2009, renters must be allowed to stay in their homes until the end of their leases - if the home their renting is foreclosed on by the bank.

    There is a provision that said the renter can be evicted if they don't have what's called a "bona fide" lease. A lease is considered bona fide if the mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant, if the lease was the product of an arm's-length transaction, or if the rent is substantially less than fair market rate.

    Still, Harrell said the company is contesting her loan. Emails provided to us by Harrell show the company's position is that Harrell's lease is not bona fide.

    "They're going to have to drag me out of here," she said. "I will not go willingly. I know what they're doing is illegal and I'm not going to tolerate it." She said she's not leaving without a fight for the sake of her foster children.

Antitrust Feds Tack On Obstruction Of Justice Charge Against Accused Foreclosure Sale Bid Rigging Suspect In Connection With Alleged Deletion Of Electronic Records Related To Case, Software Installation Designed To Prevent Review, Recovery Of Destroyed Records

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

  • A federal grand jury in U.S. District Court for the Eastern District of California in Sacramento [] returned a superseding indictment charging Andrew B. Katakis, of Danville, Calif., with obstruction of justice related to a federal investigation into conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Calif., the Department of Justice announced.

    The remaining allegations are unchanged from the original indictment, which was returned by a federal grand jury on Dec. 7, 2011. The pre-existing counts charge Katakis, Donald M. Parker, Anthony B. Joachim and W. Theodore Longley with conspiring with other unnamed co-conspirators to rig bids and commit mail fraud when purchasing selected properties at public real estate foreclosure auctions. Wiley C. Chandler, another real estate investor who was also charged in the original indictment, pleaded guilty on Feb. 24, 2012.

    The added charge alleges that after Katakis received a letter notifying him that a federal grand jury had subpoenaed his bank account, he deleted and caused others to delete electronic records and documents related to the conspiracies.

    The superseding indictment alleges that Katakis also installed and caused others to install and use a software program that overwrote deleted electronic records and documents so that they could not be viewed or recovered.
For the Justice Department press release, see Northern California Real Estate Investor Indicted on Additional Charge (Superseding Indictment Adds Obstruction of Justice to Bid-Rigging and Mail Fraud Charges).

Friday, May 24, 2013

Class Action Accuses So-Called Payment Processor Of Screwing Consumers Seeking Debt Relief Services With Inflated Fees Executed Through Network Of Front-End Outfits

In San Francisco, California, Courthouse News Service reports:

  • So-called payment processor Meracord "loots" customers' accounts by taking exorbitant, fraudulent fees through a network of "front end" debt relief companies, customers claim in a RICO class action.

    Lead plaintiff Donte Cheeks sued Meracord LLC and its sureties, Fidelity and Deposit Company of Maryland and Platte River Insurance Company, in Federal Court.

    The four named plaintiffs claim that Meracord, based in Tacoma, Wash., changed its name from NoteWorld "after a number of class action lawsuits were filed against Note World. ... (M)any of the events described herein took place when the company was called 'NoteWorld,'" the complaint states.

    The Courthouse News database shows similar complaints against Meracord, including two class actions, in upstate New York, in two other California venues, and in Cleveland and Cincinnati.

    "Meracord engages and relies upon a network of 'front-end' debt relief companies ('Front DRCs') that it utilizes to recruit customers," the complaint states. "The Front DRCs offer to act as intermediaries between distressed and distraught debtors and their creditors, using inflated claims and misrepresentation about their services to sign up customers, and charging exorbitant, abusive, and often illegal fees once the mark is on the hook.
  • The class claims that Meracord changed its name from NoteWorld to try to hide from lawsuits just like this one: "By changing names, companies in the industry are able to wipe clean their online reputation virtually overnight, making it more difficult for consumers to associate the companies with lawsuits and other negative consumer feedback," the complaint states.

    The class claims that Meracord is a defendant in "numerous cases" around the country, and has settled at least two cases "that have severely depleted its available assets, including insurance policies."

    The complaint lists dozens of Front DRCs Meracord allegedly uses.

    The plaintiffs seek class certification and damages to be paid from "over $17 million" in surety bonds that Meracord allegedly carried. They are represented by Steve Berman with Hagens Berman Sobol Shapiro of Seattle.

NYC Feds' $17.75 Forfeiture Score Biggest In U.S. Marshals Service History; 14-Room Upper East Side Co-Op's Former Owner Now To Reside In Slammer For 12 Years For Running $292M Ponzi Scheme On Notorious Banksters

In New York City, the New York Post reports:

  • The US Marshals Service said [] that its $17.75 million sale of fraudster Hassan Nemazee’s plush Park Avenue penthouse marked the biggest real-estate deal in the agency’s 224-year history.

    The 14-room duplex was forfeited by the former Democratic campaign bundler as part of his guilty plea for running a $292 million Ponzi scheme on Bank of America, Citibank and HSBC.

    Combined with other properties and possessions that Nemazee coughed up — including an apartment in Rome, a Westchester estate, a 2008 Maserati Quattroporte and a 2007 Cessna airplane — the banks have gotten back more than $90 million, Manhattan US Marshal Joseph Guccione said.

    Nemazee’s former co-op at 770 Park Ave. was bought in March by hedge-fund analyst Thomas Purcell and his wife, Marina Shields Purcell, who’s the half-sister of actress Brooke Shields.

    The sprawling, 5,130-square-foot apartment was initially listed for $28 million in 2011.(1)

    Nemazee is serving 12 years in the slammer for bank and wire fraud.
Source: Park Ave. Ponzi pay.

(1) For a view of the lifestyle that a $292 million Ponzi scheme fuels, see Curbed NY: Inside a Jailed Fraudster's $28 Million Park Avenue Palace.

Four Convicted For Fraudulently Collecting Upfront Fees, Using Phony Letters With Bankster Logos In Screwing Hundreds Of Homeowners Seeking Loan Modifications

From the Orange County, California District Attorney:

  • Four men were convicted yesterday, May 8, 2013, of defrauding hundreds of victims in a real estate scam that included fraudulently collecting upfront fees for loan modification services and sending fake letters with the CitiFinancial or CitiMortgage logos offering home loan modification assistance. Victim losses in this case are estimated to be in excess of $130,000.
  • Jacob John Cunningham, 26, and John D. Silva, 28, both from Irvine, pleaded guilty to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses. Cunningham and Silva are each expected to be sentenced to six months in jail and five years formal probation, during which they will be prohibited from engaging in loan modification or loan consulting practices. They are also ordered to jointly pay $60,000 toward restitution by their sentencing date and will be ordered to pay additional restitution in an amount to be determined at a later hearing.

    Justin Dennis Koelle, 23, Costa Mesa, pleaded guilty to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses. He is expected to be sentenced to nine months in jail, five years of formal probation, during which he will be prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

    Dominic Adam Nolan, 32, Irvine, pleaded guilty to one felony count of conspiracy to collect illegal upfront fees. He is expected to be sentenced to six months in jail, five years of formal probation, during which he will be prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

    Andrew Michael Phalen, 26, Mission Viejo, pleaded guilty June 4, 2012, to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit fraud. He was sentenced to one year in jail, five years formal probation, during which he is prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.
For more, see Four Men Convicted Of Defrauding Hundreds Of Victims In Real Estate Loan Modification Scam (*Hundreds of fake letters with CitiFinancial or CitiMortgage logos sent as part of scam).

NY Lawyer Peddling Debt Relief Services Becomes First To Ever Be Criminally Prosecuted On Charges Stemming From CFPB Referral

In New York City, The Blog of LegalTimes reports:

  • The Consumer Financial Protection Bureau [] filed suit against two lawyers and two debt relief companies, alleging they charged thousands of consumers illegal advance fees and left some worse off financially.

    One of the lawyers, Michael Levitis, also faces mail and wire fraud charges brought by the Manhattan U.S. Attorney’s office - the first-ever criminal charges stemming from a CFPB referral.

    Brooklyn-based Levitis and his company, Mission Settlement Agency, as well as New Jersey lawyer Michael Lupolover and Premier Consulting Group, allegedly sold debt-relief services to consumers, promising to renegotiate or settle their debts, according to the complaint filed in U.S. District Court for the Southern District of New York.

    But the CFPB said the defendants illegally paid themselves first, with Mission and Levitis collecting $1.1 million up-front fees; Lupolover allegedly taking in $112,000 and Premier collecting $188,000. The Federal Trade Commission’s Telemarketing Sales Rule makes it illegal for debt relief providers to collect fees until at least one successful result has been achieved for the consumer.

    The Manhattan U.S. Attorney’s Office provided additional details, reporting that Mission had approximately 2,200 customers who paid a total of nearly $14 million for debt settlement services. Of these funds, Mission allegedly took more than $6.6 million in fees, while paying just $4.4 million to customers’ creditors.
For more, see CFPB Charges Two Lawyers in Debt Relief Scam.

For the U.S. Attorney press release and links to the formal charging documents, see Manhattan U.S. Attorney Charges Debt Settlement Company And Six Individuals For Multi-Million Dollar Scheme That Targeted Debt-Ridden Consumers (Two Former Employees of the Debt Settlement Company Have Already Pled Guilty; First-Ever Criminal Charges Based on Consumer Financial Protection Bureau Referral).

Ohio AG Tags Outfit Allegedly Peddling Bogus Loan Modification Services With Civil Suit

From the Office of the Ohio Attorney General:

  • Ohio Attorney General Mike DeWine [] announced a lawsuit against N.M.M.S.R. Incorporated, doing business as Making Home Affordable USA, and its owner Jason Keating of Maumee. The lawsuit charges Keating and his business with multiple violations of Ohio’s consumer laws. 
  • Making Home Affordable USA is located at 120 10th Street in Toledo. It offers loan modification and foreclosure assistance services through its “National Mortgage Modification Stimulus Home Saver Program.” Although the business’ name and website closely resemble that of the federal government’s Making Home Affordable program, Making Home Affordable USA is not associated with the federal government.

    According to the Attorney General, the business instructed consumers to stop making their mortgage payments (even if they were current on their payments) and stated that banks and lenders would not negotiate unless consumers were behind on their payments.

    Consumers paid 60 to 65 percent of their current mortgage payment to the business after the business assured them that the funds would be held in escrow and submitted to their lenders once a modification was reached. Consumers’ lenders never received any of the funds placed into the accounts.

Thursday, May 23, 2013

Indiana Woman Who Had Home Sold Out From Under Her In Tax Foreclosure Sale Fights To Get It Back; Currently Awaits State High Court Ruling In Seperate Case Addressing Constitutional Sufficiency Of Pre-Sale Notices Under 14th Amendment's Due Process Clause

In Mishawaka, Indiana, the South Bend Tribune reports:

  • A series of setbacks led to a Mishawaka woman's home being sold at a county tax sale, and a St. Joseph County judge is weighing whether she was adequately warned that her house was in jeopardy.

    Meanwhile, attorneys and judges around the state are waiting for the Indiana Supreme Court to rule on a case they heard earlier this year, which could determine how constitutional the state's tax sale process is.
  • The Indiana Supreme Court decided to take on the issue of due process and tax sale notifications, hearing oral arguments on Feb. 14. [...] In that case, M&M Investment Group v. Ahlemeyer Farms, the property was sold without notifying the bank that owned the mortgage, which had $700,000 outstanding.

    Indiana's law on tax sales require mortgage holders, even after the mortgage is initially recorded in public records, to send an auditor a certified letter every year asking for notification of any possible tax sales. In the Bartholomew County case, that did not happen.

    But a trial judge ruled in the bank's favor, and the Indiana Appeals Court agreed, saying, in part, "We therefore conclude that the Indiana pre-sale notice violates the Due Process Clause of the Fourteenth Amendment because it does not require the government to provide sufficient notice prior to the tax sale."

    The appeals court noted several earlier cases, quoting extensively from a 1983 Indiana case, Mennonite Board of Mission v. Adams, in which the U.S. Supreme Court ruled that the auditor did not go far enough in determining whether a mortgage was involved.

    The most recent appeals court ruling quoted from the Mennonite case: "A party's ability to take steps to safeguard its interests does not relieve the State of its Constitutional obligation. It is true that particularly extensive efforts to provide notice may often be required when the state is aware of a party's inexperience or incompetence."

    In a 2006 U.S. Supreme Court decision, Jones v. Flowers, the court addressed similar due process issues relating to an Arkansas property owner whose notices had been returned unclaimed.
For the story, see Woman fights to keep house (Judge reviews tax sale case -- as state court tackles the larger issue).

Elderly Homeowner On Verge Of Losing Mortgage-Free Home Over $4K+ In Back Taxes Saved By Good Samaritan; Senior Says Tax Bills Sent To Wrong Address

In Miami, Florida, WSVN-TV Channel 7 reports:

  • An elderly woman on the verge of losing her South Florida home received the best Mother's Day gift after a Good Samaritan came to her rescue.

    Thousands of unpaid property taxes almost caused Thelma Turner to lose the house she has called home all her life. "We grew up in that house," said Turner, "going to school, senior high school, all the neighbors know us and stuff."

    An unexpected gift gave Turner a second chance. "Now we're going to pay your house off," said foreclosure specialist Luis Valdeon. Turner had gone to foreclosure specialist Luis Valdeon for help. Turner could not come up with the money she owed to save her home.

    Valdeon paid off the back taxes of more than $4,000. Valdeon called it a late Mother's Day gift and a reverse birthday gift for him. "For me, to give her my birthday is the same as they give it to me. It's the same thing," said Valdeon.

    Turner's home was built in the 1930s and purchased by her grandmother in 1961. The home's mortgage was paid in full. Valdeon said no one should lose their home over unpaid taxes. "You imagine losing a free and clear house? The system really doesn't work," he said. "If you've been working in this country for 65 years, don't you think that people can not afford... can't they give them like a break?"

    Turner said she did not receive a tax bill since 2009 because it was being sent to the wrong address. She found out about the tax debt though a notice that her home would be auctioned. "Never, never, never, as long as I live and God is my witness, I will be in this situation again." she said.

    Turner hopes the house will remain in the family and plans on passing it on to her son Brandon.

Sneaky Accounting Firm CEO, Wife Squeezed For $110K+ Over Sleazy Move In Unloading Mansion While Stiffing Long-Time Friend/Real Estate Broker Out Of Sales Commission

In White Plains, New York, the New York Post reports:

  • Deloitte CEO Joe Echevarria and wife Ana have been ordered by a judge to pay $110,000 to their 82-year-old real-estate broker after cheating her over the sale of their New York mansion.

    The head of the prestigious firm didn’t account for the fact that Bernice Gottlieb, a longtime friend who even trained his wife as a real-estate broker, would sue them after they gave her the exclusive listing for their $3 million home — but then, the couple secretly sold it to realty firm Weichert, which handles Deloitte relocations, in 2011.

    But last week, Supreme Court Justice Mary H. Smith ruled their contract “unambiguously” made it clear the Echevarrias were obligated to direct all sales inquiries to Gottlieb, and that “Ana had admitted that she had failed to inform Ms. Gottlieb of the Weichert offer.”

    Echevarria, who became CEO of accounting, tax and consultancy firm Deloitte in June 2011, put his five-bedroom Irvington mansion on the market in March of that year for $3 million, and gave Gottlieb and her firm Hudson Shores Realtors a six-month exclusive right to sell it with a 4 percent commission on the sale price.

    In July 2011, according to court papers, Gottlieb brought in an offer of $2.4 million, which the following month Ana said they would accept “only if the closing was in two weeks” — which Gottlieb responded was impossible.

    The filing adds that the Echevarrias — who’d claimed in their legal response that they were unhappy with Gottlieb’s work and were in a rush to sell because they were moving to Miami — stopped communicating with Gottlieb, who discovered their deal with Weichert for $2.1 million when they called to ask for the keys.

    Gottlieb was awarded $85,333.32 plus interest from August 2011 and legal costs of $25,000. She told us, “I feel embarrassed, betrayed and humiliated. It’s hard for me to understand because I have great admiration for Joe Echevarria, and I knew them for years. We socialized . . . his wife worked for me. I am glad justice has been done, but it took two years.” Echevarria’s lawyer and a Deloitte rep didn’t get back to us.
Source: Tax mogul must pay broker.

For the trial judge's ruling, see Hudson Shores Realty v. Echevarria.

Loan Officer Gets 42 Months For Role In Scam That Included Identity Theft In Connection With Processing Mortgage Applications; Suspect Sold His Own Home To One Unwitting Victim For A $320K Profit; Another Swindled Victim Took $193K+ Hit

From the Office of the U.S. Attorney (Alexandria, Virginia):

  • Kenneth H. DiPasquale, 38, of Morgantown, W. Va., was sentenced [] to 42 months in prison, followed by three years of supervised release, for his role in a series of fraudulent mortgage loan transactions, including one in which he stole an individual’s identity and “sold” that individual his home for a nearly $320,000 profit. DiPasquale was also ordered to pay a total of $3,354,773 in restitution to his victims and to forfeit $529,098 in proceeds from his crimes.
  • According to court records, DiPasquale was employed in 2007 as a loan officer at Landover, Md., mortgage lender Citywide Mortgage. DiPasquale used that position to process loans based on false and fraudulent information, including for borrowers who had not applied for loans and who had no idea their names and identities had been used as borrowers in the transactions.

    In particular, DiPasquale processed fraudulent loans in exchange for kickbacks from a co-conspirator.  When he had trouble selling his own home in Bowie, Md., in October 2007, he stole the identity of an individual living in Arlington, Va., and “sold” this victim his house at a nearly $320,000 profit.

    He also engineered a series of transactions involving a homeowner in Hyattsville, Md., whom he swindled out of over $193,000.

    Co-conspirator Nadin Samnang, a former Virginia realtor and title company owner, was convicted of mortgage fraud-related charges following a trial in April 2012 and was sentenced to 84 months in prison.

    Co-defendant Lyle C. Williams pleaded guilty to conspiracy and identity theft charges in November 2012 and was sentenced to 18 months in prison.

Pair Peddling Nationwide "Walk Away Today" Foreclosure Rescue Racket Admit Scheme Was Nothing More Than Giant Rent Skimming Operation That Reaped Million$; 100s Of Duped Homeowners Signed Over Deeds; Perpetrators Then Pocketed Cash From Subsequent Tenants While Filing Phony HAMP Loan Mod Requests To Prolong Stiffing Lenders Out Of House Payments

From the Office of the U.S. Attorney (Alexandria, Virginia):

  • Mark S. Farhood, 49, formerly of San Diego, Cal., and Jason S. Sant, 37, of Lecanto, Fla., pleaded guilty [] to conspiracy charges in connection with their operation of a nationwide online foreclosure rescue scam that went by various names, including Home Advocate Trustees and Walk Away Today, and used various web sites, including and, to deceive hundreds of vulnerable, distressed homeowners into surrendering their properties to the company.
  • According to court records, Farhood and Sant co-owned Home Advocate Trustees, which also went by the names Walk Away Today, First Equity Trustees, Home Security Consultants, Sell Fast USA, Short Sale Buyer, USA Sell House Fast, and USA Rental Housing. They marketed the businesses nationwide as purchasers of distressed real estate and a means by which vulnerable homeowners could avoid foreclosure and the accompanying negative effects on their credit.

    The companies told homeowners they were in the business of negotiating with lenders to purchase mortgage notes at a discount and falsely claimed to have been in business for seventeen years, to have experienced a 90% success rate in purchasing such notes, and to be the nation’s largest volume buyer of short sale and over-leveraged real estate.

    As Sant and Farhood admitted in connection with their pleas, the businesses were a fraud, no such negotiations with lenders ever took place, and the scheme was merely a way for them to take possession of hundreds of residential properties, including homes within the Eastern District of Virginia, at virtually no cost and then reap millions of dollars in profits by renting the homes to unsuspecting tenants.

    Farhood and Sant further admitted that as part of the scheme, they submitted fraudulent loan modification applications to mortgage lenders under the U.S. Department of the Treasury’s Home Affordable Modification Program (“HAMP”) in the name of homeowners, without the homeowners’ knowledge or consent.

    Farhood and Sant used the fraudulent applications to stall foreclosures on the properties under their control and for which no mortgage payments were being made and to maximize the time period during which they could collect rental income.

Wednesday, May 22, 2013

Ohio Court Upholds Validity Of Defectively-Notarized Oil & Gas Lease; Exploration/Production Outfit Dodges Flood Of Landowners Challenging Improperly-Acknowledged Instruments Conveying Mineral Rights

From a client alert from the law firm McGuireWoods:

  • On April 15, 2013, U.S. District Judge John R. Adams of the Northern District of Ohio dismissed Ohio landowners’ claim that oil and gas leases not properly notarized are invalid, in Cole v. EV Properties, L.P.

    In this class action lawsuit, the landowner plaintiffs admitted to signing an oil and gas lease, but contended that the lease should be declared invalid because they did not acknowledge their signatures on the lease before a notary, as required by Ohio law. The landowners’ argument rested on their allegation that oil and gas leases are akin to standard leases of surface property, and not the conveyance of a greater interest in property.

    The court rejected the landowners’ argument, explaining that oil and gas leases are inherently different from standard leases of property and convey a fee simple interest in the rights contained therein.

    Based on this finding, the court agreed with the gas producer defendants that it should follow the ruling in Citizens National Bank v. Denison, in which the Supreme Court of Ohio held that “[a] defectively executed conveyance of an interest in land is valid as between the parties thereto, in the absence of fraud.”

    This result followed a similar result in the Trumbull County, Ohio, Court of Common Pleas, on Feb. 25, 2013, in Tomko v. Cobra Leasing, LLC, when the court granted the gas producer defendants’ motion to dismiss in its entirety, dismissing the landowner plaintiffs’ claim to invalidate their oil and gas lease due to defective notarization.

    Cole and Tomko were the first favorable rulings by Ohio federal and state courts on this issue for an exploration and production company. To be sure, a decision in the landowners’ favor on this issue would have prompted countless Ohio landowners to flood the court system with challenges to the validity of the landowners’ oil and gas leases.

Credit Reporting Agencies' Improper Reporting Of Short Sale As Foreclosure Haunts Ex-Homeowner Looking To Get Back Into Real Estate Market

Real estate columnist Kenneth Harney writes:

  • Are large numbers of homeowners who have negotiated short sales with lenders at risk because of a startling omission in the American credit system? Do their credit reports and scores indicate that they were foreclosed upon, rather than having negotiated a mutually agreeable resolution with their lender?

    The answers appear to be yes, and last week the Federal Trade Commission and the Consumer Financial Protection Bureau were asked to investigate why. The reality is this: The credit reporting system now in place does not have a separate code that distinguishes a short sale from a foreclosure. Yet there are crucial differences between the two:

    1- In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.

    2- In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they’re evicted. Frequently, there is damage to the house left by the departing owners; sometimes it is extensive. There is little or no cooperation between them and the bank.
  • George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage. According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, down-payment cash of 20 percent and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.

    That’s not unusual, Marron said, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants such as Albright.

    “I did my time,” Albright said in an interview. “I’m ready to move on,” but because of the inadequacy of current credit reporting practices “I’m still paying more for rent than I’d be paying on a new mortgage.”

Defaults On Mortgages Where Borrower Need Not Make Any Monthly Payments Of Principal & Interest On The Upswing?

The Wall Street Journal reports:

  • Growing numbers of older borrowers with reverse mortgages are delinquent on these loans. But a little-known federal guideline can help steer such individuals out of financial trouble.

    Reverse mortgages allow people age 62 or older to convert their home equity into cash. The homeowner can elect to receive a lump sum, a line of credit or monthly payments. With a conventional loan, such as a home-equity line of credit, a borrower can tap into a home's equity but must make monthly repayments. Reverse mortgages, in contrast, are due with interest when the borrower dies, moves or sells the house.

    Defaults occur when a borrower fails to pay property charges, including property taxes and homeowners insurance. Of the almost 600,000 reverse mortgages outstanding, 9.8% are currently delinquent, up from 8% in 2011, the first year for which statistics are available, according to the federal Department of Housing and Urban Development, whose Federal Housing Administration insures virtually all reverse mortgages.

    Delinquencies have increased in recent years as up to 70% of borrowers have opted for lump-sum payouts.

    "For many homeowners, taking all eligible cash upfront results in insufficient cash flow in later years for property upkeep, taxes and insurance," HUD warned in a November report to Congress.

    The good news: Help is available. Under guidelines HUD released in 2011, lenders—before initiating foreclosure proceedings—are required to notify borrowers who fall behind of free financial counseling. Such sessions can help them get back on track by, among other things, tapping benefit programs for some older individuals.

    Unfortunately, many older borrowers "don't know about these programs," says Ramsey Alwin, senior director of economic security at the National Council on Aging, one of a handful of nonprofits that provide the free counseling.

C. Florida R/E Operator Lacks Needed Cash To Take Prosecutor Up On 'Jail Time Buy Out" Offer; Gets 36 Months For Duping Homeowners In Foreclosure To Sign Over Their Deeds, Then Pocketing Cash By Selling/Renting To Unwitting Victims Without Paying Existing Liens

In Brooksville, Florida, the Tampa Bay Times reports:

  • Gaetano Antonelli promised to make dreams come true by selling foreclosed homes to buyers with bad credit.

    The problem, prosecutors say: Antonelli didn't own the homes, and in some cases the buyers didn't realize that until after they had moved in and made renovations.

    On Thursday, the 63-year-old pleaded no contest to fraud and selling real estate without a license. He was sentenced to 36 months in prison, with credit for time served since November. As part of a plea agreement, Circuit Judge Daniel B. Merritt Jr. ordered Antonelli to pay five victims a total of $40,667 in restitution. Payments owed to a sixth victim who recently died would have brought the total to nearly $50,000, Assistant State Attorney Mark Simpson said.(1)

    If convicted at trial on both counts, Antonelli faced up to 20 years in prison.

    Simpson said it's unclear if Antonelli has the money to pay restitution. During plea negotiations, however, Simpson offered to seek a more lenient sentence if Antonelli came up with money to repay the victims. When he didn't, Simpson pushed for the prison term. "This wasn't somebody who just found a bag of money that fell of a Wells Fargo truck and made a mistake," he said. "This is somebody who systematically went out and started doing this to folks knowing he had no right to do so."

    Investigators say Antonelli found homeowners facing foreclosure, telling them he could relieve them of their mortgages by suing their mortgage company. He told them they could walk away and maybe even get money back if they signed their deeds over to him by a power of attorney agreement. Then he listed the houses for sale on Craigslist without the knowledge of the homeowners.

    But Antonelli's scheme was based on a false premise: Once the foreclosure process begins, as it had in these cases, the owner has no legal right to sign over the deed. Antonelli later told Hernando Sheriff's detectives that he had the right to sue banks and mortgage companies because mortgages are not legally binding contracts.
For the story, see Man gets 36 months for selling homes he didn't own.

(1) Did death disentitle this scam victim (or more specifically, this scam victim's estate) from receiving restitution?

SC Appeals Court Reinstates Criminal Charges Against Sale Leaseback Peddler; Continuing To Prosecute Scammer After Earlier Contempt Convictions In Same Case Not Double Jeopardy

In Myrtle Beach, South Carolina, The Sun News reports:

  • Appeals court orders new trial for man in scam that targeted homeowners facing foreclosure

    Robert Steve Jolly, who operated an illegal foreclosure rescue scam through his Socastee-based Jolly & Associates, will face another trial on charges that he obtained clients’ property under false pretenses, the S.C. Court of Appeals ruled on Wednesday.

    The court reversed an earlier ruling by Judge Benjamin Culbertson, who in 2011 dismissed two of five felony charges that Jolly obtained property under false pretenses. Culbertson said in his ruling that prosecuting Jolly on the two charges would amount to double jeopardy because Jolly previously had been found guilty of contempt of court related to foreclosure actions in those two cases.

    The appeals court said the contempt charges were separate and different from the fraud charges, even though all of the charges stemmed from the same activity, clearing the way for another trial.(1)

    Jolly, 64, was convicted during a jury trial of the other three charges of obtaining property under false pretenses. He is serving a 10-year prison sentence at MacDougall Correctional Institution in Ridgeville. The appeals court dismissed Jolly’s appeal of those convictions earlier this year.

    No new trial date has been scheduled for the two felony charges Jolly still faces.

    Court documents show Jolly targeted home owners who were in danger of defaulting on their mortgages, saying he could save their homes if they would sign the properties over to him through a quit-claim deed. Jolly told the home owners that he would pay off their mortgages once they transferred the property. He also told the home owners to submit future mortgage payments to him instead of the original mortgage holder.

    Jolly never paid the mortgages and kept the money for himself, causing foreclosure lawsuits to be filed against at least 45 of his clients. Once the properties were in foreclosure, Jolly filed multiple frivolous actions in the cases to stall the lawsuits, according to court documents. Jolly’s filings created such a backlog of cases that Judge Michael Baxley was assigned to clear them.

    Baxley eventually voided all of the quit-claim deeds Jolly had filed and issued an order holding Jolly in criminal contempt of court. In his order, Baxley said Jolly’s actions through court filings and during hearings exhibited disrespect for the court and hampered witnesses and “were calculated to obstruct, degrade and undermine the administration of justice.” Jolly was sentenced to six months in jail on the contempt charge.
For the story, see Appeals court orders new trial for Myrtle Beach area man convicted in foreclosure rescue scam.

For the ruling, see State v. Jolly, No. 2011-190688 (SC App. May 8, 2013).

(1) A short excerpt from the court's ruling:
  • The State argues the trial court erred in dismissing two indictments for obtaining property by false pretenses based on double jeopardy because the elements of obtaining property by false pretenses were distinctly different from the elements of criminal contempt and each required a proof of fact the other did not. We agree.
  • "A defendant may be severally indicted and punished for separate offenses without being placed in double jeopardy where a single act consists of two distinct offenses." Brandt, 393 S.C. at 538, 713 S.E.2d at 597 (internal quotation marks omitted).

Tuesday, May 21, 2013

Underwater Homeowner's Bankruptcy Maneuver Leaves Another 'Stripped-Off" Mortgage-Holding Bankster Holding 'Unsecured' Bag; Federal Appeals Court: "We Find Nothing In The Act To Suggest That Congress Intended To Bar Lien-Stripping Of Worthless Liens In Chapter 20 Proceedings!"

From a Opinion Summary:

  • Debtors filed a Chapter 7 bankruptcy petition and sought to discharge their unsecured debt, strip down liens on their primary residence and a rental property, and obtain a loan modification to address mortgage arrears on the properties.

    The Trustee subsequently challenged confirmation orders entered by the bankruptcy court and affirmed by the district court, stripping off junior liens against debtors' residences.

    The Trustee argued that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a per se rule barring lien-stripping in so-called "Chapter 20" cases.(1) The Act, however, did not bar the orders entered by the bankruptcy court, and the stripping off of valueless liens - liens secured by collateral without a single penny of value to support it - was otherwise consistent with the Bankruptcy Code.(2) Accordingly, the court affirmed the judgment.
Source: Opinion Summary: Branigan v. Davis.

For the ruling, see Branigan v. Davis, No. 12-1184 (4th Cir. May 10, 2013).

(1) In actuality, there is no such thing as a "Chapter 20" bankruptcy (the U.S. Bankruptcy Code, as currently constituted, only has 15 chapters).The appeals court addresses "Chapter 20" in footnote one of its majority opinion:
  • "Chapter 20" is a colloquial reference to a Chapter 13 bankruptcy filed within four years of a Chapter 7 bankruptcy that concluded with a discharge.
(2) The majority ruling sums up its analysis of the relevant law and its application with the following comments:
  • In sum, although BAPCPA clearly tipped the bankruptcy scales back in the direction of creditors, we find nothing in the Act to suggest that Congress intended to bar lien-stripping of worthless liens in Chapter 20 proceedings.

    This, we conclude, is the most sensible reading of a complex statutory scheme that admittedly "abounds with arbitrary distinctions." Lane, 280 F.3d at 669. We therefore affirm the judgment of the district court.

Alabama Man Who Lost Real Estate In Tax Foreclosure Scores Windfall As State Appeals Court Kiboshes Mortgage Lienholder's Attempt To Snatch Surplus Proceeds To Satisfy Loan

From a Real Estate Finance Newsletter from the law firm Bradley Arant Boult Cummings LLP:

  • In Alabama, when a property owner fails to pay his ad valorem property taxes, his property may be sold at a public auction to the highest bidder (the “tax purchaser”). Statutory law in Alabama provides that the owner of the property who failed to pay the taxes, and certain other parties, such as a lender holding a mortgage on the property, have the subsequent right to redeem the property by paying the back taxes, the accrued interest and any excess bid paid by the tax purchaser at the tax sale.

    However, the Alabama Court of Civil Appeals recently addressed the rights of redemption by various parties and reached a decision that not only penalizes a lender for redeeming property in order to protect its interest but also provides a windfall to a property owner who failed to pay his property taxes and allowed his property to be sold at a tax sale.


    In First United Security Bank v. McCollum, the Alabama Court of Civil Appeals addressed the rights of a lender that redeems property sold at a tax sale as a result of its borrower’s failure to pay his property taxes. In McCollum, the property owner executed a promissory note and a mortgage in favor of his lender.

    When the property owner failed to pay his 2009 property taxes, his property was sold at a tax sale. The tax purchaser not only paid the back taxes for 2009, but also paid an excess bid of $32,305.12. The lender subsequently foreclosed on the property and recorded its foreclosure deed in the county where the property was located. The lender, as the current owner of the property, then redeemed the property by paying the back taxes for 2009, interest and the excess bid of $32,305.12.

    The lender then applied to the probate court for reimbursement of the excess bid it paid to redeem the property. The probate court refused, saying that the excess bid could only be claimed by the original property owner, that is, the individual who failed to pay the taxes on the property.

    In rejecting the lender’s claim for reimbursement of the excess bid, the Court in McCollum stated that only the property owner was entitled to receive the excess bid even though such owner did not pay to redeem the property. The court based its ruling on Section 40-10-28 of the Alabama Code which provides, in pertinent part, as follows:

    The excess arising from the sale of any real estate remaining after paying the amount of the decree of sale, and costs and expenses subsequently accruing, shall be paid over to the owner, or his agent, or to the person legally representing such owner, or into the county treasury, and it may be paid therefrom to such owner, agent or representative in the same manner as to the excess arising from the sale of personal property sold for taxes is paid.

    The Court then ruled that even though the lender foreclosed on the property and was now the owner of the property, the lender still would not be entitled to receive the excess bid because the lender foreclosed after the tax sale took place.

    Therefore, the only person entitled to recover the excess bid was the owner of the property at the time of the tax sale, the person who failed to pay the property taxes. The Court reached its decision even though a party other than the property owner paid the excess bid as part of its redemption of the property.
For the story, see Pitfalls in the Redemption of Property by Lenders.

For the court ruling, see First United Security Bank v. McCollum, (Ala. Civ. App. November 30, 2012).

Lack Of Contract Privity Between Mortgage Servicer, Borrower Sinks Homeowner's Claim Under Ohio Consumer Protection Law; Court Ruling Kiboshes Use Of Attorney Fee-Shifting Statute Against 3rd Party Banksters

In Columbus, Ohio, The Columbus Dispatch reports:

  • The Ohio Supreme Court has ruled that servicing a residential mortgage does not constitute a “consumer transaction” as defined by state law, a ruling that consumer groups and attorneys say eliminates a protection for homeowners trying to save their homes amid the housing collapse.

    The ruling stems from a lawsuit filed by a Norwalk homeowner against Barclay’s Capital Real Estate in U.S. District Court in Toledo.

    The homeowner, Sondra Anderson, alleged that Barclay’s, which operated the mortgage-servicing business under the name HomEq before selling it three years ago, had not applied her mortgage payments correctly. As a result, she was stuck with hundreds of dollars worth of fees that it has yet to account for, despite her attempts to obtain more information, said her attorney, John Murray of Sandusky. He said Anderson is up to date with her mortgage payments.

    The federal court asked the Supreme Court for clarification of the situation in the context of the Ohio Consumer Sales Practices Act, which generally prohibits unfair or deceptive acts in consumer transactions. It is common for federal courts to ask for guidance from the Supreme Court on questions of state law.

    The court, in a 5-2 ruling written by Chief Justice Maureen O’Connor, effectively determined that the interaction between the servicer and the homeowner is not a consumer transaction. Mortgage-servicing companies act as an agent for the lender by collecting payments, late fees and other assessments and handling day-to-day interactions between lenders and their customers.

    “Mortgage servicing is a contractual agreement between the mortgage servicer and the financial institution that owns both the note and mortgage,” she wrote. “Mortgage servicing is carried out in the absence of a contract between the borrower and the mortgage servicer.”

    O’Connor acknowledged that the servicer’s duties may involve interactions with borrowers and may even help them modify their loans, but the company does that on behalf of the financial institution.

    In his dissent, Justice William O’Neill said dealings between consumers and mortgage servicers should not be exempt from the law.

    Given the foregoing history of protecting consumers when they are forced into the hands of third-party debt collectors, it is wholly appropriate to also protect residential-mortgage-loan borrowers when they are forced into the hands of mortgage-loan servicers,” he said.

    The issue of whether the state’s consumer-protection law applies in these relationships was important because the law would have allowed consumers the possibility of recovering attorney fees along with damages, attorneys say.

    A lot of homeowners in foreclosure don’t have the money to pay the attorneys to represent them,” said Linda Cook, senior staff attorney for the Ohio Poverty Law Center. “Legal-aid resources are limited ... so having fee-shifting statutes in consumer sales practices actions level the playing field.”

    Cook disagreed with the ruling, saying mortgage servicers “are the middlemen, and most of the time that’s the only entity that homeowners deal with once the loan is closed.”

    Murray said the problems Anderson has been facing are industry-wide. “It’s unfortunate for consumers to not have this protection,” he said. Murray said the ruling will not stop the lawsuit that he expects ultimately will include tens of thousands of homeowners.

    Attorney General Mike DeWine’s office, which also asked the court to rule on Anderson’s behalf, said it, too, was disappointed in the court’s ruling.

Bankster To File Foreclosure Lawsuit Against Colorado Homeowner Who Questioned Constitutionality Of Non-Judicial Process "To Remove Any Due Process Concerns" That Come From A Public Trustee Foreclosure

In Denver, Colorado, The Denver Post reports:

  • The owners of an Aurora woman's mortgage said they absolutely will file a foreclosure lawsuit to take her house because of claims that Colorado's public trustee process is unconstitutional.

    In a request to dismiss a federal lawsuit against them, lawyers for U.S. Bank on Thursday said they'll pursue a foreclosure against Lisa Kay Brumfiel in Arapahoe County District Court "to remove any due process concerns" that come from a public trustee foreclosure.

Robosigning, Sewer Service Allegations Continue Dogging Banksters In Recent California AG Suit Tagging Chase For Practices In Credit Card Collection Cases

From the Office of the California Attorney General:

  • Attorney General Kamala D. Harris [] filed an enforcement action against JPMorgan Chase & Co. (Chase) alleging that the bank engaged in fraudulent and unlawful debt-collection practices against tens of thousands of Californians.

    The suit alleges that Chase engaged in widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a three-year period.

    “Chase abused the judicial process and engaged in serious misconduct against California credit card borrowers,” Attorney General Harris said. “This enforcement action seeks to hold Chase accountable for systematically using illegal tactics to flood California’s courts with specious lawsuits against consumers. My office will demand a permanent halt to these practices and redress for borrowers who have been harmed.”

    From January 2008 through April 2011, Chase filed thousands of debt collection lawsuits every month in the State of California. On one day alone, Chase filed 469 such lawsuits in California. The Attorney General’s complaint against Chase alleges that, to maintain this pace, Chase employed unlawful practices as shortcuts to obtain judgments against California consumers with speed and ease that could not have been possible if Chase had adhered to the minimum substantive and procedural protections required by law.

    “At nearly every stage of the collection process, Defendants cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits,” the complaint states.

    Chase used California’s judicial system as a mill to obtain default judgments, the suit alleges, using illegal tactics to flood the state’s court system in order to secure default judgments and garnish wages from Californians.

    The alleged misconduct includes:

    Robo-signing: Chase illegally robo-signed various litigation filings, including sworn documents, declarations, and verified complaints, without reviewing the relevant files or bank records or even reading the documents before signing.

    Sewer Service”: Chase failed to properly serve notice of debt collection lawsuits against consumers while claiming they had been served as required by law. This practice, known as “sewer service,” deprives the consumer of any notice of the lawsuit.

    Filing Irregularities: Chase haphazardly assembled its official legal filings. For example, Chase failed to redact consumers’ personal information in attachments to filings, potentially exposing them to identity theft and in violation of California law. In addition, when asking courts to enter default judgments against consumers, Chase consistently swore under penalty of perjury that the consumers were not on active military duty. In fact, Chase never checked. This deprived servicemembers of important legal protections to which they are entitled while on active duty.

Monday, May 20, 2013

WV Non-Profit Public Interest Lawyers Take Up Fight For Another Homeowner Over Allegations Of Improper Debt Collection Activities Against Notorious Banksters

In Charleston, West Virginia, The West Virginia Record reports:

  • A Charleston man is suing Bank of America N.A. and JPMorgan Chase Bank N.A. for illegal debt collection in two separate lawsuits.

    In 2005, William Martin was induced into two simultaneous loans with Quicken Loans based on misrepresentations regarding the actual value of his property, according to two complaints filed April 17 in Kanawha Circuit Court.

    Martin claims his Pennsylvania home secured the loans and the combined indebtedness of the two loans was more than $293,000; the first mortgage was for $187,000 and the second mortgage was for $106,300.

    Quicken’s appraiser appraised the property at a value of $300,000 when, unknown to Martin, the property was only worth approximately $240,000, according to the suits.

    Martin claims the first mortgage was subsequently assigned to Bank of America and the second mortgage was assigned to Chase.

    In January 2006, Martin discovered the inflated appraisal when his job required that he relocate to West Virginia, according to the suits.

    Martin claims after he moved he was unable to sell the property for enough to cover the two loans and, because he could not sell the home for enough to satisfy the indebtedness, he contacted the defendants to explore loss mitigation alternatives.

    The defendants refused to provide Martin with any assistance and he obtained counsel, which then provided the defendants with his counsel’s information, according to the suits.

    Martin claims despite being aware that he was being represented by counsel, the defendants continued to attempt to contact him to collect the debt.

    Bank of American engaged in illegal debt collection attempts on at least 19 occasions and Chase engaged in illegal debt collection attempts on at least 20 occasions, according to the suits.

    Martin is seeking actual damages and civil penalties of $4,800 for each violation pursuant to West Virginia code. He is being represented by Bren J. Pomponio and Sean W. Cook of Mountain State Justice.
Source: Man sues Bank of America, JPMorgan Chase for illegal debt collection.

(1) Mountain State Justice, Inc. is a non-profit public interest law office dedicated to pursuing litigation focusing primarily on combating predatory lending and abusive debt collection techniques on behalf of low-income West Virginians, and which provides free legal services in its areas of practice to qualifying individuals.

See Despite Jury's Actual Damage Award Of $0, Booted WV Homeowner Walks Away With $32K In Inflation-Adjusted Civil Penalties, $30K In Attorney Fees Anyway In Connection With Foreclosing Lender's Unlawful Debt Collection Practices for a post on a recent West Virginia Supreme Court of Appeals case in which Mountain State Justice scored a win for another screwed over homeowner.

Bay State Senator To Feds: Why The Hell Aren't You Ever Taking The Sleazy Banksters To Trial?

Mother Jones reports:

  • On Tuesday, fierce consumer advocate and needler of banks Sen. Elizabeth Warren (D-Mass.) called out Wall Street regulators for their habit of giving tepid punishments to misbehaving banks, and asked the agencies to justify their policy of settling with the wrongdoers out of court.

    Warren sent a letter to the Justice Department, as well as to the Securities and Exchange Commission and the Federal Reserve, asking them for evidence on how a settlement that doesn't require a bank to admit guilt would be better policy than taking the bad apple to trial. If regulators at least show that they are willing to play tough, she argued, it will help deter bad behavior and allow regulators to negotiate bigger fines in the event of a later settlement.

    Here are a few snippets:

    There is no question that settlements, fines, consent orders, and cease and desist orders are important enforcement tools, and that trials are expensive…But I believe strongly that if a regulator reveals itself to be unwilling to take large financial institutions all the way to trial…the regulator has a lot less leverage in settlement negotiations and will be forced to settle on terms that are much more favorable to the wrongdoer…If large financial institutions can break the law and accumulate million in profits, and if they get caught, settle by paying out of those profits, they do not have much incentive to follow the law.

NYS Intermediate Appeals Court: OK To Screw Big-Time Bond Insurer In Collateralized Crappy Mortgage Transaction; Victim Was Too Commercially Sophisticated, It Should Have Known Better Than To Get Into A Deal Like That!

The Wall Street Journal reports:

  • Goldman Sachs Group Inc. obtained a victory in New York state appeals court in a case involving a complex mortgage security, moving the firm further from a crisis-era cloud.

    The New York state appeals court tossed out a lawsuit on Tuesday by bond insurer ACA Financial Guaranty Corp., which got burned in a complex security deal along with investors while hedge fund Paulson & Co. scored big profits.

    ACA had maintained that Goldman fraudulently induced it to insure the collateralized-debt- obligation deal known as Abacus 2007-AC1.

    A CDO is a pool of loans, such as subprime mortgages, sold in slices to investors. Goldman arranged it just as the housing market was collapsing in 2007 in the months leading up to the financial crisis.

    The New York State Supreme Court’s Appellate Division, in a 3-2 decision, dismissed ACA’s fraud claims against Goldman, saying as a “highly sophisticated commercial entity,” ACA should have realized something was amiss.
  • “It’s a good day for Goldman, but the other shoe may still drop,” said John Coffee, a professor at Columbia Law School in New York. With a 3-2 decision on a high-profile case, the matter “is likely to go up to the court of Appeals,” Mr. Coffee added.
For more, see Judge Says Insurer Should Have Known Better on Debt Deal (Goldman Sachs scored a victory in a New York state appeals court Tuesday, winning the dismissal of a lawsuit filed against it by a bond insurer over a financial product that went sour during the financial crisis).

Federal Judge Leaves Constitutional Question Involving Colorado Foreclosure Laws Open While Formally Halting Homeowner's Foreclosure Sale

In Denver, Colorado, The Denver Post reports:

  • A federal judge Tuesday formally stopped the foreclosure auction of an Aurora woman's house, leaving unanswered whether he can determine whether a part of Colorado's foreclosure laws is unconstitutional.

    While U.S. District Judge William J. Martínez's order enjoins U.S. Bank, the trustee on Lisa Kay Brumfiel's mortgage, from seeking a public-trustee foreclosure, it doesn't stop the bank from pursuing her house the old-fashioned way — via a lawsuit in state court.
  • Although U.S. Bank said it would never again seek a public-trustee foreclosure against Brumfiel's house — essentially rendering her federal lawsuit moot — Martínez did not dismiss her complaint outright, because the state judge hasn't ruled yet.

    That means the question of whether Brumfiel's constitutional right to due process — guaranteed by the 14th Amendment — is violated remains on the table for now. But that can change.

    Martínez also allowed two advocacy groups — the Colorado Center on Law and Policy and the Colorado Progressive Coalition — to file briefs regarding the constitutionality issue.

BofA Feels Sharp Teeth Of Newly-Minted California Homeowner Bill Of Rights; Borrower's Successful Arguments In Scoring Injunction Could Cost Bankster Upwards Of $60K In Legal Fees & Costs Alone

Housing Wire reports:

  • A California man successfully halted a foreclosure sale on his property using the newly minted California Homeowner Bill of Rights to obtain a court injunction against two foreclosing parties: Bank of America and its ReconTrust Co. subsidiary.

    For simply obtaining the HBOR injunction, the homeowner’s attorney is requesting $20,255 in legal fees and costs – a compensation request that is permissible under HBOR since the legislation allots borrowers reasonable attorneys fees and expenses for successfully obtaining an injunction.

    Attorney Robert Jackson with Jackson and Associates out of California says the injunction alone may cost BofA/Recontrust upwards of $60,000 when calculating in attorneys fees and expenses from both sides.

    "The biggest problem with the HBOR from the investor standpoint is the litigation risk of having to pay legal fees," Jackson said. "The way the thing breaks down is when you get an injunction, the prevailing borrower gets all of their legal fees paid by the servicer and the investor."

    This is one of the first legal disputes to show the real strength of HBOR and it’s effectiveness in stalling proceedings and increasing expenses for servicers that are accused of violating one of the provisions of HBOR.

    Jackson has spent months warning servicers about the hidden litigation expenses facing firms when they pursue nonjudicial foreclosures in an HBOR world.

    The new case in question – Singh v. Bank of America (Recontrust Co.) – was filed by a borrower who accused BofA and Recontrust of violating HBOR’s ban on dual-tracking.

    Singh claimed the bank failed to respond to his request for a loan mod before filing for a foreclosure sale.

    Using the HBOR provision against dual-tracking, Singh filed suit in the U.S. Eastern District of California, requesting injunctive relief to prevent the sale of his home during the pending dispute.

    The court granted his motion and even noted the California Homeowner Bill of Rights "offers homeowners greater protection during the foreclosure process."

    In evaluating HBOR and the plaintiff’s allegations, the court said the homeowner "has adequately shown he is likely to succeed on the merits in light of California’s new Homeowner Bill of Rights."

    The court granted the injunction, which is loaded with potential attorneys fees.

    If you add in the bank's own attorney fees, the injunction alone could carry a $60,000 price tag, Jackson estimates.

    "They now have to file an answer to this thing, and they have to produce evidence showing they are in compliance before this case can go on," he added.

    Not to mention, the bank is now subject to discovery – with those costs possibly running the financial firm another $50,000 at least, Jackson said.

    The servicer also will have to pay legal fees and expenses to make a factual showing to set aside the injunction, which could be another $50,000 to $60,000 in legal expenses, Jackson suggested.

    Meanwhile, the property in question has an online estimate of around $273,000, the veteran real estate attorney pointed out. So when you assess legal fees long-term, servicers could face $100,000 or more in legal expenses on a property not worth much more.

    Jackson predicted early on that more servicers and investors would file judicial foreclosures, fearing litigation expenses stemming from HBOR. He believes the $20,000 in automatic attorneys fees for a successful injunction alone is proof of a legal landmine.

    "This is just one motion that was granted," he said.

    "Under HBOR, the injunction is in place until Bank of America proves that it didn’t violate the HBOR to the satisfaction of the court. They have to file an answer to this thing, and they have to produce evidence that they are in compliance before this case can go on," Jackson concluded.
Source: California Homeowner Bill of Rights blocks BofA foreclosure.

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

Sunday, May 19, 2013

More Homeowner Horror Stories To Come As Banksters Begin Unloading Servicing Rights; Trouble Expected As Buying & Selling Servicers Begin Fumbling Handoffs

In Charlotte, North Carolina, the News & Observer reports:

  • Millions of homeowners around the country have received an unexpected message from their banks: Goodbye.

    After years of collecting mortgage payments from as many people as they could, big U.S. banks such as Bank of America and Wells Fargo are scaling back. As servicing mortgages grows less lucrative, they’re selling the rights to do so in deals measured by the billions.

    The buyers are specialty companies much less known to the public. And as the massive transfers take place, regulators have signaled they are concerned about a small but growing fraction of homeowners who report falling through the cracks.

    Some have found their online accounts unavailable. Others have reported delays in receiving account numbers. The details of some promised loan modifications haven’t been carried through with the new servicer.

    In Charlotte, one man said his short sale, arranged with Bank of America, wasn’t honored after the mortgage was transferred. The home is now in foreclosure.

    Tales like these have led the Consumer Financial Protection Bureau and Conference of State Bank Supervisors to warn the industry they’ll be paying close attention to how the handoffs work.

Nebraska Supremes: Special 3-Month Statute Of Limitations When Seeking Deficiency Judgments Applies Only To Non-Judicial Foreclosures; Lenders That Go To Court Seeking Trust Deed Enforcement Get Five Years To Initiate Deficiency Proceedings

From US Law:

  • Defendants gave a promissory note to Bank and secured a loan with a trust deed on real property. Defendants defaulted on the note, and Bank initiated foreclosure proceedings. The property was sold after a sheriff's sale. Bank subsequently filed a complaint to recover the deficiency.

    The district court granted Defendants' motion for summary judgment, holding that because Bank filed its complaint ninety-nine days after the sheriff's sale, the action was barred by the three-month statute of limitations in Neb. Rev. Stat. 76-1013.

    The Supreme Court reversed, holding (1) the special three-month statute of limitations on actions for deficiency set forth in the Nebraska Trust Deeds Act applies where a lender elects to judicially foreclose upon the real estate, but the special limitation applies only where the property has been sold by exercising the power of sale set forth in the trust deed; and (2) because the judicial foreclosure of the trust deed in this case did not result in the sale of property under a trust deed, it did not fall under the statutory language in section 76-1013, and the deficiency action was governed by the general statute of limitations for actions on written contracts.(1) Remanded.
Source: Opinion Summary - First Nat'l Bank of Omaha v. Davey.

For the court ruling, see First Nat'l Bank of Omaha v. Davey, 285 Neb 835 (Neb. May 3, 2013).

(1) Excerpts from the court ruling's Introduction and Conclusion:
  • In this appeal, we must determine whether the special 3-month statute of limitations on actions for deficiency set forth in the Nebraska Trust Deeds Act (Act)[1] applies where a lender elects to judicially foreclose upon the real estate. We conclude that the special limitation applies only where the property has been sold by exercising the power of sale set forth in the trust deed.

    As we will explain, our conclusion follows from our previous decisions under the Act, is faithful to the plain language of the statute, avoids absurd results, and is consistent with decisions in other states. We therefore reverse the contrary decision of the district court.
  • Based on a previous interpretation by this court, we conclude that the statute of limitations in § 76-1013 applies only to deficiency actions filed after the exercise of the power of sale provided in a trust deed.

    A deficiency action brought following the judicial foreclosure of a trust deed is governed by the general 5-year statute of limitations for actions on written contracts in § 25-205.

    Because First National's deficiency action was brought within 5 years of the judicial sale of the real property, the district court erred in granting the Daveys' motion for summary judgment on the ground that the action was barred as untimely. Accordingly, we reverse the judgment and remand the cause for further proceedings consistent with this opinion.

Nevada Supremes: Little Downside For Banksters Engaging In Mediation-Associated Bad Faith; Trial Judge's Failure To Impose Loan Modification OK; Well Within Court's Discretion To Limit Lender Sanctions To Simply Withholding FMP Certificate & Granting $3,500 In Homeowner Attorney's Fees

From US Law:

  • Homeowner attended a first Foreclosure Mediation Program (FMP) mediation with Citimortgage, after which Defendant was denied a loan modification. The district court subsequently ordered a second mediation.

    PennyMac Corp. later obtained beneficial interest in the deed of trust and promissory note and attended the second mediation.

    The mediator determined that PennyMac failed to bring the promissory note, deed of trust, and other documents to the mediation and that PennyMac's representative lacked authority to negotiate.

    Homeowner filed a petition for judicial review, requesting sanctions, attorney fees, and a judicially imposed loan modification.

    The district court imposed sanctions against PennyMac but declined to impose a loan modification or monetary sanctions beyond the amount of attorney fees.

    The Supreme Court affirmed, holding (1) Homeowner had standing to challenge the district court's order on appeal; and (2) the district court acted within its discretion in denying an FMP certificate and in determining sanctions.(1)
Source: Opinion Summary - Jacinto v. PennyMac Corp.

For the court ruling, see Jacinto v. PennyMac Corp., 129 Nev. Advance Opinion 32 (May 2, 2013).

(1) From the Nevada Supreme Court ruling:
  • A deed of trust beneficiary seeking an FMP certificate must attend the mediation, participate in good faith, bring the required documents, and if attending through a representative, the representative must have authority to modify the loan or have access at all times to such a person. NRS 107.086(4), (5); Leyva, 127 Nev. at ___, 255 P.3d at 1279.

    If the district court finds noncompliance with these requirements, the bare minimum sanction is that an FMP certificate must not issue. Holt v. Reg'l Tr. Servs. Corp., 127 Nev. ___, ___, 266 P.3d 602, 607 (2011). In the absence of factual or legal error, the choice of any further sanctions in addition to withholding the FMP certificate is committed to the district court's sound discretionPasillas v. HSBC Bank USA, 127 Nev. ___, ___, 255 P.3d 1281, 1287 (2011).

    In Pasillas, we set forth a nonexhaustive list of factors for the district court to consider in weighing the appropriate sanctions to impose when a party has violated the FMP requirements. 127 Nev. at ___, 255 P.3d at 1287.

    Relevant to this matter is "whether the violations were intentional, the amount of prejudice to the nonviolating party, and the violating party's willingness to mitigate any harm by continuing meaningful negotiation." Id.

    Here, the district court found that PennyMac violated NRS 107.086(4) by failing to bring certified copies of the promissory note and deed of trust, although it did provide noncertified copies, and the district court found that PennyMac failed to provide an appraisal, violating FMR 11's document-production requirements. The court further concluded, consistent with the mediator's findings, that PennyMac's representative lacked sufficient authority to negotiate a modification. The district court found that PennyMac was a flagrant violator of the document-production requirements, and concluded that PennyMac had participated in the FMP process in bad faith.

    It therefore granted Jacinto's petition for judicial review, denied an FMP certificate, and imposed additional sanctions of $3,500, which represented the attorney fees incurred by Jacinto for the second mediation and hearing on the petition for judicial review, but the district court denied Jacinto's request for a loan modification.

    Having reviewed the record and considered the parties' arguments, we conclude that the district court made sufficient findings and conclusions, it properly considered the nonexhaustive Pasillas factors, and it acted within its sound discretion in determining the amount and nature of sanctions. Pasillas, 127 Nev. at ___, 255 P.3d at 1286-87.

    The district court found that PennyMac acted in bad faith and violated the document-production requirements. Based on those findings, it ordered the FMP certificate withheld as required, but it also imposed monetary sanctions against PennyMac, thus imposing more than the minimum sanction. Holt, 127 Nev. at ___, 266 P.3d at 607.

    We perceive no abuse of discretion with regard to the district court's decision to decline Jacinto's request for the imposition of a loan modification or with regard to the amount of monetary sanctions imposed against PennyMac. Pasillas, 127 Nev. at ___, 255 P.3d at 1286-87.

Another Federal Suit Implicating Constitutionality Of Colorado Foreclosure Law Surfaces; Despite Dismissal Of Entirety Of Complaint, Judge Says Inartful Pleading Was Nevertheless Good Enough To Grant Pro Se Homeowner A 'Do-Over'

In Denver, Colorado, The Denver Post reports:

  • A second federal lawsuit contesting the constitutionality of Colorado's foreclosure laws has emerged.

    Unlike the case of an Aurora woman who obtained an interim federal injunction against the foreclosure auction of her house, the other involves a federal judge who decided a Denver man's 14th Amendment guarantee of due process was in question.

    U.S. District Judge Philip Brimmer last week dismissed the entirety of John Mbaku's complaint against Bank of America that challenged the bank's right to foreclose on his condominium.

    However, Brimmer determined there was a constitutional issue, though Mbaku didn't bring it up specifically.

    Because Mbaku, a law-school graduate who doesn't practice law, is representing himself, the judge is given wider latitude to read between the lines of a complaint since plaintiffs might not be as sophisticated or well-versed in the complexities of law.(1)

    In the introduction to his lawsuit filed last year, Mbaku noted how Colorado law allows a bank or lender to foreclose without showing how it obtained ownership of the loan.

    More important, because loan ownership is determined by who has possession of the document — known as indorsement in blank — Mbaku said anyone could come by that right, even a thief.

    "Plaintiffs could illegally obtain or otherwise steal a promissory note ... from any bank ... and present themselves at a ... hearing and be deemed ... to be the proper party to foreclose," Mbaku wrote.

    Brimmer thought that was enough to keep the lawsuit alive.

    The state hearing Mbaku is challenging is called a Rule 120 for the civil procedure that governs it. Brimmer liberally read the complaint and decided Mbaku's introduction was enough to merit attention. And because Bank of America didn't address it in a motion to dismiss, Brimmer let it stand.

    The judge on Thursday advised Colorado Attorney General John Suthers that a state law was under constitutional review and that Suthers has 60 days to respond.

(1) For a couple of the many Federal court rulings mandating that trial judges cut pro se litigants a considerable amount of slack when hearing their cases, see:

Haines v. Kerner, 404 U.S. 519 (1972), in which the U.S. Supreme Court reversed the rulings of two lower courts, the court stated:
  • The only issue now before us is petitioner's contention that the District Court erred in dismissing his pro se complaint without allowing him to present evidence on his claims.

    Whatever may be the limits on the scope of inquiry of courts into the internal administration of prisons, allegations such as those asserted by petitioner, however inartfully pleaded, are sufficient to call for the opportunity to offer supporting evidence. We cannot say with assurance that under the allegations of the pro se complaint, which we hold to less stringent standards than formal pleadings drafted by lawyers, it appears 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' Conley v. Gibson, 355 U.S. 41, 45—46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). See Dioguardi v. Durning, 139 F.2d 774 (CA2 1944).

    Accordingly, although we intimate no view whatever on the merits of petitioner's allegations, we conclude that he is entitled to an opportunity to offer proof. The judgment is reversed and the case is remanded for further proceedings consistent herewith.
Platsky v. Central Intelligence Agency, 953 F.2d 26 (2d Cir. 1991), in which a Federal Appeals Court ruled:
  • Pro se plaintiffs are often unfamiliar with the formalities of pleading requirements. Recognizing this, the Supreme Court has instructed the district courts to construe pro se complaints liberally and to apply a more flexible standard in determining the sufficiency of a pro se complaint than they would in reviewing a pleading submitted by counsel. See e.g., Hughes v. Rowe, 449 U.S. 5, 9-10, 101 S.Ct. 173, 175-76, 66 L.Ed.2d 163 (1980) (per curiam); Haines v. Kerner404 U.S. 519, 520-21, 92 S.Ct. 594, 595-96, 30 L.Ed.2d 652 (1972) (per curiam); see also Elliott v. Bronson, 872 F.2d 20, 21 (2d Cir.1989) (per curiam). In order to justify the dismissal of a pro se complaint, it must be " 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Haines v. Kerner404 U.S. at 521, 92 S.Ct. at 594 (quoting Conley v. Gibson355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)).

    In light of these principles, we think that the district court should not have dismissed Platsky's complaints without affording him leave to replead.
  • The district court also dismissed the complaints for their failure to plead facts that were sufficiently specific. The district judge held that Platsky failed to allege the concrete and particularized injury required to establish standing and to state a claim upon which relief could be granted.
  • We think that Platsky should have a chance to state his claim more clearly. It is not "'beyond doubt that the plaintiff can prove no set of facts in support of his claim[s],' " Haines v. Kerner, 404 U.S. at 521, 92 S.Ct. at 595, and therefore we hold that the better course would have been for the district court, in dismissing Platsky's pro se complaints, to grant him leave to file amended pleadings. See Elliott v. Bronson, 872 F.2d at 22. We have instructed Platsky that his complaint must set out, with particularity and specificity, the actual harms he suffered as a result of the defendants' clearly defined acts.

    Accordingly, we vacate the judgment and order below, and remand the case to the district court with instructions to allow the plaintiff to replead.
See also Estelle v. Gamble, 429 U.S. 97 (1976), which supports the mandate that trial judges cut pro se homeowners slack when bringing their cases:
  • The handwritten pro se document is to be liberally construed. As the Court unanimously held in Haines v. Kerner, 404 U.S. 519 (1972), a pro se complaint, "however inartfully pleaded," must be held to "less stringent standards than formal pleadings drafted by lawyers" and can only be dismissed for failure to state a claim if it appears "`beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id., at 520-521, quoting Conley v. Gibson, 355 U.S. 41, 45 -46 (1957). [429 U.S. 97, 107]