Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court

In Ohio, the Akron Beacon Journal reports:

• The state attorney general's office is looking for new ways to slow foreclosures in court, hoping a recent Ohio appellate court decision will help in those efforts. [... Ohio Attorney General's Office representative Tom] Winters said the office was encouraged by a March 20 decision by the 10th District Court of Appeals in Columbus and is looking for similar cases.

• "That ruling was the first time that a court in Ohio has held that a mortgage company must prove that it still holds the mortgage to the home before it can proceed with a foreclosure," Winters said. "That's consistent with what the federal courts have done, and that's encouraging."

***

• "If we can slow the filings down and educate the homeowners on how they can negotiate to stay in their homes, then you have a better chance of resolving this stuff," Winters said. "It's not going to work for everybody, but right now nothing's been working for anybody, and that's the problem."

For more, see Ohio looking for new ways to slow foreclosures in court.

For the decision of of Ohio Court of Appeals, see Everhome Mtge. Co. v. Rowland, 2008-Ohio-1282; (Case #07AP-615; 3-20-08).

Editorial Note:

A quick reading of this case reveals that the Ohio trial judge originally hearing the foreclosure case ruled against the homeowner and held that the foreclosing lender didn't need to prove ownership or show how it came to be the holder of the mortgage. The homeowner subsequently filed an appeal of this ruling. Upon considering the appeal, the Ohio appeals court ruled that the trial judge's decision was in error and, accordingly, reversed the original ruling. Among other things, this case:

1. illustrates the fact that trial judges will make incorrect decisions from time to time, and
2. reflects the importance of being represented by an attorney who is ready, willing and able to file an appeal to seek a reversal of an incorrect decision. Had the attorney not known enough to file an appeal, the homeowner would have been stuck having to follow an incorrect ruling (and probably wouldn't have realized that the judge's ruling was wrong).

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The following excerpts from the Ohio appeals court reflects its position on this issue:

• {¶11} "Every action shall be prosecuted in the name of the real party in interest." Civ.R. 17(A). A real party in interest is one who is directly benefited or injured by the outcome of the case. Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24. The purpose behind the real-party-in-interest requirement is " 'to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment, and that he will be protected against another suit brought by the real party at interest on the same matter.' " Id. at 24-25, quoting In re Highland Holiday Subdivision (1971), 27 Ohio App.2d 237, 240.

• {¶12} In foreclosure actions, the real party in interest is the current holder of the note and mortgage. Chase Manhattan Mtge. Corp. v. Smith, Hamilton App. No. C-061069, 2007-Ohio-5874, at ¶18; Kramer v. Millott (Sept. 23, 1994, Erie App. No. E-94-5 (because the plaintiff did not prove that she was the holder of the note and mortgage, she did not establish herself as a real party in interest). A party who fails to establish itself as the current holder is not entitled to judgment as a matter of law. First Union Natl. Bank v. Hufford (2001), 146 Ohio App.3d 673, 677, 679-680. Thus, in Hufford, the Third District Court of Appeals reversed a grant of summary judgment where a purported mortgagee failed to produce sufficient evidence explaining or demonstrating its right to the note and mortgage at issue. In that case, the record contained only "inferences and bald assertions" and no "clear statement or documentation" proving that the original holder of the note and mortgage transferred its interest to the appellee. Id. at 678. The failure to prove who was the real party in interest created a genuine issue of material fact that precluded summary judgment. Id. at 679-680.

• {¶13} Similarly, in Washington Mut. Bank, F.A. v. Green (2004), 156 Ohio App.3d 461, the Seventh District Court of Appeals reversed the trial court's finding of summary judgment where the plaintiff failed to prove that it was the holder of the note and mortgage. There, the defendant executed a note and mortgage in favor of Check 'n Go Mortgage Services, not Washington Mutual Bank, F.A. Although Washington Mutual Bank, F.A. submitted an affidavit alleging an interest in the note and mortgage, it did not state how or when it acquired that interest. Id. at 467. The court concluded that this lack of evidence defeated the purpose of Civ.R. 17(A) by exposing the defendant to the danger that multiple "holders" would seek foreclosure based upon the same note and mortgage. Id.

• {¶14} In the case at bar, the note and mortgage identify TrustCorp—not Everhome—as the lender. Therefore, Everhome needed to present the trial court with other evidence to prove its status as the current holder of the note and mortgage. To accomplish this, Everhome relied upon the affidavit testimony of Becky North, an Everhome officer. In her affidavit, North stated that "the copies of the Promissory Note and Mortgage Deed attached to Plaintiff's Complaint are true and accurate copies of the original instruments held by Plaintiff." (Emphasis in the original.) Beyond this tangential reference, North's affidavit contains no further averments regarding Everhome's interest in the note and mortgage.

• {¶15} We conclude that North's testimony is insufficient to establish that Everhome is the current holder of the note. First, Everhome failed to attach the note to its complaint. Thus, North's statement does not prove anything with regard to the note, much less that Everhome currently holds the note. Second, North does not specify how or when Everhome became the holder of the note and mortgage. Without evidence demonstrating the circumstances under which it received an interest in the note and mortgage, Everhome cannot establish itself as the holder.

• {¶16} Lacking the necessary evidence in the trial court record, Everhome attempts to introduce that evidence on appeal. In its brief, Everhome alleges that TrustCorp assigned to it TrustCorp's interest in the note and mortgage on April 19, 2007. Although evidence of an assignment would establish Everhome's status as the current holder of the note and mortgage, we cannot consider Everhome's belated allegation that an assignment occurred. See State v. Ishmail (1978), 54 Ohio St.2d 402, paragraph one of the syllabus ("A reviewing court cannot add matter to the record before it, which was not a part of the trial court's proceedings, and then decide the appeal on the basis of the new matter.").

Representing the homeowner in this case was Adam R. Todd of Dinsmore & Shohl, LLP.

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For other posts that reference the failure some mortgage lenders and their attorneys of filing madatory loan documents when starting foreclosures, Go Here , Go Here and Go Here.

For a consumer video devoted to the subject of making mortgage lenders produce the mandatory paperwork when filing a foreclosure action, see Fight Foreclosure: Make ‘Em Produce The Note!. missing mortgage foreclosure docs beta

Bankruptcy Judge Gives Green Light To U.S. Trustee On Countrywide Inquiry

In Pittsburgh, Pennsylvania, The Associated Press reports:

• A federal judge ruled the Justice Department can subpoena documents and question Countrywide Financial Corp. executives under oath to determine whether the lender abused borrowers and the bankruptcy-court process. U.S. Bankruptcy Judge Thomas Agresti said "it certainly has not been proven that Countrywide did anything wrong," but noted a bankruptcy trustee "has made a showing of a common thread of potential wrongdoing" in several cases. The cases are a representative sample of nearly 300 Pennsylvania bankruptcy cases involving Countrywide borrowers. The potential wrongdoing warrants further inquiry by a bankruptcy trustee on behalf of the Justice Department, Agresti said.

***

• The company has acknowledged errors in handling some debts, but has denied any systematic effort to thwart bankruptcy protections to collect money. Some bankrupt borrowers, however, have accused the company of threatening them with foreclosure even after they made payments under court-approved bankruptcy plans that were meant to shield them from Countrywide's subsequent efforts to collect the debts. Agresti's 50-page ruling was issued late Tuesday in Pittsburgh. [...] Agresti is overseeing 293 cases filed in Pittsburgh that include allegations that Countrywide sought improper fees or payments from bankrupt homeowners and otherwise violated bankruptcy court orders and regulations.

For more, see Judge OKs fed subpoenas of Countrywide.

See also, Reuters: Judge OKs probe into Countrywide practices.

Go here for Judge Agresti's ruling.

Go here for more on recent Countrywide problems with consumers.

Big Profits By Assembly Line "Foreclosure Mill" Law Firms Attract Interest From Private Equity Investment Firms

In Tampa, Florida, The Tampa Tribune reports:

• Their work can be so repetitive that some are known, disparagingly or not, as "foreclosure mills." But the niche field of foreclosure law is profiting enormously from the boom in Florida home foreclosures and is on a hiring spree. [...] Because many law firms file foreclosures across Florida, the biggest firms' monthly foreclosure caseload can grow to a thousand or more, with each case carrying a potential attorney fee of up to $1,200 - although it's not clear what the firms' profit margin is.

***

• The foreclosure business is so strong that it has caught the eye of private equity investment firms, which buy companies using equity and debt financing. Private equity firms have begun buying the back-office foreclosure-processing operations from big law firms and are offering law firms outsourced foreclosure help. These outsourcing companies are keen on moving into Florida.

For more, see Law Firms Cash In On Foreclosures (A surge in foreclosure filings has Florida law firms scrambling for more staff).

Countrywide, Counsel Getting Slammed Around The Country

A story was run recently in The Atlanta Journal Constitution on a fight Countrywide Home Loans faces with the U.S. Trustee in a Georgia Federal bankruptcy court for alleged mistakes and/or misconduct during the course of one particular consumer bankruptcy case. The story also describes the wrath directed towards Countrywide by judges around the country as a result of its "missteps" committed both in the servicing of home loans and in its conduct in the courts:

• A Texas judge, Jeff Bohm, rebuked Countrywide, Atlanta-based McCalla Raymer and a Texas law firm in a 72-page ruling [Judge Bohm's two-part ruling - Part I and Part II]. He found fault with each of the three parties' handling of a case in which Countrywide sought permission to foreclose on a homeowner who was up to date on payments. The Texas law firm hired by McCalla Raymer was singled out by the judge. "Above all else, what kind of culture condones its lawyers lying to the court and then retreating to the office hoping that the Court will forget about the whole matter?" Bohm wrote.

***

• In Ohio and Florida, the U.S. Trustee's office has filed complaints in the past month seeking sanctions against Countrywide. In Ohio, Countrywide sought payments in bankruptcy court from a homeowner who had already paid off Countrywide. In Florida, Countrywide tried three times to foreclose on a homeowner who no longer owed Countrywide any money on the property.

• Countrywide has already been sanctioned in other cases. A judge in Pennsylvania sanctioned the lender for trying to foreclose on a couple in that state who had made required payments "like clockwork," according to the judge.

• Countrywide's Texas law firm was hit with a $75,000 sanction for its behavior in a case that included court filings that were "erroneous" and "clearly legal nonsense."

• A judge in North Carolina sanctioned Countrywide for twice changing the locks on a house that it had sought to repossess, even though the foreclosure had been stopped by a bankruptcy filing. Countrywide's agents disposed of the family's Christmas ornaments, family pictures and a christening dress when it improperly seized the home. "It is difficult to imagine more deliberate, unwarranted and egregious conduct," Judge Catharine R. Carruthers wrote when sanctioning Countrywide.

For the article, see Couple lose home in Countrywide dispute, but may yet win (Feds seek sanctions, say lender abused bankruptcy laws).

For an article examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, by Katherine M. Porter University of Iowa - College of Law.

Go here for more on recent Countrywide problems with consumers.

Ohio Attorneys Organizing In Defense Of Homeowners Facing Foreclosure

In Ohio, The Columbus Dispatch reports:

• Low-income Ohioans facing foreclosure now have access to free legal help. Gov. Ted Strickland and the Ohio Bar Association have mobilized 1,100 lawyers statewide to offer free legal services to those Ohioans who earn $54,000 or less to help them keep their homes. [...] In addition to free legal help, the campaign also offers homeowners a new foreclosure hot line, 1-888-404-4674, to call for help. Consumers can also access information on the Web site www.savethedream.ohio.gov.

For more, see Low-income Ohioans facing foreclosure offered free legal aid.

See also State adds free legal aid to foreclosure prevention effort:

• Gov. Ted Strickland, Ohio Supreme Court Chief Justice Thomas J. Moyer and several other state officials gathered Tuesday to announce it has added the legal component to its Save the Dream initiative [... . S]tate officials last month sent letters to more than 34,000 registered Ohio attorneys requesting they help provide free legal aid. As of Tuesday, more than 1,100 attorneys have registered. About 350 of those attorneys have received foreclosure training from the Ohio State Bar Association, while more training sessions are scheduled, officials said.

More Attorneys Coming Forward To Represent Homeowners In Predatory Lending Cases

In New York City, the Staten Island Advance reports:

• [T]he legal landscape is changing and more local lawyers are willing to represent homeowners against banks that made high-interest, problematic subprime loans. "Their ranks have been growing. Over the last two weeks, we've gotten several more private attorneys calling to say they can handle cases," said Margaret Becker, director of the Homeowner Defense Project at Staten Island Legal Services in St. George.

***

• A Harvard Law School graduate who said she was once misled on the interest rate she received on a home equity line of credit, Ms. Becker recently conducted a course on foreclosure defense for members of the Richmond County Bar Association.

• She makes a point of telling attorneys that they can win back their fees and expenses from banks if they are successful in their claims against those lenders. That's important because most people in default don't have the money to pay for lawyers, and proving mortgage fraud can be a complex and costly process.

• One legal recruit is Robert Brown, an Annadale resident and retired New York City police captain who graduated from St. John University's Law School in 2000. Brown is carving out a niche bringing violation of truth-in-lending claims on behalf of the clients he represents, [...].

For more, see New legal arsenal to battle bad loans.

For a story involving a Staten Island couple who recently obtained a favorable court decision against a mortgage lender for violating a New York State anti-predatory lending statute, see:

• Staten Island Advance: Stuck with a bad loan, a Staten Island family fights back (if link expires, try here),
• For the court decision itself: LaSalle Bank, N.A. v Shearon, Supreme Court, Richmond County, 2008 NY Slip Op 28032 (January 28, 2008),
• Kelley Drye & Warren LLP newsletter: LaSalle Bank v. Shearon: A Harbinger of Things to Come (New York Supreme Court Rules in Favor of Borrower on Defensive Claims Under State’s Anti-Predatory Lending Law).

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here and Go Here.

Editorial Note:

The significance of attorney "fee shifting" statutes, which are commonly a part of Federal and state consumer protection statutes, anti-unfair labor statutes, civil rights cases, etc. and allow for attorneys to win back their legal fees and expenses from the losing party in a successful case, can't be emphasized enough. For an example of one case where the lawyers representing aggrieved parties were allowed to win back their legal fees as a result of such a "fee shifting" statute, see NY BigLaw Leader Scores $1 Million Fee in Pro Bono Case (or go here for the actual court decision itself).

Gerogia Attempts To Address Confusion From Home Foreclosures By Companies Without Legal Standing

In Georgia, an opinion article in the Atlanta Journal Constitution addresses the confusion taking place with home foreclosures in the state where the company bringing the foreclosure action doesn't own the promissory note being enforced:

• The General Assembly is attempting to reduce the confusion by requiring clear proof of mortgage ownership before a foreclosure can proceed. But its efforts have been stymied by banks reluctant to come clean on ownership, and there are suggestions the Legislature may put off definitive action until next year.

***

• "We want to be able to be certain that our clients are being foreclosed on by the legal entity that has standing," says William Brennan, director of Atlanta Legal Aid's Home Defense Program. "And we want to know who to talk to about the foreclosure. Now, we often don't know who holds the note."

***

• Even if 5,000 investors own a piece of a mortgage, the mortgage owner is considered to be the trustee bank that manages the pool. But rather than have to deal with desperate homeowners, those banks prefer to let contractual servicers —- companies that collect the monthly payments or record the deeds —- become the public face of foreclosure while they lurk in the shadows. Those servicing agencies have no incentive to negotiate with borrowers. Lawyers have complained to the Legislature that they can't even get a live person on the phone to talk about a pending foreclosure, leaving homeowners stranded.

For more, see Owning up to a crisis (Georgians faced with foreclosure have a right to know who exactly holds their mortgage) (if link expires, try here).

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in connection with their mortgage loan documents, Go Here , Go Here , Go Here , Go Here, and Go Here. missing mortgage foreclosure docs beta

Scrutiny Increases As Profits Mount For "The Foreclosure Machine"

According to a column in The New York Times:

• Nobody wins when a home enters foreclosure — neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.

• The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and a host of other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes.

• As the subprime mortgage crisis has spread, the volume of the business has soared, and firms that handle loan defaults have been the primary beneficiaries. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say.

***

• Law firms and default servicing operations that process large numbers of cases have made it harder for borrowers to design repayment plans, or workouts, consumer lawyers say. “As I talk to people around the country, they all unanimously state that the foreclosure mills are impediments to loan workouts,” [one consumer advocate] said.

For more, see Foreclosure Machine Thrives on Woes (if no subscription, try here).

Go here , go here , and go here for posts on questionable mortgage servicing practices.

NYS Anti-Predatory Loan May Leave Mortgage Holders Holding The Bag

A client newsletter from the law firm Kelley Drye & Warren LLP contains a discussion of a recent court decision by a New York State trial judge which applied a state anti-predatory lending statute in favor of the borrower and which potentially can leave mortgage lenders holding loans that were originated in violation of this statute holding the bag. The discussion begins as follows:

• In an opinion that may well mark a rise in predatory lending claims and an expansion in the scope of lender liability, the New York Supreme Court recently found in favor of a homeowner who, in defending a motion for summary judgment in a foreclosure action, alleged that he was the victim of predatory lending practices prohibited by New York Banking Law §6-L. The court, in LaSalle Bank, N.A. v. Shearon, No. 100255/2007, 2008 WL 268449 (N.Y. Sup. Jan. 28, 2008), denied LaSalle’s motion and granted summary judgment for the homeowner based on his defenses under the state’s anti-predatory lending law. A hearing on damages is pending.

For more, including the reasons why the article's author believes the court’s decision in Shearon is noteworthy, see LaSalle Bank v. Shearon: A Harbinger of Things to Come (New York Supreme Court Rules in Favor of Borrower on Defensive Claims Under State’s Anti-Predatory Lending Law).

To view the trial judge's decision, see LaSalle Bank,N.A. v. Shearon, No. 100255/2007, 2008 WL 268449 (N.Y. Sup. Jan. 28, 2008).

For a February 3, 2008 media article from the Staten Island Advance reporting this story, see Stuck with a bad loan, a Staten Island family fights back (if link expires, try here).

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here and Go Here.

Editor's Note:

For those unfamiliar with the New York judicial system, the "New York Supreme Court" is simply what the state calls its trial courts, not to be confused with the state's highest court - the New York Court of Appeals. So, while this case could potentially have significant ramifications, it is simply one decision by one trial judge which has yet to be reviewed by a state intermediate appellate court or the state high court. While there may be cause for celebrating this case in the future, consumer advocates who have already begun wild celebrations may well consider "putting the cork back in the champagne bottle" for the time being.

Ohio Man Facing 30 Felony Charges In Alleged Foreclosure Rescue Scam

In Licking County, Ohio, The Newark Advocate reports:

• A Newark man has been indicted for 30 felony counts related to his alleged making of criminally false promises to 15 homeowners rattled by foreclosure fears. Harry W. Blausey, 66, [...], was charged with 10 counts of grand theft, [...]; 14 counts of securing writings by deception, [...]; five counts of theft, [...]; and one count of engaging in a pattern of corrupt activity, [...].

• Licking County Prosecutor Ken Oswalt declined to discuss the specifics of Blausey’s alleged actions, but did say that the defendant preyed on their foreclosure concerns. “In most, if not all, of these (charges), he accepted from (the alleged victims) a quit claim deed,” he said. “They signed their property over to him based on the representations he was making. ... They would sign there property over to him thinking they would get a significant benefit in terms of avoiding foreclosure .. or walking away from the property.”

***

• In addition to the 30-count indictment, Blausey is involved in 17 civil cases in the Licking County Common Pleas Court. Six of those cases involve plaintiffs named in the indictment. One civil complaint claims fraud, intentional infliction of emotional distress, breach of contract and unjust enrichment by Blausey against the plaintiff, who also is listed as a victim in two counts of the indictment. He claims Blausey tricked him into signing over the deed to his house, getting him to vacate his home, then renting it out until it was seized by creditors.

For more, see:

• Man indicted in foreclosure fraud scheme (Former real estate agent also facing civil court complaints),
• More area residents come forward about foreclosure case,
• Recorder raised suspicions 2 years ago (Licking County Recorder Bryan Long said his office was skeptical of documents submitted by Harry Blausey as far back as 2006).

See also, WBNS-TV Channel 10: Real Estate Agent Accused In Foreclosure Scheme.

Go here for other posts on foreclosure rescue operator Harry Blausey.

For other criminal prosecutions involving foreclosure rescue and other deed scams, see:

• Criminal Prosecutions Of Foreclosure Rescue Operators II, and
• Foreclosure Rescue - For Criminal Prosecutors Only.

California DA Slams Two In Alleged "Fractional Interest Deed Tranfer" Foreclosure Rescue Bankruptcy Scam

In Northern California, the San Jose Mercury News reports:

• Alameda County District Attorney investigators arrested two women in Livermore on Wednesday for allegedly running a real estate scam targeting homeowners facing foreclosure. Sonia Alburez, 37, owner of the Community Home Saver Program, and her employee Verena Silva, 42, of Union City, are facing 36 felony counts in at least 14 incidents throughout Alameda County. In the alleged scam, homeowners paid a fee -- between $1,500 and $2,500 each -- to have the women stall the foreclosure, but ended up losing their homes anyway.

***

• According to the District Attorney's office, the suspects would have property owners transfer a fractional interest of their property to fictitious company names via a grant deed. These companies had no real assets nor did they do any legitimate work. These company names were then added to the deeds at the recorder's office and the two women would file a petition with the U.S. Bankruptcy Court. The petitions would automatically stall foreclosure proceedings. But what the homeowners didn't know was that the banks that held the liens on the home would go to the bankruptcy court, get the grant deed overturned and foreclose the home anyway. Prosecutors believe there may be more victims.

For the story, see Women accused in alleged loan scam (Women reportedly said they'd stall foreclosure, but victims still lost their homes).

See also: San Francisco Chronicle: 2 arrests in Alameda County foreclosure scam.

For story update, see San Jose Mercury News: Alleged real estate scammer arraigned (Woman hit with eight felony counts after duping homeowners who still wound up in foreclosure).

Editorial Note:

As reported in an earlier post, some who are allegedly pulling this scam are actually putting the fractional ownership interest in the home facing foreclosure in the name of an unwitting person who recently filed for bankruptcy. The perpetrators are getting the names of recent bankruptcy filers in far away places by simply checking online bankruptcy resources and selecting individuals' names at random. For more on this, see Texas AG, Judge Slam Mortgage Rescue Operators In Fractional Interest "Foreclosure Delay" Bankruptcy Scam.

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

Florida AG Files Another Civil Suit Targeting Firms Offering Allegedly Bogus Sale Leaseback, Foreclosure Rescue Programs

The Florida Attorney General's Office has filed another civil lawsuit against a foreclosure rescue operator offering allegedly sham sale leasebacks to homeowners facing foreclosure. Excerpts from the Florida AG announcement follow:

• Attorney General Bill McCollum [Wednesday] announced that his office has sued three Broward County companies and their owners for their alleged roles in a foreclosure rescue scheme. The lawsuit names Florida Housing Council, LLP; Equity Investment Capital Management, Inc.; Star Enterprises, LLC, and Jack Moussa and Rose Moussa as the participants in a deceptive operation that defrauded hundreds of thousands of dollars in home equity from numerous homeowners in the foreclosure process.

• Florida Housing Council allegedly identified homeowners in the foreclosure process and sent them an advertising mailer telling them to contact Florida Housing Council immediately to avoid foreclosure. Representatives of the companies would then persuade homeowners to sign documents, including complicated trust agreements and deeds, which conveyed the titles to their properties to trusts controlled by Florida Housing Council. The complaint states consumers were often charged various fees for signing the trust agreements even though no actual services were provided. According to the lawsuit, Jack Moussa also occasionally misrepresented to consumers that Florida Housing Council was a government entity.

• Once the deeds were transferred, Florida Housing Council would allegedly charge the homeowners rent, and if rent was not paid, the homeowners would be evicted from their homes. Jack Moussa would supposedly either keep the homes or sell them for a profit. At least 38 homeowners in Florida have been affected and hundreds of thousands of dollars in homeowner equity has been taken.

***

• Consumers who believe they may have been victimized by any of these defendants may contact the Attorney General's Office at 1-866-966-7226 or online at http://myfloridalegal.com to file a complaint.

For the Florida AG press release, see Broward Companies, Couple Sued for Foreclosure Rescue Scam (Scheme victimized more than 30 families, defrauding them out of hundreds of thousands of dollars in home equity).

For a copy of the lawsuit and the Florida AG's allegations, filed in state court in Fort Lauderdale, see Office of the Attorney General - State of Florida v. Florida Housing Council, et al.

Go here for other posts on Florida foreclosure rescue operator Jack Moussa and the Florida Housing Council.

For another recent civil lawsuit by the Florida AG against another foreclosure rescue operator, see:

• Office of the Attorney General, et al. v. National Foreclosure Management, Inc., et al.,
• Florida AG Tags Foreclosure Rescue Operator, Title Agency, Others With Civil Suit In Alleged Sale Leaseback Scam; State "Rescue" Statute Proposed.

"Fractional Interest Deed Transfer" Foreclosure Rescue Scam Slammed By Texas Bankruptcy Judge, Attorney General

From the Texas Attorney General's office:

• Texas Attorney General Greg Abbott's Bankruptcy and Collections Division successfully intervened in a federal bankruptcy involving an illegal residential foreclosure rescue scheme. In that case, Judge Stacey G.C. Jernigan sharply criticized fraudulent mortgage rescue schemes, which she referred to as “a new cottage industry of bottom feeders.”

***

• The case involved two fraudulent companies promising to stave off residential foreclosures: North American Foreclosure, L.L.P., of California, and Jireh Capital Services, L.L.C., a Dallas-area affiliate. Jireh and its operator, David Curtis, who cooperated with the Attorney General’s investigation, appeared in court and were ordered to pay a $48,000 civil penalty and $10,000 in attorneys’ fees. [...] Judge Jernigan ordered the North American and its president [Jeremy Mitchell a/k/a Jason Mitchell] to pay $100,000 in punitive damages as well as $48,000 in state civil penalties, attorneys’ fees and restitution [...].

***

• Curtis convinced the [homeowners] to convey one percent of their home’s value to an out-of-state person who was in bankruptcy, or would agree to file “bankruptcy.” The [homeowners] were told that by transferring a fractional ownership interest in their home to a third person in bankruptcy, they could automatically postpone their foreclosure date. [...] Under the “client agreement,” the [homeowners] were to pay North American $650 per month for as long as its “services” were needed.

The judge also referred North American and Jireh Capital to the U.S. Attorney’s Office for an investigation into potential criminal violations. For more, see Bankruptcy Judge Condemns Mortgage Rescue Scheme, Applauds Attorney General Abbott's Efforts (Calling defendants ‘bottom feeders,’ judge exacts punitive damages).

For the related Federal Bankruptcy Court court documents setting forth all the underlying facts in this case, see:

• Final Judgment and Permanent Injunction,
• Summary of Facts, Judge's opinion and order (recommended reading for anyone wanting some perspective on "fractional interest" home title transfers on the eve of foreclosure, use of backdated deeds for this purpose, conveyances to unwitting debtors in bankruptcy in far away places, the frequency of use of this scam, and other interesting points).

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

More On Federal Indictments Of 19 In Nationwide Alleged Sale Leaseback, Home Equity Scams

In Sacramento, California, The Sacramento Bee reports on the announcement of the Federal indictment of foreclosure rescue operator Charles Head, his brother Jeremy Michael Head, and 17 others for allegedly screwing over homeowners facing foreclosure from Maine to Hawaii with "sale leaseback" home equity scams:

• The case – the largest equity-skimming scam in the country – affected about a half-dozen Sacramento-area residents and came to an FBI agent's attention when a North Highlands victim reached an FBI economic crimes agent who was taking calls from the complaint line. "(The agent) called Head, and based on call the agent believed there was something to this," Assistant U.S. Attorney Ellen Endrizzi said.

***

• The defendants reached out to people on the brink of foreclosure, offering them the chance to keep their homes and pay rent for them while repairing their credit. Those who agreed were presented with a hefty pile of paperwork that included blank spaces that were filled in later, giving a "straw buyer" title to their homes.

***

• Kevin Carlin, a New Jersey attorney who has spoken with about 70 victims of Head's alleged fraud, said the scam targeted elderly and disabled people facing financial strain after job loss and illness. "I trust that some people will be leaping for joy today," Carlin said. "Even if they lost title to their house, Mr. Head may be required to pay for it with his liberty." Carlin said one of Head's former employees testified in a deposition that Head took an entire office full of workers to Hawaii. [... Ass't. U.S. Attorney Endrizzi] said Head faces about 30 civil lawsuits filed from Hawaii to New Jersey.

For more, see FBI ties 19 to equity scam (Indictments allege massive mortgage fraud targeting homeowners near foreclosure).

For others stories, see:

• Reuters: Charges laid in alleged nationwide mortgage scam,
• Press Enterprise: Calif. prosecutors indict 19 in mortgage fraud scheme,
• Los Angeles Times: Houses stolen in mortgage fraud, indictments allege (reports that prosecutors said they found victims of the mortgage scam in California, Oregon, Washington State, Nevada and at least 14 other states. Also reports that Jeremy Michael Head's court-appointed attorney, Christopher Haydn-Myer, described his client as making a modest living at an auto maintenance shop. He said Head rides to work by bicycle because "he doesn't even own a car.").

For the criminal indictments, see:

• U.S. v. Head, et al. - Head #1,
• U.S. v. Head, et al. - Head #2.

Go here for earlier posts as well as available updates on the Head nationwide foreclosure rescue operation.

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For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

For other criminal prosecutions involving foreclosure rescue and other deed scams, see:

• Criminal Prosecutions Of Foreclosure Rescue Operators II, and
• Foreclosure Rescue - For Criminal Prosecutors Only.

Alleged Nationwide Equity Stripping, Foreclosure Rescue Scam Indictments Announced As Sacramento Feds Bag 19 Suspects; Over 100+ Homes Involved So Far

In Sacramento, California, media reports from KNXV-TV Channel 15 (Phoenix) and KCRA-TV Channel 3 (Sacramento), as well as an announcement by United States Attorney McGregor W. Scott (Eastern District, CA) report that foreclosure rescue operator Charles Head and his brother, Jeremy Michael Head, the alleged ringleaders of what prosecutors describe as a nationwide straw buyer, equity stripping, foreclosure scam operation involving over 100 homes, have been indicted along with 17 others.

According to Assistant United States Attorneys Laura Ferris, Rob Tice-Raskin, and Ellen Endrizzi, who are prosecuting the case, the charges are broken out into two separate indictments, "Head One" (2-28-08) and "Head Two" (3-13-08).

Reportedly, investigators have said that more indictments could soon be on the way, increasing the number of homes to more than 300 nationwide. The case, known as Operation Homewrecker, included an investigation by the FBI and IRS.

The following defendants were charged in the Feb. 28 "Head One" indictment:

1. Charles Head, 33, of Los Angeles
2. Jeremy Michael Head, 30, of Huntington Beach
3. Elham Assadi, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine
4. Leonard Bernot, 51, of Laguna Hills
5. Akemi Bottari, 28, of Los Angeles
6. Joshua Coffman, 29, of North Hollywood
7. John Corcoran, aka Jack Corcoran, 52, of Anaheim
8. Sarah Mattson, 27, of Phoenix, Ariz
9. Domonic McCarns, 33, of Brea
10. Anh Nguyen, 36, of Los Angeles
11. Omar Sandoval, 32, of Rancho Cucamonga
12. Xochitl Sandoval, 29, of Rancho Cucamonga
13. Eduardo Vanegas, 28, of Phoenix
14. Andrew Vu, 39, of Santa Ana
15. Justin Wiley, 28, of Irvine
16. Kou Yang, 32, of Corona.

In the March 13 "Head Two" indictment, in addition to Charles Head, John Corcoran, Kou Yang and Dominic McCarns, who were all charged in "Head One" -- the following additional defendants were charged:

1. Keith Brotemarkle, 42, of Johnstown, Pennsylvania
2. Benjamin Budoff, 41, of Colorado Springs, Colorado
3. Lisa Vang, 24, of Westminster.

Friends and family members were recruited as straw buyers in "Head One," -- in "Head Two" the defendants recruited strangers via the Internet to act as the straw buyers.

For more, including the Arizona connection in this story, see KNXV-TV Channel 15: Mesa elementary school teacher indicted for federal fraud.

For the KCRA-TV Channel 3 story, see 19 Accused Of Mortgage Scheme (Struggling Homeowners Victimized, Officials Say).

For the U.S. Attorney's press release, see Indictments Announced In Major Mortgage Fraud Scheme.

For the criminal indictments, see:

• U.S. v. Head, et al. - Head #1,
• U.S. v. Head, et al. - Head #2.

Go here for earlier posts as well as available updates on the Head nationwide foreclosure rescue operation.

Thanks to Josh Bernstein and Tim McDaniel for the "Heads-Up" (so to speak) on this story.

-------------------------

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

For other criminal prosecutions involving foreclosure rescue and other deed scams, see:

• Criminal Prosecutions Of Foreclosure Rescue Operators II, and
• Foreclosure Rescue - For Criminal Prosecutors Only.

Some Boston-Area Tenants In Foreclosed Homes Obtaining Financial Settlements Averaging $18K From Banks With Help From Harvard Law Students

In Boston, Massachusetts, The Record at Harvard Law School reports on the activities of the Harvard Legal Aid Bureau in representing renters in residential property that are facing eviction actions brought by foreclosing lenders as a result of rent-skimming landlords pocketing tenant rent and stiffing the mortgage lender, thereby allowing the homes to go into foreclosure.

• Foreclosing lenders, through local real estate brokers, use a program dubbed "cash-for-keys," through which they offer a one-time payment of around $500.00 to tenants in exchange for their voluntary abandonment of the property. Many tenants, unaware that possession is worth significantly more money, and facing intimidation from banks and constables, leave their homes with almost nothing.

• Additionally, banks serve deficient 5- and 15-day Notices to Quit, pressuring tenants to quickly leave apartments before filing actual eviction notices with the Court. Tenants lack the knowledge to fight these tactics, the money to pay for representation, and the resources to avoid homelessness.

Reportedly, in representing low income tenants in these foreclosure eviction actions brought by foreclosing mortgage lenders, the Bureau has assisted tenants obtain financial settlements from the foreclosing lenders:

• The median settlement in these cases is $18,000, a life-changing sum for many tenants. "Part of this process is about making it more expensive for banks to litigate these cases. We're trying to change the cost/benefit analysis of no-fault evictions," says Dave Haller, [a] second year [law] student.

For more, see Legal Aid Bureau Addresses Foreclosure Crisis.

According to their website, the Harvard Legal Aid Bureau is a student-run organization at Harvard Law School composed of approximately 40 second and third-year student-attorneys, and 7 staff attorneys that provides free legal services in civil (non-criminal) matters to low-income people. equity skimming unwittingly epsilon alpha beta delta gamma

Contingent Fee Plaintiffs Attorneys A Key In Representing Financially Strapped Homeowners Against Sloppy Mortgage Lenders

A December, 2007 article by attorney Michele Magar in California Progress Report reminds us of the importance of contingent fee private attorneys coming forward to represent homeowners facing the possible loss of their homes against lenders with faulty loan documents. A couple of excerpts:

• The [state] legislature is doing little to stop this disaster, but plaintiffs' attorneys can help. Federal and state laws which offer statutory attorneys’ fees enable attorneys to help desperate homeowners restructure abusive loans into sustainable ones, rescind predatory mortgages altogether, and battle foreclosure rescue scams.

***

• “Sorting out winnable cases is not hard to do, but lawyers have to work on contingency or rely on statutory attorneys fees because typically clients have no money to pay up front to hire lawyers,” said Shirley Hochhausen. Hochhausen teaches a predatory lending clinic at the University of San Francisco School of Law and is co-counseling 36 cases with private practitioners via the Fair Lending Consortium, a Bay area group she organized to develop predatory lending expertise among private attorneys. Hochhausen works [...] at the Community Legal Services in East Palo Alto, and refers overflow clients to private attorneys in Santa Clara, San Mateo, San Francisco, Marin and Alameda Counties.

According to one San Francisco attorney quoted in the article who specializes in helping homeowners fight abusive loans, “Ninety percent of loan documents I see have blank three-day rescission notices or contain other [Truth In Lending Act] violations.”

For more, see Right Now, Consumer Attorneys May Be the Best Hope for Californians Stuck in Predatory Loans.

Carelessness In Securitization Process Coming Back To Bite Foreclosing Mortgage Lenders

A June, 2007 article in Forbes magazine reminds us how the carelessness in the securitization process by which mortgage loans were packaged and sold off to mortgage pools is now coming back to bite mortgage holders seeking to foreclose loans in default:

• The financial engineering (ie. mortgage securitization) helped oil the housing boom by making credit more available. But stalled housing prices and rising defaults have revealed a mess: In the rush to flip paper, lots of the new lenders or pools don't have the proper paperwork to show they even hold the mortgage.

***

• This sloppiness offers glorious reprieves for some defaulted homeowners but just headaches for lenders. One Maryland man, holding documents suggesting his loan was held simultaneously by a pool of loans and a bank, is still in his home--five years after foreclosure was filed.

Reportedly, lawyers representing homeowners facing foreclosure around the country are making moves that are "often forcing sloppy lenders to offer generous terms to avoid litigation."

For more, see Paper Chase (You're in luck. Your mortgage lender has flipped, sliced and diced your loan--and now no one knows who holds it).

For related articles, see:

• Financial Times: Contested foreclosures rise, could increase RMBS losses,
• Bloomberg News: Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish,
• The Wall Street Journal Law Blog: Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in connection with the mortgage loan documents when bringing foreclosure actions, Go Here , Go Here , Go Here, and Go Here.

Foreclosure Defense Training Conference

In Valparaiso, Indiana, the Valparaiso University School of Law recently announced their Defending Foreclosures, Saving Homes law conference to be held on March 28, 2008.

• Conference participants will learn about the latest developments in foreclosure and bankruptcy, loss mitigation and mortgage servicer practices. Attorneys interested in representing homeowners will learn the nuts and bolts of the Indiana foreclosure process, explore effective claims and defenses available to homeowners, and learn how to present workout and loan modification proposals to mortgage servicers. Housing counselors will learn more about judicial foreclosure in Indiana and options available to homeowners at each stage of the process. Architects of the Indiana Foreclosure Prevention Network will be on hand to explain the IFPN initiatives—including the recently established hotline and referral network.

Among the topics to be covered, according to the conference brochure, are:

• Defending Foreclosures in State Court: Defenses and Counterclaims,
• Defending Foreclosures in Chapter 13, and
• Attorney Fee Claims and Handling Foreclosure Cases as a Private Attorney, which may be of interest to those civic minded attorneys interested both in representing homeowners facing foreclosure and picking up a few bucks in legal fees in the process (probably payable by the foreclosing mortgage lender and/or mortgage servicer who either broke the rules or otherwise screwed up).

For more, including a link to the conference brochure and schedule, see Defending Foreclosures, Saving Homes.

More On The Screw-Ups In Producing Proper Paperwork When Filing Foreclosure Actions

In the February, 2008 Bloomberg News article (referenced earlier in this blog) on the problems foreclosing mortgage lenders are facing resulting from their inability to physically produce the actual promissory notes signed by the homeowners when they (the homeowners) originally borrowed the money, as well as other required paperwork, when initaiting foreclosure actions. Below are a few choice excerpts reflecting how big the problem may be:

• Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages.

***

• "I think it's going to become pretty hairy,'' said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. "Regulators appear to have ignored this, given the size and scope of the problem.''

***

• Each time the mortgages change hands, the sellers are required to sign over the mortgage notes to the buyers. In the rush to originate more loans during the U.S. mortgage boom, from 2003 to 2006, that assignment of ownership wasn't always properly completed, said Alan White, assistant professor at Valparaiso University School of Law in Valparaiso, Indiana. "Loans were mass produced and short cuts were taken,'' White said. "A lot of the paperwork is done in the name of the original lender and a lot of the original lenders aren't around anymore.'' More than 100 mortgage companies stopped making loans, closed or were sold last year, according to Bloomberg data.

***

• "All these loan documents are being sent to the inside of a mountain in the middle of America and not being checked very carefully,'' [real estate lawyer Stuart] Saft said. "The lenders can't find the paper. We're dealing with a lot of paper produced in a mortgage closing.''

***

• Judges are becoming increasingly impatient with plaintiffs who produce no more proof of ownership than a lost-note affidavit or a copy of the note, said Michael Doan, an attorney at Doan Law Firm LLP in Carlsbad, California.

***

• U.S. District Judge David D. Dowd Jr. in Ohio's northern district chastised Deutsche Bank National Trust Co. and Argent Mortgage Securities Inc. in October for what he called their "cavalier approach'' and "take my word for it'' attitude toward proving ownership of the mortgage note in a foreclosure case.

***

• Federal District Judge Christopher Boyko dismissed 14 foreclosure cases in Cleveland in November due to the inability of the trustee and the servicer to prove ownership of the mortgages. Similar cases were dismissed during the past year by judges in California, Massachusetts, Kansas and New York.

• "Judges are human beings,'' said Kenneth M. Lapine, a partner at the Cleveland law firm Roetzel & Andress LPA. "They no doubt feel the little guy needs all the help he can get against the impersonal, out of town, mega-investment banking company.''

• U.S. Bankruptcy Judge Samuel L. Bufford in Los Angeles issued a notice last month warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. "This requirement will apply because developments in the secondary market for mortgages and other security interests cause the court to lack confidence that presenting a copy of a promissory note is sufficient to show that movant has a right to enforce the note or that it qualifies as a real party in interest,'' the notice said.

***

• "I can't believe the handling of notes is worse than it was five years ago,'' said Guy Cecala, publisher of Inside Mortgage Finance. "What we didn't have back then were armies of attorneys out there looking for loopholes. People are challenging foreclosures and courts are paying a lot more attention to foreclosures than they ever did before.''

For the article, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Lost Note Affidavits: Are Foreclosing Lenders Really Losing All These Homeowner Promissory Notes?

In a Bloomberg News article last month featuring Boca Raton, Florida resident Joe Lents, who reportedly hasn't made a payment on his $1.5 million mortgage since 2002 because the lender's inability to produce Mr. Lents' promissory note has precluded a foreclosure of Lents' home, the apparently common (and possibly illegal and/or unethical) practice by foreclosing lenders and their attorneys of submitting "lost note affidavits" in foreclosure actions as a substitute for a promissory note that can't be produced was raised in these excerpts:

• When the mortgage servicers and securitizing banks that act as trustees of the securities fail to present proof that they own a mortgage, they sometimes file what's called a lost-note affidavit, said April Charney, a lawyer at Jacksonville Area Legal Aid in Florida. Nobody knows how widespread the use of lost-note affidavits are, Charney said. She's had foreclosure proceedings for 300 clients dismissed or postponed in the past year, with about 80 percent of them involving lost-note affidavits, she said. "They raise the issue of whether the trusts own the loans at all,'' Charney said. "Lost-note affidavits are pattern and practice in the industry. They are not exceptions. They are the rule.''

***

• "If the homeowner doesn't object to the lost-note affidavit, the judge rubber-stamps it,'' Lents said. "Is it oversight, or are they trying to get around the law?''

***

• [Mortgage Electronic Registration Systems] rules don't allow [its] members to submit lost-note affidavits in place of mortgage notes, [MERS CEO R.K.] Arnold said. "A lot of companies say the note is lost when it's highly unlikely the note is lost,'' Arnold said. "Saying a note is lost when it's not really lost is wrong.''

• Lents's attorney, Jane Raskin of Raskin & Raskin in Miami, said she has no idea who owns Lents's mortgage note. "Something is wrong if you start from what I think is the reasonable assumption that these banks are not losing all of these notes,'' Raskin said. "As an officer of the court, I find it troubling that they've been going in and saying we lost the note, and because nobody is challenging it, the foreclosures are pushed through the system.''

For the story, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Editor's Note:

I have yet to find any published reports on class action lawsuits or administrative disciplinary actions by state bar associations being brought against mortgage companies' attorneys who are filing lost note affidavits in foreclosure actions as a matter of practice and without regard to whether the promissory note has actually been lost or not. If anyone comes across a story about such a class action or state bar association disciplinary action, please forward me the story or a link - HomeEquityTheft@yahoo.com.

Requiring The Proper Paperwork To Initiate Foreclosure "A Nuisance ... A Gigantic Waste Of Time," Says Attorney

Bloomberg News ran a story last month on the difficulties foreclosing mortgage companies are facing by their inability to produce the mandatory paperwork in court when initiating a foreclosure action. The following excerpt caught my eye:

• Requiring banks to produce the paperwork at a foreclosure hearing is a nuisance, said Jeffrey Naimon, a partner in the Washington office of Buckley Kolar LLP. "It's a gigantic waste of time,'' Naimon said. "The mortgage may have transferred five, six, eight times. It's possible that you don't have all the pieces of paper, but it was enough to convince the next guy in the chain. There's no true controversy over whether the owner owns the loan.''

What needs to be pointed out to anyone harboring this belief is that the promissory notes being used in connection with institutional home mortgages are generally considered to be what the law refers to as "negotiable instruments." When the debtor on the negotiable instrument (known as the "maker" of the note) pays the loan off in full, the debtor is entitled to physically receive his note back from the creditor (known as the "holder" of the note), and the note is to be marked "canceled" by the creditor (Note: Simply receiving a satisfaction of mortgage, while enough to clear the lien from the title to the home, is not enough to actually cancel the debt evidenced by the note).

The reason that the actual note is to be returned to the debtor/maker is because if it isn't, the note remains out in the stream of commerce and if someone else gets their hands on the actual note, that person will be able to come forward and present it for payment, leaving the debtor/maker in a position of possibly having to pay twice on the same note (and having to go back and sue the first guy that he paid for a return of the money that was paid to him).

The point here is that how any attorney handling foreclosures on behalf of mortgage lenders can possibly believe that physically presenting the actual note for payment when initiating a foreclosure action to enforce payment is "a nuisance ... a gigantic waste of time" is beyond belief.

I suspect that in attorney Naimon's case, above, he was either misquoted or had his words taken out of context. I say this only because any attorney handling foreclosures for lenders who actually asserts the position expressed in the above excerpt is either clueless, willfully ignorant, or being intentionally deceptive as to what the requirements of law are in a mortgage foreclosure action.

For the article, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Lender Screw-Up With Loan Docs Precludes Foreclosure; Boca Raton Man Continues "Living Large" Despite Unpaid $1.5M Mortgage

An article in Bloomberg News late last month reported on the increasing problem mortgage companies are facing as a result of the screw-ups in the chain of custody in physically handling the essential paperwork when mortgage loans are sold from investor to investor and, in many cases, end up as part of a mortgage securitization trust. Such screw-ups have resulted in an inability to physically produce the documentation (ie. promissory notes, assignments of mortgage) necessary to commence a foreclosure action when attempting to repossess real estate. The article kicks off with this short anectdote:

• Joe Lents hasn't made a payment on his $1.5 million mortgage since 2002. That's when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton, Florida. The Seattle-based lender failed to prove that it owned Lents's mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork. "If you're going to take my house away from me, you better own the note,'' said Lents, 63, the former chief executive officer of a now-defunct voice recognition software company.

For more, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For actual court cases that provide real life illustrations of the problems foreclosing lenders have faced in the past when these types of screw-ups occur, see:

1. State St. Bank & Trust Co. v. Lord, 851 So. 2d 790; (Fla. App. Ct. 4th Dist., 2003),
2. In re Shwartz, (Bankr. Ct., Mass. April 19, 2007),
3. Terwin Advisors LLC vs. Balbachan (New York Supreme Court - Queens County; April 16, 2007) (Note: For those unfamiliar with the New York judicial system, the "New York Supreme Court" is simply what the state calls its trial courts - not to be confused with the New York Court of Appeals, which is the state's "highest court."),
4. Lasalle Bank Natl. Assn. v. Lamy, 2006 NY Slip Op 51534(U); 12 Misc 3d 1191(A); (New York Supreme Court, Suffolk County; August 7, 2006).

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Judge Declines Imposing Sanctions On Countrywide & Lawyers, Despite Unprofessional, Unethical Conduct

The New York Times reports:

• The Countrywide Financial Corporation, the largest American mortgage lender, did not show “bad faith” in the handling of a Texas homeowner’s mortgage and will not be sanctioned merely for unprofessional and unethical conduct, a federal judge ruled on Wednesday. Countrywide and two law firms it used showed “a disregard for the professional and ethical obligations of the legal profession and judicial system,” Judge Jeff Bohm of Federal District Court said in ruling on a request by a Justice Department official to consider punishing the company for its conduct. But to impose sanctions, Judge Bohm wrote, he would have had to find “clear and convincing evidence of conduct that is in bad faith, vexatious, wanton or undertaken for oppressive reasons.”

***

• “In Texas, homesteads are sacrosanct,” the judge said in a ruling that traced how Countrywide’s corporate culture led to mistakes including a failure to properly record some payments made by [a Texas homeowner]. [...] The judge also found fault with the law firms, saying their flat-fee rate had led to a “corrosive ‘assembly line’ culture of practicing law.”

For more, see Judge Lectures Countrywide but Decides Not to Punish It in Texas Mortgage Case.

See also, Reuters: US judge won't punish Countrywide for botched case.

To view the court ruling, in which the presiding bankruptcy judge carefully rips apart Countrywide & their attorneys (probably "must reading" for anyone who believes they were screwed over by Countrywide or any other loan servicer), see:

• In re: William Allen Parsley - Part I,
• In re: William Allen Parsley - Part II.

Go here for more on recent Countrywide problems with consumers.

For an article examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, by Katherine M. Porter University of Iowa - College of Law.

Culture Condoning Lying To The Court, "Assembly Line" Lawyering In Foreclosures Cases Has One Judge Wondering

The Wall Street Journal Law Blog reports:

• Does flat-fee pricing foster assembly-line lawyering? That’s what U.S. bankruptcy judge Jeff Bohm suggested in a decision, entered [Wednesday], in a consumer bankruptcy case involving Countrywide and a Texas homeowner. While Judge Bohm declined to enter sanctions against Countrywide and its lawyers from two firms — Barrett Burke and McCalla Raymer — he wrote: “This fixed-fee business model appears to have been an overwhelming financial success. . . . Meanwhile, the profession has suffered from the ever decreasing standards that firms like Barrett Burke and McCalla Raymer have heretofore promoted. This demise must stop.”

• The judge called problems at the firms’ culture “disconcerting” and described what he called the firms lack of care for accuracy and failure to communicate with clients. “[W]hat kind of culture condones its lawyers lying to the court and then retreating to the office hoping that the Court will forget about the whole matter.” While “perfection” he said is “too much to demand, preparedness and candor are not.”

For more, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

To view the court ruling, in which the presiding bankruptcy judge carefully rips apart Countrywide & their attorneys (probably "must reading" for anyone who believes they were screwed over by Countrywide or any other loan servicer), see:

• In re: William Allen Parsley - Part I,
• In re: William Allen Parsley - Part II.

For an article examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, by Katherine M. Porter University of Iowa - College of Law.

Go here for more on recent Countrywide problems with consumers.

Increase In Contested Foreclosure Actions Costly For Lenders

The Financial Times reports:

• Borrowers whose properties are being foreclosed on are contesting those foreclosures in rising numbers, attorneys representing both mortgage servicers and homeowners told Debtwire. The trend could impact the performance of subprime-backed bonds, as foreclosures will take longer and be more costly, which could put downward pressure on recoveries. [...] As foreclosures in states such as Ohio, Florida and Nevada flood the courts, borrowers and their attorneys have begun finding ways to challenge foreclosures, and judges in several states have been sympathetic, said Alan Wolf, a partner with the Wolf Firm in Irvine, California, in comments made at a panel 27 February during the Mortgage Bankers Association National Mortgage Servicing Conference in New Orleans.

***

• Challenges by borrowers are taking a variety of forms, said Edward Hyne, assistant vice president in the legal department for First Horizon Home Loans in Irving, Texas, speaking at the same 27 February panel. Some borrowers are making the case that forbearance agreements are required by law, and others that various notices servicers are required to send were not received, for example. But one defense that seems to be garnering a lot of attention from judges is the issue of standing, or whether plaintiffs may rightfully bring the foreclosure complaints to begin with, Hyne said.

• In order for trustees acting on behalf of investors in mortgage bonds – the ultimate owners of securitized loans - to have standing to file foreclosure complaints, they must demonstrate that the trust for the securitization has ownership of the loan backed by the property being foreclosed on. But with thousands of loans that have in many cases been sold and re-sold before ultimately landing in their securitizations, the paperwork showing ownership – the assignment of the loans – often has not kept up.

***

• Defense attorneys are organizing seminars to teach other attorneys about strategies that can be used in contesting foreclosures.

For more, see Contested foreclosures rise, could increase RMBS losses.

For related posts on contesting foreclosures, see:

• Foreclosures Stalled By Missing Loan Documents, and
• Using Truth In Lending Act & Other Consumer Protection Statutes To Undo Bad Mortgage Loans.

Florida, Texas Upfront Fee Foreclosure Rescue Operators Targeted By FTC

The Federal Trade Commission announced last week:

• As part of the Federal Trade Commission’s intensified efforts to protect consumers from mortgage foreclosure rescue scams, the agency has filed two lawsuits charging six individuals and their businesses with falsely claiming that they will stop foreclosure. The FTC will seek to bar them from further violations and make them forfeit their ill-gotten gains.

***

• In the first case, Florida-based Mortgage Foreclosure Solutions, Inc., Debra Behrens, and Michael Siani are charged with falsely representing that they will stop foreclosure in all or virtually all instances, in violation of the FTC Act, which prohibits unfair and deceptive acts or practices. They allegedly claim that they can stop foreclosure regardless of consumers’ hardships or payment histories, stating in one such claim, “We are so confident of our abilities to provide you with a solution in stopping your foreclosure that we guarantee our services in writing to you.” [...] According to the FTC’s complaint, [...] the defendants allegedly charge a $950 advance fee and a $250 processing setup charge, and, after receiving consumers’ money they fail to provide updates about the foreclosure proceedings or return consumers’ telephone calls. [...] Many consumers ultimately lose their homes to foreclosure, and others avoid foreclosure only through their own efforts.

• In the second case, the defendants, all based in Texas, are National Financial Solutions, LLC, National Hometeam Solutions, LLC, United Financial Solutions, LLC, Nationwide Foreclosure Services, LLC, Evalan Services, LLC, Elant, LLC, Elias H. Taylor aka Eli Taylor, Everard Taylor aka Everardo Taylor, Emanuel Taylor, and Edwin P. Taylor, Sr. aka Ed Taylor. They are charged with violating the FTC Act by falsely representing that they would stop foreclosure in all or virtually all instances, and that they would refund most or all fees if foreclosure could not be stopped. [...] In phone calls with consumers, they also claimed that, for an up-front fee ranging from $500 to $1,200, they could stop foreclosures on specific homes and would provide options other than filing for bankruptcy [according to the FTC complaint].

For more, see FTC Sues Two Mortgage Foreclosure “Rescue” Operations.

To view the two FTC lawsuits, see:

• FTC v. Mortgage Foreclosure Solutions, Inc., et al. (U.S. District Court - M.D. Fla.), and
• FTC v. National Hometeam Solutions, LLC; et al. (U.S. District Court - E.D. Tx.)

Feds Target Central Florida Foreclsoure Rescue Operator In Civil Suit

The Federal Trade Commission announced last week:

• In an ongoing effort to crack down on businesses that prey upon homeowners facing foreclosure, the Federal Trade Commission has charged six businesses and three individuals with violating the Home Ownership and Equity Protection Act (HOEPA), the FTC Act, and the Truth in Lending Act (TILA) by enticing homeowners into high-cost, short-term loans secured by an additional mortgage on their homes. The FTC will seek to bar the defendants from further violations, make them forfeit their ill-gotten gains, and stop collection and foreclosure actions or efforts to seize or transfer properties.

• The defendants are Safe Harbour Foundation of Florida, Inc., Silverstone Lending, LLC, Silverstone Financial, LLC, Southeast Advertising, Inc., Keystone Financial, LLC, MT25 LLC, Peter J. Porcelli II, Bonnie A. Harris, and Christopher Tomasulo.

• According to the FTC’s complaint, Safe Harbour, Porcelli, Harris, and Tomasulo target homeowners facing foreclosure with claims such as “We have all the funds available to pay your bills and save your home from foreclosure. GUARANTEED!” The Silverstone companies and Keystone then provide high-cost, interest-only, short-term balloon-payment loans secured by second mortgages on homes already subject to foreclosure.

For more, see FTC Charges Mortgage Foreclosure “Rescuers” with Deceiving Homeowners.

In a related story, see the St. Petersburg Times: Scammer in trouble again (A millionaire, already in prison for credit card fraud, is accused of foreclosure deceit).

To view the lawsuit, see FTC v. Safe Harbor Foundation Of Florida, Inc., et al. (U.S. District Court, N.D. Ill.).

This suit now makes at least three civil suits against foreclosure rescue operator Peter Porcelli and his group of associates. To view the two other lawsuits (that I know of), see:

• Complaint - Clark, et al. v. Porcelli, et al. (U.S. District Court, M.D. Fla.),
• Complaint - Heise, et al. vs. Porcelli, et al. (U.S. District Court, M.D. Fla.).

Go here for earlier posts on Peter Porcelli.

Racketeering, Conspiracy, Criminal Usury, TILA Violations Alleged In Another Civil Suit Against Central Florida Foreclosure Rescue Operator

In Central Florida, the St. Petersburg Times reports:

• Two homeowners filed a lawsuit in federal court [last] week against Peter J. Porcelli, saying they lost their homes because of his foreclosure lending scam. Philip Clark and Tania Harris say Porcelli of Oldsmar and others associated with his Safe Harbour Foundation, Silverstone Lending and Silverstone Financial companies targeted them as part of a scam to save them from foreclosure through fraudulent loans. In October, a federal judge sentenced Porcelli to 13 years in prison for his part in a credit card scam that victimized tens of thousands of credit-poor consumers across the country. He also was ordered to pay restitution of more than $11.8-million. Porcelli was indicted in March on conspiracy, wire fraud, mail fraud and money laundering charges. Prosecutors said he had a telemarketing operation that preyed on 165,141 consumers nationally and took in nearly $12-million in illegal profits.

Source: Homeowners sue over loan fraud (2nd blurb from the top).

Included in the lawsuit are allegations of:

1. civil RICO violations by a pattern of racketeering activity and through the collection of unlawful debt (18 USC § 1961 et seq.),
2. Truth In Lending Act violations (15 USC § 1601 et seq.),
3. unlawful mortgage brokering and mortgage lending (Fla Statute Chapter 494),
4. criminal usury (Fla. Statute Chapter 687), and
5. civil conspiracy.

The homeowners also seek to void all liens, mortgages, etc. currenly clouding title to their homes by reason of the alleged acts of Porcelli and his confederates. To view the lawsuit, see Complaint - Clark, et al. v. Porcelli, et al. (U.S. District Court, M.D. Fla.).

To view an earlier lawsuit against Porcelli and associates making similar allegations, see Heise, et al. vs. Porcelli, et al. (U.S. District Court, M.D. Fla.).

Representing the homeowners in both lawsuits is Michael Alex Wasylik, Esq., with the law firm Ricardo & Wasylik PL, Dade City, Florida.

Go here for earlier posts on Peter Porcelli.

Class Action Sought Against Countrywide For Allegedly Squeezing Homeowners With Improper Fees When Servicing Mortgage Loans

The Tampa Tribune reports:

• Countrywide Financial Corp., the largest U.S. mortgage lender, is being sued by the estate of a Florida woman and accused of charging borrowers improper foreclosure fees. Starting in February 2002, Countrywide overcharged for attorneys' fees tied to foreclosures and imposed unjustified interest, escrow and late charges, according to a complaint filed Monday in federal court in Wilmington, Del.

• "As a result of Countrywide's improper practice of overcharging fees and expenses, those borrowers who have enough funds to pay past due debt and other foreclosure costs, but are unable to pay the greater sums, remain subject to losing their homes," lawyers for Gregory O'Gara, who sued as executor of the estate of Tamara Portnick, said in the complaint.

***

• O'Gara accused Countrywide of making arrangements with attorneys for flat, per-case rates of about $300 to $500 and then charging the homeowners $1,200 to $2,000 for the expenses. The company also was accused of charging excessive fees for appraisals, from $300 to $500, regardless of whether an appraisal is really done on the property. If fees are not paid by borrowers, they are added to the settlement amount on a foreclosure sale of the property, the complaint states. [...] O'Gara asked for class-action status for the lawsuit, [...].

For more, see Countrywide Sued Over Borrowers' Foreclosure Fees.

Representing the homeowners are Carmella P. Keener, of Rosenthal, Monhait, & Goddess, P.A., Wilmington, DE; and Jeffrey M. Norton, of Harwood Feffer LLP, New York City.

To view the lawsuit, go to this this direct link on the PACER system (approx. 2 MB - PACER registration required - 52 pages - $2.40); or drop me a line at HomeEquityTheft@yahoo.com and I'll e-mail it to you (please put "O'Gara v. Countrywide Complaint" in the subject line).

For another lawsuit with similar allegations against Mortgage Electronic Registration Systems (aka "MERS"), see MERS Clipping Homeowners In Foreclosure With Inflated Legal & Appraisal Fees, Says Class Action Lawsuit.

Go here , go here , and go here for posts on questionable mortgage servicing practices.

Go here for more on recent Countrywide problems with consumers. questionable mortgage servicing practices tactics xero

Federal Judge Allows Minnesota MERS Foreclosures To Continue; Homeowners' Attorney To Seek Certification Of Legal Issue To State High Court For Review

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:

• A federal judge has refused to temporarily block many Hennepin County foreclosures in a ruling that signals that the borrowers could have a hard time proving their case. Judge Joan Ericksen [last] Wednesday denied a request for a temporary restraining order against foreclosures initiated by a national electronic mortgage registry [Mortgage Electronic Registration Systems, Inc.]. [...] Attorneys for the borrowers argue that the national registry violated Minnesota law because its foreclosure notices don't list assignments, a document recorded when a mortgage is sold to another party, as required by law. [...] Attorney Amber Hawkins, representing the borrowers, said they will proceed with their underlying challenge. She said they'll argue for Ericksen to certify the issue to the Minnesota Supreme Court for review.

For more, see Federal judge refuses to block foreclosures.

Go here for earlier posts on this story.

Go here for other posts on mortgage lenders missing foreclosure documents.