FTC Settles Foreclosure Rescue Claims With Four Texas Defendants & Their Companies

The Federal Trade Commission announced this week:

• [F]our Texas defendants and their companies(1) have agreed to settle FTC charges that they deceived homeowners facing foreclosure by falsely claiming they could prevent foreclosure in return for an up-front fee ranging from $500 to $1,200. The settlements bar them from further law violations and require them to pay more than $137,000 in redress for affected consumers.

• According to the Commission’s complaint, in numerous instances, the defendants did not prevent foreclosure for their clients; rather, they often ensured foreclosure by not taking promised actions or taking only minimal steps not calculated to prevent foreclosure. The defendants also increased the threat of foreclosure by inducing consumers to wait passively for weeks rather than contact the lender and explore possible options. In addition, they allegedly did not honor their promise to fully refund all fees if they could not stop foreclosure, which resulted in consumers sometimes losing the fees and their homes.

For more, see FTC Acts Against Two Family-Owned Mortgage Foreclosure ‘Rescue’ Operations.

For more on this case from the FTC, see:

• Stipulated Permanent Injunction and Final Order,
• Original FTC complaint - Federal Trade Commission v. National Hometeam Solutions, LLC, et al.

(1) According to the FTC press release, the defendants, all based in Texas, are Elias H. Taylor and his companies, National Hometeam Solutions, LLC, National Financial Solutions, LLC, and Elant, LLC; Everard Taylor and his company, Evalan Services, LLC; Emanuel Taylor and his company, United Financial Solutions, LLC; and Edwin P. Taylor, Sr., and his company, Nationwide Foreclosure Services, LLC.

Mortgage Lending Industry Dodges Bullet As Federal Appeals Court Strips Homeowners Of Class Action Status In Truth In Lending Lawsuit

Reuters reports:

• A lawsuit brought by a Wisconsin couple who accused a bank of deceptive lending practices and wanted to cancel their home loan has been stripped of class-action status in a victory for U.S. banks. In a 2-to-1 decision, a panel of the U.S. Court of Appeals for the 7th Circuit on Wednesday overturned a lower court ruling that had allowed other borrowers to join Susan and Bryan Andrews as plaintiffs against Chevy Chase Bank FSB.

In its ruling, the 7th Circuit U.S Court of Appeals indicated that it joins two other federal appellate courts(1) in refusing to certify a class action for claims seeking the remedy of rescission under
the Truth in Lending Act, 15 U.S.C. § 1635.

For more, see U.S. court sides with bank in mortgage loan case.

For the court ruling, see Andrews v. Chevy Chase Bank (7th Cir., 9-24-08).

For earlier stories on the Chevy Chase, option ARM class action lawsuit, see:

• The Washington Post: A Fight Over the Fine Print (Chevy Chase Bank Faces Suit Over Adjustable-Rate Mortgages),
• Milwaukee Journal Sentinel: Mortgage lawsuit may have big effect (Couple's low interest rate lasted a month).

(1) see McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007); James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727 (5th Cir. 1980). UndoMortgageLoans TILAdelta

Maryland Feds Bag 2nd Guilty Plea In Alleged "Money Store" Foreclosure Rescue Scam

In Greenbelt, Maryland, The Washington Post reports:

• A Lanham man pleaded guilty yesterday to participating in a scheme to defraud people who faced losing their homes because they were behind in their mortgage payments. Clifford McCall, 47, was the president of a financial services firm that prosecutors say aided in the fraud orchestrated by Metropolitan Money Store, a Maryland corporation that did business in the District, Maryland and Virginia. McCall, appearing yesterday in federal court in Greenbelt, pleaded guilty to one count of conspiracy to commit mail and wire fraud.

***

• McCall is one of nine people charged in the case and the second to plead guilty since the indictments were announced in June. [...] The unsealed portion of the plea documents does not indicate whether McCall is obligated to cooperate with investigators against the remaining defendants, including McCall's wife, Jennifer McCall, and a daughter, Chandra Jones. Both have pleaded not guilty, as have the other five defendants awaiting trial, including JoyJackson and Kurt Fordham, the husband and wife alleged to have masterminded the scheme.

For more, see Man Pleads Guilty To Fraud Charge in Foreclosure Scheme.

See also:

• Original Federal indictment - U.S. v. JoyJackson, et al.,
• USDOJ news release: President of Financial Services Firm Pleads Guilty In Metropolitan Money Store Mortgage Fraud Scheme (Fraudulently Obtained Almost $2.5 Million in Scheme to Take Title of Homes from Financially Distressed Homeowners and Secretly Use Home Equity for Personal Benefit).

Go here and go here for other posts on the alleged Metropolitan Money Store foreclosure rescue scam. joyjackson

More On Mortgage Lenders' Lack Of Legal Standing To Foreclose

In New York City, The Village Voice reported earlier this month:

• [A] series of startling court decisions nationwide have ruled against subprime lenders attempting to foreclose on borrowers after failing to legally establish ownership of the loans in question because they had been 'transferred' multiple times.

***

• More and more Judges have demonstrated they are not willing to foreclose on a mortgage when they can't determine where it originated, or who actually owns the loan.

***

• [Josh Zinner, co-director of NEDAP, New York Economic Development Advocacy Project] said that after the recent spate of publicity subprime garnered, courts are becoming more open to hearing about abuses in the lending system.

For more, see Fighting Foreclosure: Subprime Borrowers Battle (and Beat) Lenders in Court.

Mortgage Servicer Agrees To $28M Payment To Settle FTC Charges Alleging Unlawful Practices

The Federal Trade Commission announced earlier this month:

• The Bear Stearns Companies, LLC and its subsidiary, EMC Mortgage Corporation, have agreed to pay $28 million to settle Federal Trade Commission charges that they engaged in unlawful practices in servicing consumers’ home mortgage loans. The companies allegedly misrepresented the amounts borrowers owed, charged unauthorized fees, such as late fees, property inspection fees, and loan modification fees, and engaged in unlawful and abusive collection practices. Under the proposed settlement they will stop the alleged illegal practices and institute a data integrity program to ensure the accuracy and completeness of consumers’ loan information.

For more, see Bear Stearns and EMC Mortgage to Pay $28 Million to Settle FTC Charges of Unlawful Mortgage Servicing and Debt Collection Practices.

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

For the relevant court documents, see:

• Stipulated Final Judgment and Order,
• Plaintiff Federal Trade Commission’s Complaint for Permanent Injunction and Other Equitable Relief.

Hawaii Feds Charge 6th Suspect In Alleged Foreclosure Rescue Scam; Loan Officer, Two Others Agree To Plead Guilty This Week

In Honolulu, Hawaii, the Star Bulletin reports:

• Federal prosecutors have charged a sixth defendant in a mortgage fraud case that displaced two families on Oahu. Paula Galacgac is the unindicted co-conspirator named as P.G. in an indictment returned by a federal grand jury in May charging five others with crimes related to mortgage fraud. Prosecutors charged her Friday and she has agreed to plead guilty this week. Two other defendants, Albert Alimoot and Evan Koizumi, are scheduled to plead guilty [today] before a federal magistrate judge.

***

• Galacgac was a loan officer with a mortgage broker company. She identified properties occupied by individuals facing foreclosure and otherwise having financial difficulty, according to court documents. She, along with John Mendoza, Antonio Alcantara Jr., Ira Altwegg, Alimoot and Koizumi, are accused of convincing troubled property owners that they could sell their properties to so-called "straw purchasers" without having to move out.

• The straw purchasers didn't intend to occupy the homes but filled out false loan applications to obtain loans they never intended to repay, according to the indictment.

For the story, see Defendant No. 6 joins mortgage fraud case.

To view the original indictment, see U.S. v. Mendoza, et. al.

The Call Grows For The Right To Legal Counsel In Civil Cases?

The National Law Journal reports:

• Through litigation and legislation, a growing number of private and public interest lawyers across the country are pushing to secure those with low incomes the right to counsel in civil matters, including foreclosures, evictions and child custody cases. Legal aid groups are under-funded and overworked, they argue, and pro bono services aren't enough to fill the gap for the millions who go unrepresented.

***

• On the litigation front, attorneys are asking the Ohio Supreme Court to rule that an elderly, low-income couple facing loss of their home through foreclosure has a state constitutional right to counsel at state expense. Hill v. Myers, No. 08-1141. [...] On the legislative front, [... i]n New York City, a proposed bill is pending that would give low-income seniors the right to an attorney in eviction cases and foreclosures.

***

• In 2006, the ABA [American Bar Association] adopted a resolution urging governments to provide lawyers in civil cases where "basic human needs are at stake, such as those involving shelter, sustenance, safety, health or child custody."

For more, see Suits, Legislation Over a Civil Right to Counsel Grow Across U.S.

Ohio AG Targets Two Mortgage Brokers In Separate Suits For Alleged Violations Of Predatory Lending Laws

From the Ohio Attorney General's Office:

• The Ohio Attorney General's Office and the Ohio Department of Commerce [last month] filed two complaints against mortgage brokers for violating Ohio’s predatory lending laws. The lawsuits were filed against Columbus companies Magellan Mortgage Corporation and Highland Banc, Inc. along with an individual loan officer and appraiser, accusing them of engaging in unfair, deceptive and unconscionable acts and practices. The complaints were filed in the Franklin County Court of Common Pleas.

• The lawsuits against Highland Banc and Magellan Mortgage raise many violations of the Ohio Homebuyers Protection Act, in addition to multiple violations of the Ohio Mortgage Broker Act (OMBA), and the Real Estate Settlement Procedures Act (RESPA). The suit against Magellan also alleges that the company violated the Truth in Lending Act (TILA). Some of the allegations in the suits were that a mortgage broker arranged loans with undisclosed fees and loans that resulted in no net tangible benefit for homeowners who had no reasonable ability to repay the loans.

For the press release, and to view the lawsuits,(1) see Ohio Attorney General Accuses Mortgage Brokers Of Predatory Lending Practices.

(1) State of Ohio v. Highland Banc, Inc., et al. begins at p.3 of press release. State of Ohio v. Magellan Mortgage Corporation, et al. begins at p. 23 of press release.

Washington State Homeowners File Lawsuit Against Countrywide Alleging Violations Of State Consumer Protection Act, Seek Class Action Status

In Seattle, Washington, the Seattle Post Intelligencer blog recently reported:

• Add one more lawsuit to Countrywide's list of legal woes. Illinois and California have sued, accusing the lender of deceptive sales practices. Now borrowers, represented by the Seattle law firm of Hagens Berman Sobol Shapiro, have sued in U.S. District Court in Seattle, accusing the lender of knowingly steering customers into high-risk loans and not disclosing the risks associated with them.

• They allege in the complaint that the lender misrepresented the terms of ARMs (adjustable-rate mortgages), marketed risky complex loans by emphasizing low teaser rates while misrepresenting later steep monthly payments and routinely encouraged borrowers to refinance only months after an affiliated broker sold them a loan.

For more, see Homeowners sue Countrywide.

For the lawsuit, see Buckley v. Countrywide Home Loans, Inc.

Go here and Go here for more on other Countrywide lawsuits & other problems. countrywide consumer problems

Advocates: NYC's Growing Foreclosure Crisis Outstripping Pro Bono, Government-Subsidized Lawyers' Ability To Handle Problem

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

• [T]he city's growing foreclosure crisis has outstripped pro bono and government-subsidized lawyers' ability to handle the problem, advocates said. "There are thousands of people out there who might be in need of legal assistance, and we just don't have the capacity," said South Brooklyn Legal Services foreclosure unit director Jessica Attie.

• Legal Services had so many foreclosure cases last year it had to stop taking new ones, she said. The group has now expanded its foreclosure unit. But even with an enlarged foreclosure practice, they can only take a fraction of the cases, Attie said.

• There is one more complication to finding free legal assistance for homeowners in trouble. Pro bono lawyers from elite city law firms are also not much help to homeowners facing foreclosures: Many of the firms represent the banks that are trying to take their homes.

For the story, see Nonprofit 'Common Law' trains homeowners to be their own lawyers.

California Man Gets 120 Days In Case Involving Alleged Forgery Of Judgment Holder's Signature On Lien Satisfactions

The San Bernardino County District Attorney's Office announced last week:

• James Badalian, 45, of Fontana, was sentenced Wednesday, August 27, 2008, to felony charges connected to forged documents. Badalian appeared in San Bernardino County, Central Division, Superior Court, and was sentenced to 120 days county jail for the crime of accessory to a forgery, a felony, as part of a plea agreement. The issue of restitution has been reserved.

• On two separate occasions, in 2002 and 2004, Badalian allegedly forged the victim’s names on two different Acknowledgment of Satisfaction of Judgment documents and later recorded them at the San Bernardino County Recorder’s Office. The documents were notarized utilizing false notary stamps.

For the DA's press release, see Fontana Man Sentenced in Forgery Case.

Trial Of Central Florida Couple Charged With Duping Senior In Foreclosure Out Of Home Derailed As State Lawmaker Sends Judge Improper Communication

In New Port Richey, Florida, The Tampa Tribune reports:

• Under normal circumstances, State Sen. Mike Fasano's Thursday morning fax to Circuit Judge Jack Day might have amounted to nothing more than another person's opinion about an ongoing case. Judges get them all the time.

• But this was different. Day was presiding over the trial of a couple accused of cheating 91-year-old Eloise Mudway out of her house and assets. Unlike most criminal cases, which are decided by juries, the judge alone was to determine whether Joe and Cynthia Clancy were guilty and, in the event he did, what their sentences should be.

• That made Fasano's letter(1) condemning the Clancys and suggesting they receive the harshest possible sentences grounds for a recusal, defense attorneys argued. Day granted the request, prematurely ending a trial that has been on the docket since October 2005.

• Now the case must be assigned to another judge and retried from the beginning. The case must come to trial within 90 days, unless the Clancys waive their right to a speedy trial. "This is just a shame," said Assistant State Attorney Mary Handsel as she left the courtroom.

For the rest of the story, see:

• Judge Gets Fax From Fasano, And A Trial Is Derailed,
• Woman Testifies Against Pair.

Go here, here, here, here, here, and here for other posts on elder financial abuse.

(1) According to the story, Fasano wrote: "If Joseph and Cynthia Clancy have done even half of what they are alleged to have done, they should get the strongest possible sentence. Too often we read of deadbeat individuals in this state taking advantage of our elderly residents. Enough is enough!" FinancialAbuseOfElderlyAlpha

New NYC Non-Profit Legal Clinic Gives Homeowners Foreclosure Self-Defense Training

In New York City, WNYC Radio 93.9 FM (820 AM) reports:

• A new legal clinic is claiming great success in helping homeowners fight off foreclosure of their homes. [...] In July, [a] Brooklyn businesswoman was sued by her bank after missing payments. Now she's headed to court. [She's] been trained in foreclosure law by a new nonprofit called Common Law.(1) Co-founder Karen Gargamelli says it's a program born of necessity. "Because there are only a handful of people that even understand the foreclosure laws, people have to represent themselves against the bank," [she said.]

• A spokesman for the state Bar Association confirmed that very few attorneys in New York practice foreclosure law. Gargamelli says each of the 50 or so homeowners her group has advised have convinced the court to not foreclose on them.

For the story, see New Legal Clinic Helps Homeowners Fighting Foreclosure.

In a related story, see New York Daily News: Nonprofit 'Common Law' trains homeowners to be their own lawyers.

(1) According to this City University of New York (CUNY) Law School Alumni News report, Common Law Inc. is a non-profit consortium of three CUNY Law alums from the class of 2006, who created a clinic to help homeowners in foreclosure. At the clinic, homeowners listen to the situations faced by nearby residents. At a following meeting, they describe their own situations. Then, experts in foreclosure help them with paperwork so they can represent themselves in court.

Washington State AG Takes Page Out Of Scammer Playbook To Identify, Warn Potential Foreclosure Scam Targets

In Seattle, Washington, KOMO-TV Channel 4 reports:

• Pending foreclosure listings are a matter of public record. Anyone can get the information through your county property tax division. That's how scammers find vulnerable homeowners desperate for help.

• Now, the [Washington] State Attorney General is taking a cue from the scammers, using public records to reach homeowners before they become targets. Starting this month, homeowners facing foreclosure will get a letter warning about foreclosure rescue scams. The letters will highlight warning signs and share horror stories from people who've lost their homes through a foreclosure rescue scheme.

• Some 14,000 letters went out this week to homeowners who missed mortgage payments. Many county treasurers will start including scam warnings when they mail certified foreclosure notices to people who haven't paid property taxes.

For more, see State officials take cue from scammers to help protect those facing foreclosure (read story) (watch KOMO-TV video).

Go here for the Washington State AG's foreclosure rescue warning letter.

Upstate NY Non Profits Pick Up $700K Grant To Fight Foreclosures

In Buffalo, New York, Business First of Buffalo reports:

• The Western New York Law Center in partnership with HomeFront Inc. has been awarded a $700,000 two-year grant by the New York State Department of Housing and Community Renewal. The funding will be used to address the subprime mortgage crisis in the region.

***

• HomeFront and the Western New York Law Center are offering their services free of charge to qualified borrowers. HomeFront will provide counselors who can assist borrowers in developing workout agreements.

• The Center will represent borrowers in cases that cannot be resolved through counseling and in mandatory court settlement conferences, which [pursuant to a new state] law must be scheduled within 60 days of the date legal action is filed with the county clerk.

For more, see Aid for subprime mortgage holders.

Go here for a partial list (by county) of New York not-for-profit organizations that are providing foreclosure prevention services. New York homeowners at risk of foreclosure are encouraged to contact an organization in their area to seek assistance.

Texas Homeowner Files Suit Alleging Race Bias, Truth In Lending Violations In Predatory Refinance

In Baytown, Texas, The Houston Chronicle reports:

• Nanette Lewis refinanced her mortgage to get peace of mind. Instead, she says, she got a bait-and-switch, predatory loan and heartbreak. Now far less naive, the Baytown woman decided to fight back. In a lawsuit she filed against her lenders in federal court last week, she alleges she was targeted for a loan with onerous terms because she's black. Her suit mirrors one filed by the attorney general of Massachusetts and another by the city of Baltimore.

• All three accuse lenders of "reverse redlining" — targeting minority loan applicants for the worst possible mortgage deals. Lewis' lawsuit may be the first of its kind in Texas. She is represented by a legal aid lawyer and seeking primarily, she said, to get the word out about what happened and to remove the lien from her property, though she still would be responsible for repaying the mortgage.

***

• When she was laid off, Lewis worried she'd miss a mortgage payment and lose the house. She went to Lone Star Legal Aid to see how she could keep the home safe. Lawyer Sapna Aiyer said she was surprised at Lewis' "horrible, horrible" mortgage terms. Aiyer said the lawsuit cites the federal Home Ownership and Equity Protection Act and the Texas Constitution, which bar lenders from excessive points and fees (more than 8 percent) and from certain changes in loan terms at closing.(1)

For more, see Lawsuit over signing shock (Baytown woman sues lenders, says she was a victim of predatory lending practices because she's black).

For the homeowner's lawsuit described in this story, see Lewis v. Alpha Mortgage, et al.

The non-profit legal services firms representing the homeowner are Texas RioGrande Legal Aid (Austin, Texas; provides free legal services to low-income and disadvantaged clients in a 68-county service area that covers the southwestern third of the state, including the entire Texas-Mexico border region) & Lone Star Legal Aid (Houston, Texas; serves 72 counties in the East Region of Texas and 4 counties in Southwest Arkansas).

For the race bias-related lawsuits referenced in the story filed by Massachusetts & Baltimore City, see:

• Commonwealth of Massachusetts v. H&R Block, Inc., et al.,
• Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A., et al. (8.76 MB).

For a July, 2008 study on Mortgage Lending & Race, see the National Community Reinvestment Coalition Study: Income Is No Shield Against Racial Differences in Lending.

Go here and go here for other posts on alleged race bias in real estate transactions.

(1) The lawsuit alleges violations of Home Ownership and Equity Protection Act (15 U.S.C. §§ 1602(aa) and 1639); the Truth in Lending Act (15 U.S.C. § 1601 et seq. and § 1640(a)); the Equal Credit Opportunity Act (15 U.S.C. § 1691- 1691 (f)); the Fair Housing Act (42 U.S.C. § 3605); and the Texas Constitution, Article 16, §50(e)(2). PredatoryLendingRaceBias

Florida Firm Charged In 14th Civil Suit Brought By Illinois AG Against Foreclosure Rescue Operators

From the Illinois Attorney General's Office:

• [Illinois Attorney General Lisa] Madigan filed suit [last week] in Cook County against Law & Associates LLC, and its managing member, Thomas E. Law, II, alleging the defendants violated the [Illinois] Mortgage Rescue Fraud Act and the [Illinois] Consumer Fraud and Deceptive Business Practices Act by falsely promising to help consumers save their homes after falling behind on their mortgage payments. According to the complaint, the defendants charged consumers up to $1,900 and promised to provide mortgage foreclosure rescue services that they either failed to perform the services or only performed ineffective services. Attorney General Madigan’s Consumer Fraud Bureau has directly received one complaint relating to the defendant and 68 complaints referred from the Better Business Bureau.(1)

For more, see Illinois AG Sues 14th Company For Mortgage Rescue Fraud (Madigan Alleges Florida Company Takes Advantage of Homeowners on the Verge of Losing their Homes to Foreclosure).

For other recent civil actions by other state attorneys general against Law & Associates, see:

• Minnesota: State sues two firms that asked cash for foreclosure assistance (The attorney general says some companies claiming to help in a foreclosure do anything but),
• Florida: State of Florida v. Law & Associates, et al. (alleges an upfront fee foreclosure rescue operation).

(1) According to the Illinois AG's news release, Madigan’s suit asks the court to prohibit the defendants from engaging in mortgage rescue practices. The suit also seeks a civil penalty of $50,000, additional penalties of $50,000 for every violation found to have been committed with the intent to defraud, and a $10,000 penalty for each violation committed against a person 65 years or older. Further, the suit asks the court to rescind the contracts signed as a result of these deceptive practices and offer full restitution to affected consumers. Finally, Madigan’s suit asks the court to order the defendants to pay all costs associated with the investigation and prosecution of the lawsuit.

Maryland Attorney Cops Plea In Metropolitan Money Store Alleged Equity Stripping, Foreclosure Rescue Scam

The U.S. Attorney's Office for the District of Maryland announced yesterday:

• Richard Allison, age 37, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau, pleaded guilty today to conspiracy to commit mail and wire fraud, in connection with a mortgage fraud scheme which falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein.

• According to his plea agreement, Allison became employed by the Metropolitan Money Store located in Lanham, Maryland in December 2005. He provided legal services to: the Metropolitan Money Store, which offered foreclosure consultation and credit services to financially distressed homeowners; the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland; Burroughs & Smythe Financial Services, Inc., another foreclosure consulting and credit servicing business based in Lanham, Maryland; and several individual officers of the companies.

For more, see Lawyer Pleads Guilty In Metropolitan Money Store Mortgage Fraud Scheme (Conspired to Take Title of Homes from Financially Distressed Homeowners and Secretly Use Home Equity for Personal Benefit).

See also: The Washington Post: Lawyer Pleads Guilty in Metropolitan Money Store Scheme.

To read the original Federal indictment of the alleged perpetrators, see U.S. v. JoyJackson, et al. (available online courtesy of the consumer protection attorneys at The Holland Law Firm, P.C. and the Legg Law Firm).

Go here and go here for other posts on the alleged Metropolitan Money Store foreclosure rescue scam. joyjackson

Some Seniors Look To Pro Bono Attorneys To Undo Damage Done In Real Estate Scams

A recent article in Newsday recounts two stories in downstate New York of elderly victims of real estate scams who have sought help from local attorneys working on a pro bono basis to recover some of what they have been swindled out of.

In a Nassau County case involving a foreclosure rescue scam:

• Attorneys Douglas Good and Jennifer Hillman of the Uniondale firm Ruskin Moscou Faltischek worked pro bono to arrange a settlement for [homeowner Priscila] Nano in which she eventually got back most of the value of her home. Additionally, the "mortgage broker" who scammed Nano has been told by the courts to pay her a $3.5 million judgment, although he has few documented assets.

In a Queens County case involving alleged deed thefts of two homes through forgery from an elderly man suffering from Alzheimer's:

• Artee McKoy, 94, had two homes stolen "out from under him," according to Queens District Attorney Richard Brown (see Queens County DA's news release). [... The two suspects] are charged with multiple counts of grand larceny totaling $800,000 and are out on bail.

***

• Ann Goldweber, director of the Elder Law Clinic at St. John's University School of Law, is working for convictions in McKoy's case and to have McKoy's finances made whole again. "Our position is he should get back title to both homes and not be responsible for paying back the mortgage, which is held by HSBC. Anything McKoy signed should be voided because of his lack of competency," said Goldweber.

For the story, see Seniors, be wary of scam artists who target you.

Bankruptcy Court Disallows Creditor Claim, Voids Mortgage Lien Due To Lender's Screw Up In Establishing Chain Of Title

On the Bankruptcy Law Network blog, Massachusetts attorney L. Jed Berliner comments on a 2006 case in which a bankruptcy judge disallowed a mortgage lender's secured claim for a loan it held and voided the lien of the mortgage:

• Foreclosures are being stopped because the purported mortgage holder cannot prove it holds rights to the mortgage. Those cases do not remove the mortgage entirely, but only stop the foreclosure. More can be done.

• Section 506(d) of the Bankruptcy Code will permanently void a mortgage [lien](1) if the claim is disallowed. This can be easier than you think. With so many mortgages being sold and resold, the electronic transfer of the funds moves much faster than the papers. Sometimes the paperwork is never completed.

• In In re Long, 353 B.R. 1 (Bankr D MA 2006) (Somma, J.), the bankruptcy court permanently voided a mortgage where the holder could not prove it held rights to the mortgage.(2)

Source: Missing Assignment Voids Mortgage.

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

(1) In contrast to voiding the actual debt secured by the mortgage lien.

(2) According to the following excerpt from the case, bankruptcy judge ruled that the existence of two critical gaps in the mortgage loan's chain of title from the initial mortgage holder to the last mortgage holder was fatal to the secured creditor's bankruptcy claim (see In re Long, pp. 26-27):

• Portfolio contends that it holds title [to the mortgage in question] by virtue of two assignments: the first from Astrum to Union Mortgage Company, and the second from Resolution GGF OY “as successor in interest to Union Mortgage Company” to Portfolio. The first assignment has been well established: the assignment from Astrum to Union Mortgage Company, having been made and signed by Astrum itself, appears to be valid and in order.

• The second assignment, however, was not executed by Union Mortgage Company, the assignee under the first mortgage. Rather, it was executed by “Foremost Servicing Company, Inc., by Power of Attorney for Resolution GGF OY, Successor in Interest to Union Mortgage Company, Inc.”

• The assignment is effective only if (1) Resolution GGF OY was in fact the successor in interest to Union Mortgage Company with respect to ownership of the promissory note and mortgage and (2) Foremost Servicing Company, Inc. held a valid power of attorney for Resolution GGF OY.

• The assignment itself is not evidence that either of these necessary conditions was satisfied when the assignment was executed. (my emphasis added) Proof that these conditions were satisfied requires evidence extraneous to the assignment. Portfolio submitted no such evidence either with the proof of claim or at the evidentiary hearing.22

• Hence, there are two critical gaps in the Portfolio’s proof that it holds title (my emphasis added). In view of these gaps, I conclude that the Debtor has rebutted the prima facie evidence of the proof of claim, that the burden of proof was thereby shifted to Portfolio to prove that it is the holder by assignment of the promissory note and mortgage, and that Portfolio has failed to carry this burden. Portfolio has failed to establish that it is the holder by assignment of the second mortgage. The Debtor’s objection to the secured claim of Portfolio must therefore be sustained, the claim disallowed, and, in accordance with 11 U.S.C. §506(d),23 the mortgage declared void. missing mortgage foreclosure docs gamma

Georgia Lawmakers Close Class Action Loophole On Little Known Law Allowing Homeowners To Hammer Sloppy Lenders After Paying Off Mortgage

In Atlanta, Georgia, The Atlanta Journal Constitution reports:

• Here's an obscure law that mortgage lenders would probably rather you didn't know about: Georgia statute 44-14-3. The reason is, it can cost mortgage lenders $500 or more if they didn't properly finish the paperwork for a homeowner who paid off his or her loan. The law has been on the books for decades, but because of a recent amendment, more folks are likely to be hearing about it as they pay off their mortgages, refinance or sell their homes.

***

• Under Georgia law, lenders are required to notify the county clerk within 60 days after a mortgage is paid off. But about a third of the time, they don't, estimates [title insurance agency president Michael] Watkins, which means his company's employees often see deed records that falsely indicate a property has more than one loan outstanding.

***

• As the result of an amendment enacted in May, lenders are now required to notify homeowners who pay off their mortgage that they can collect $500 if their lender doesn't send the proper paperwork to clear up their property title within 60 days. The amendment, to forestall class-action lawsuits against lenders, also requires the homeowner to make that demand in writing after waiting at least 60 days.(1) Georgia law has long allowed homeowners and other real estate owners to demand $500 in damages from lenders who didn't meet the deadline, but most people didn't know about the law, [Atlanta attorney Jennifer] Fitzgerald(2) said.

***

• Joe Brannen, president of the Georgia Bankers Association, said the trade group sought the amendment to remove the threat of several class-action lawsuits, agreeing to the extra notification as "part of the negotiation."

For the story, see Little-known law can snag lenders.

(1) Prior to the law's amendment, homeowners weren't required to send a formal written notice demanding that the lender record the satisfaction of mortgage prior to commencing a lawsuit. The requirement of first sending a lender a a written demand before bringing a lawsuit will obviously make the lenders less likely to screw up when complying with their obligations post-mortgage payoff, thereby making it tougher for:

• homeowners to sue the mortgage lenders for their 500 bucks, and
• homeowners' attorneys to obtain court-ordered attorney fee awards, the bill for which has heretofore been footed by the lenders.

(2) Reportedly, Fitzgerald said she has filed "several hundred" lawsuits on behalf of homeowners in recent years. In addition to the $500 the homeowner is entitled to, lenders that fail to comply with the law are also liable for homeowners' legal fees.

Illinois Cops Nab California Deed Theft Suspect On Outstanding Warrants; Man Shipped Back To Face Multiple Felony Charges

In Southern California, San Bernardino County District Attorney Michael Ramos announced late last month:

• In May 2008, felony charges were filed against John Christopher Foster, 50, formerly of Rancho Cucamonga, involving several felony counts of Real Estate Fraud related offenses. In 2005 and 2006, Foster forged the victim's signature on a Grant Deed and Deeds of Trust for property located in the city of Fontana. Subsequently, Foster sold the Fontana residence for $675,000.

• Investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit found that Foster had fled California in January 2008. On August 14, 2008, Illinois State Troopers arrested him while driving through Douglas County, Illinois. Foster was arrested on the outstanding felony warrant, which included charges of: Forgery, identity theft, and filing forged documents with the County Recorder’s Office.

• On Wednesday, August 20, 2008, DA Investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit extradited Foster, via airplane, back to California from the state of Illinois.

For the DA's press release, see Rancho Cucamonga Man Extradited From Illinois on Real Estate Fraud Charges.

Feds Warn NYC Landlords On Apartments Not Accessible To Those With Disabilities; May Cost Tens Of Millions To Comply With Law

In New York City, The New York Times reports:

• [The status of thousands of disabled tenants] took the spotlight last week with the news that developers and landlords in New York City — potentially facing lawsuits from the federal government — may have to spend tens of millions of dollars to renovate more than 100,000 apartments built since 1991 to comply with federal housing laws barring discrimination against tenants who use wheelchairs.

• The United States attorney’s office in Manhattan has sent letters to some of the city’s most prominent landlords and architects, saying they risk prosecution under the Fair Housing Act because, the prosecutors said, their buildings are not accessible to people with disabilities.

For more, see Accessible Homes? Not Really, Say Disabled Residents.

Law Regulating Foreclosure Rescue Among Financing-Related Homeowner Protection Bills Signed By Delaware Governor

In Wilmington, Delaware, The News Journal reports:

• Gov. Ruth Anne Minner signed into law [last] Tuesday four bills aimed at helping homeowners avoid foreclosure, including a measure that for the first time licenses and regulates all loan originators. The legislation, which grew out of the recommendations of a foreclosure-prevention task force chaired by Lt. Gov. John Carney, licenses and regulates mortgage loan originators and foreclosure consultants, requires independent counseling for seniors considering reverse mortgages and raises money for a state-run fund that provides short-term loans to help homeowners make mortgage payments.

For more, see Minner OKs foreclosure prevention bills.

According to the synopsis of one of the new laws, the Mortgage Rescue Fraud Protection Act, which regulates foreclosure purchasers and foreclosure consultants:

• Each month foreclosure proceedings begin on about one house in every 1,000 nationwide. The growing foreclosure rate has led to a wave of equity stripping and foreclosure rescue scams. This bill regulates foreclosure consultants and foreclosure reconveyances in order to protect homeowners from foreclosure rescue schemes that deplete the homeowner’s equity.

Among the highlights of the law is that it makes a violation of any provision a crime punishable as a Class A misdemeanor (see section 2428B(d) of the new law).

Go here for Delaware's Mortgage Rescue Fraud Protection Act; and go here for legislative history of the new law. The law goes into effect on January 1, 2009.

Ex-EMC Employee Spills The Beans On Loan Servicing Secrets

Consumer Warning Network has a video on YouTube of an interview with a former loan servicing employee with EMC Mortgage Corporation, who spills the beans on what was once an industry secret servicers didn't want the public to know.

• The secret mortgage servicers don't want you to know is they can make MORE money off of homeowners when they keep your loan in default. A former employee of loan servicer EMC tells the inside story why so many people can't get their loan out of default.

For the video, see Mortgage Servicers' Secret.

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

Erie Homeowner Hurt In Mortgage Scam Settles Suit; 40%+ Cut In Loan Balance, Interest; Non-Profits Reviewing 50 Other Cases Say Class Action Possible

In Erie, Pennsylvania, the Erie Times News reports on the settlement of a predatory lending case brought in an Erie Federal Bankruptcy Court by local resident Eloise Woodsbey, who nearly lost her home to foreclosure:

• [I]n the main provision of the settlement, the principal on Woodsbey's mortgage was cut from $44,900 to $25,000, and the interest rate was set at 5 percent, over 30 years. That rate had been as high as 11.75 percent.

• Using the Woodsbey case as a guide, the statewide legal-aid organization that represented her is working with local groups to try to help hundreds of other Erie homeowners caught up in the same Erie subprime mortgage scam, which was at the center of a federal criminal probe. Among those indicted in the case were the mortgage broker and developer involved in selling Woodsbey her house.

***

• "It is a good result for her," said one of Woodsbey's lawyers, Kevin Quisenberry, of the Pittsburgh-based Community Justice Project. "I wish there was a way to get relief for the other 100 people who bought these homes." He said the nonprofit Community Justice Project has been receiving information from St. Martin Center Inc. and other Erie-based groups on other homeowners who might need assistance.

***

• Dave Pesch, the housing counseling manager at St. Martin Center Inc. [...] said that he and lawyers from the Community Justice Project are reviewing the mortgages of about 50 Erie residents who purchased houses from the defendants in the criminal case. [...] When asked if the review could result in a class-action suit involving some of those homebuyers, Pesch said, "I certainly think that is a possibility." Quisenberry said he hopes that local lawyers and other officials can provide the resources to review the cases of other homeowners to see if they merit legal action. "What would be really great is if we can get a dedicated pool of attorneys who would be available for cases that would be referred to them," Quisenberry said.

For more, see Woman settles mortgage fraud suit.

Foreclosure Defense Law Seminars Coming To Miami, Cleveland

In Miami, Florida, The Florida Bar News reports:

• April Charney, a Jacksonville Area Legal Aid lawyer and nationally recognized foreclosure defense expert, is the featured speaker at a September 12 seminar in Miami---designed for all attorneys interested in learning how to handle defense of foreclosure cases. [...] Registration for the seminar begins at 8:30 a.m., and the seminar begins at 9 a.m. on Friday, September 12, at the Dade County Courthouse, Courtroom TBA, 73 W. Flagler Street, Miami.

Topics include:

1. Federal laws that govern mortgage originating and servicing;
2. Laws and regulations that govern mortgage lending and servicing;
3. Understanding loan documents, origination, and closing process;
4. Servicing problems and post origination issues;
5. Common law/state law causes of action and affirmative defenses;
6. Drafting discovery/motion practice.

For details and contact information, see Defending Foreclosures in Florida.

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

In Cleveland, Ohio, the Institute for Foreclosure Legal Assistance has their mortgage foreclosure defense Intensive Training Session scheduled for September 4, 2008 at Cleveland Marriott Downtown at Key Center, 127 Public Square, Cleveland.

This session coincides with the National Association of Consumer Advocates' 2008 Mortgage Lending Litigation Conference on September 5-7, to be held at the same location in Cleveland. Go here for the Beginning Track Agenda, and go here for the Advanced Track Agenda.

Northern Indiana Legal Services Firm Launches Foreclosure Defense Project

In South Bend, Indiana, the South Bend Tribune reports:

• [W]ith funding from the IFLA [Institute for Foreclosure Legal Assistance(1)], Indiana Legal Services Inc. has launched its new Indiana Foreclosure Legal Assistance Project to provide free legal help to eligible Northern Indiana homeowners who face losing their homes through foreclosure. Indiana Legal Services was awarded a $240,000 grant over three years from IFLA located in Washington, D.C.

• The Indiana not-for-profit organization was one of 27 legal aid offices throughout the country to receive funds from the national competition. "The mortgage foreclosure issue is significant throughout Indiana, but also in northern Indiana and in the general South Bend area," said Ron Gyure, resource development director for Indiana Legal Services.

***

• ILS' new project will initially target the South Bend area and northwest Indiana, where there are a high number of subprime mortgages, many of which are predicted to go into default. In the grant's first year, ILS will have two attorneys in its South Bend office and one attorney in its Gary office to perform foreclosure defense work.(2) [...] In the grant's latter stages, ILS expects to expand its foreclosure work into the Fort Wayne area.

***

• ILS can provide direct legal representation to homeowners by reviewing their mortgage documents to see whether they include provisions that are abusive or predatory, negotiate new terms with their lenders or take other appropriate legal actions.

For more, see Project to aid homeowners (Indiana Legal Services program in South Bend aims to avoid foreclosures).

(1) The Institute for Foreclosure Legal Assistance, a project of the Center for Responsible Lending and managed by the National Association of Consumer Advocates, made the awards to nonprofit groups that demonstrated that they already had successful foreclosure prevention programs but needed more resources.

(2) The ILS South Bend Regional Office serves clients in St. Joseph, Elkhart, Fulton, Kosciusko, Lagrange, LaPorte, Marshall, Noble, Pulaski and Starke counties. From its Gary office, the ILS legal staff serves Lake, Porter, Jasper and Newton counties.

Foreclosure Rescue "Federal Land Grant" Scams Flooding San Diego DA's Office

In San Diego, California, North County Times reports:

• Two months ago, the district attorney's office busted foreclosure consultants based in Carlsbad who offered a "federal land grant" system that offered to save homeowners from foreclosure, he said. Authorities said the program was useless and bilked struggling homeowners for fees as high as $10,000, plus monthly rent. Similar land grant scams are still active throughout the county, [economic crimes division chief Michael] Groch said, flooding the office with cases.

Source: Fraud cases surpass 2007 numbers, DA says (Land grant scams targeting owners facing foreclosures still active, authorities said).

Controversy Over New Washington Law Regulating Foreclosure Rescue Deals Has State AG, Lawmaker Pointing Fingers

In Seattle, Washington, Seattle Weekly reports:

• Since the [Washington State] Distressed Property Law took effect on June 12, it has facilitated zero lawsuits but much finger-pointing. The law, designed to quash nefarious foreclosure-rescue schemes, has realtors uncomfortable because, they say, it burdens them with undue liability. Meanwhile, Attorney General Rob McKenna, who once declared ownership of the bill, now disavows it, instead siding with the realtors (see "Home Flipper," SW, July 23).

***

• [Sen. Brian Weinstein (D-Mercer Island), one of the bill's sponsors] claims the attorney general's office was involved in every phase of crafting the final law.

For more, see McKenna Called Out on Controversial Foreclosure Bill (The attorney general says he wasn’t part of the bill’s changes. Rep. Weinstein begs to differ).

For tutorials and other information on the new law regulating foreclosure rescue transactions in Washington State, see What You Need To Know About Washington State's New Distressed Property Law HB2791 (available online courtesy of the Washington Association of REALTORS®).

New Law Protects Hawaii Homeowners From Foreclosure Rescue Scams

In Honolulu, Hawaii, Pacific Business News reports:

• The Hawaii Bankers Association is reminding consumers that the Hawaii Mortgage Rescue Fraud Prevention Act, signed into law by Gov. Linda Lingle in June, protects them from people who prey on homeowners facing property foreclosures and liens. “Mortgage rescuers,” or distressed-property consultants, charge high fees, often do minimal work and employ deceptive tactics that sometimes force homeowners to deed their properties to the mortgage rescuer, according to the association. The new law requires consultants to provide homeowners with a written contract detailing their services. It also gives homeowners the right to cancel at any time before services are performed.

For more, see Hawaii homeowners are protected from fraudulent mortgage rescuers.

For the perspective of a Hawaii real estate agent, who believes the new law is written in a way that may impede real estate salespeople in the legitimate conduct of arranging short sales for homeowners pursuant to standard listing agreements, see Hawaii Reporter: Mortgage Rescue Fraud Prevention -The Unintended Consequences of Hawaii's New Act 137.

Monterey DA Charges Three In Alleged Upfront Fee Foreclosure Rescue, Refinance Scam

In Monterey County, California, The Salinas Californian reports:

• [T]he Monterey County District Attorney's Real Estate Prosecution Unit has filed multiple felony charges alleging that three suspects targeted and defrauded financially distressed homeowners through a Monterey County “foreclosure rescue” scam between Feb. 10 and June 15 of this year. The complaint charges Monterey County residents Maria de Lourdes Ponce and Fabian Olivarez Casillas and Santa Cruz County resident Melissa Garcia with criminal conspiracy.(1)

***

• The suspects allegedly promised that they could negotiate with lenders to either lower monthly mortgage payments or refinance home mortgages and that such services required an advance fee of as much as $2,800.(2) Clients were assured that the advance fee was a “loan processing charge” and “fully refundable” if the loan negotiation failed.

***

• The criminal investigation commenced on June 6, after the Gonzales Police Department received a report from an alleged victim of the foreclosure rescue scam. By July 17, the Gonzales Police Department had obtained statements from more than 35 victims and additional witnesses and executed a search warrant on Maria de Lourdes Ponce’s home.

For more, see DA charges 3 in Monterey County foreclosure scams; more than 30 victims involved.

See also, KSBW-TV Channel 8: Gonzales Woman Arrested For Mortgage Fraud (Police: Woman Charged Homeowners Thousands) (read story) (watch video).

(1) According to the story, Ponce, who was arrested by Gonzales Police Department on Aug. 15, faces 11 other felony counts, including residential burglary and elder abuse, 9 counts of grand theft, and 3 misdemeanor counts. Garcia is currently in custody in Santa Cruz County, where she faces prosecution on charges of forgery, elder abuse and multiple counts of felony grand theft in a similar foreclosure fraud scheme. A warrant has been issued for the arrest of Fabian Casillas.

(2) Collecting upfront fees in California is prohibited under Section 2945.4(a) of the California Civil Code.

Two Charged In Alleged Foreclosure Rescue Scam Involving $4M+ In Fraudulently Obtained Loans, Say Minnesota Feds

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:

• An Associated Bank employee and a real estate company owner from Minnetonka were charged Wednesday by a federal grand jury in a conspiracy to defraud the bank on at least 21 loans totaling more than $4 million. Eric Richard Krahnke, 50, of Ramsey, and Michael Ian Striker, 55, of Minnetonka, jointly face one count of conspiracy and 21 counts of bank fraud. Each man also faces one of two separate counts of money laundering related to the alleged conspiracy.

***

• Between March and October 2003, the indictment says, Striker submitted 21 loan applications through Krahnke that contained false or misleading information; the applications overstated his and U.S. Equities' finances. Striker also allegedly submitted inflated appraisals to justify loan amounts exceeding the true market value of the properties.

According to the indictment:

• In the case of many of these Loans, the properties were not vacant rehab properties [as was represented to the lender], but rather were homes that financially-distressed individual homeowners were were still living in. The homeowners had conveyed their title to Striker, or businesses that Striker was working with, under a contractual agreement whereby they re-purchased the residence on a contract for deed. At the same time these homeowners thought that Striker was helping them to stay in their homes, Striker was falsely representing to the bank an intention to rehab and re-sell these properties.(1)

For more, see:

• Real estate loans bring two indictments (A former bank officer and a real estate investor face federal fraud charges),
• Indictment - U.S. v. Krahnke, Striker.

(1) Indictment, paragraph 7(g).

Breathing Life Into A Time-Barred Truth In Lending Act Claim

Earlier this year, an article in the law firm Stroock, Stroock & Lavan's Subprime Task Force Special Bulletin(1) contained a discussion on the 2008 California Federal Court decision in Monaco v. Bear Stearns Residential Mortgage Corp.(2) which, it appears to me, illustrates a way how, in California (as well as any other state having a state law similar to the California statute at issue in this case), claims for damages on account of conduct that constitute violations of the Federal Truth In Lending Act ("TILA") can be pursued even if the one-year TILA statute of limitations has expired. A few excerpts from the article:

• In Monaco, a federal court in California found that standard option-ARM loan documents are “ambiguous,” potentially subjecting the lender to liability for trying to enforce the loan’s terms. Making matters more difficult for the lender, the court further held that the lender’s alleged violation of the federal Truth In Lending Act (“TILA”) could create liability under California’s Unfair Competition Law (“UCL”), which provides for greater penalties than allowed under TILA, even though the borrower’s TILA claim was barred by the statute of limitations.

***

• Plaintiffs seek to rescind their loans by reason of alleged violations of TILA, including failure to disclose the actual interest rate and negative amortization, and, using the alleged TILA violations as a predicate, demand damages and restitution under California’s UCL.

***

• Bear Stearns moved to dismiss the TILA claims on the grounds that plaintiffs were not entitled to have their loans rescinded because the option-ARMs were refinancings of prior loans and because TILA’s one-year statute of limitations had expired. Second, defendants moved to dismiss the UCL claims on the grounds that TILA preempts California’s UCL and will not permit plaintiffs to win damages and penalties not permitted under TILA.

***

• Although the California court agreed that plaintiffs could not use TILA to rescind their loans and the TILA claim was barred by the statute of limitations, it nevertheless rejected defendants’ preemption argument:

• A State law is inconsistent with TILA if it requires a creditor to make disclosures or take actions that contradict the requirements of the Federal law. Here, Plaintiffs’ second cause of action under the UCL is based solely on Defendants’ alleged TILA violations. Nowhere do Plaintiffs suggest that Defendants failed to make certain disclosures or take certain actions not encompassed by TILA. Plaintiffs invoke the UCL solely for the additional remedies offered thereunder. Additional penalties are not inconsistent with TILA, but merely provide greater protection to consumers. (Monaco, page 7, at lines 9 through 17).

• Thus, the UCL’s longer statute of limitations enabled the Monaco plaintiffs to pursue their otherwise time-barred TILA claim and to obtain penalties that would not be permitted under TILA.(3)

For more, see Courts Act to Protect Borrowers on Option-ARM and Subprime Loans.

For the court decision, see Monaco v. Bear Stearns Residential Mortgage Corp., 554 F. Supp. 2d 1034 (C.D. Cal. 2008).

For those of you who are interested, the article also contains a discussion of another pro-borrower decision referred to in this blog earlier this year, the New York decision in LaSalle Bank, N.A. v Shearon, No. 100255/2007 (Sup. Ct. Richmond County, Jan. 28, 2008).

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

(1) By Julia B. Strickland, a Partner in the Class Action/Financial Services Litigation Practice Group of Stroock & Stroock & Lavan LLP, and Curtis C. Mechling, a Partner in Stroock’s Litigation Practice Group, both of whom are members of Stroock’s Subprime Task Force.

(2) No. CV 07-05607 SJO (CTx) (U.S.D.C. Central District of California, Jan. 28, 2008).

Foreclosure Network of New York City Formed By Local Lawyer Groups In Support Of The Cause Of Financially Strapped Homeowners

In New York City, the New York Law Journal reports:

• A trio of bar groups yesterday announced the formation of the Bar Association Foreclosure Network of New York City, a cooperative pro bono effort by lawyers in three boroughs. The network will address a "citywide crisis" in mortgage foreclosures by providing a central resource for information and training in the cause of helping homeowners, according to Jeannie Costello, executive director of the Brooklyn Bar Association's Volunteer Lawyers Project. The New York City Association Justice Center and the Queens County Bar Association are the other participants. The network is an outgrowth of a city bar project in May in conjunction with the Federal Reserve Bank of New York, in which some 125 lawyers were recruited to counsel New Yorkers facing loss of their homes due to the subprime mortgage crisis.

Source: NYC Bar Groups Band Together for Pro Bono Effort.

See also, Brooklyn Daily Eagle: Brooklyn Bar and City Lawyers Create Network For Foreclosure Flood.

Legal Services Of Northern Virginia To Launch Foreclosure Legal Assistance Project

In Northern Virginia, The Blog of Legal Times reports:

• Legal Services of Northern Virginia (LSNV) is launching a new program designed to help low-income homeowners facing foreclosure. The Foreclosure Legal Assistance Project (FLAP) is designed to provide a range of legal assistance. Potential clients call LSNV to make an appointment to meet with an attorney and housing counselor. The three review the homeowners’ financial information and possible legal solutions. The attorney and housing counselor may also offer advice about options lenders may accept to prevent a foreclosure.

***

• FLAP is similar to other programs around the country including the Foreclosure Prevention Pro Bono Project in Maryland and the Foreclosure Prevention Collaborative Initiative in Boston.

For more, see Foreclosure Program to Help Low-Income NOVA Homeowners.

Foreclosure Crisis Has South Florida Legal Services Firm Operating At Full Capacity; May Begin Turning Away Clients In Foreclosure

In Fort Lauderdale, Florida, WFOR-TV Channel 4 reports:

• Legal Aid [Service] of Broward County has spent years as a lifeline for thousands of people needing legal help and dealing with foreclosures. But, the very thing Legal Aid has been fighting may become the latest victim of the continuing foreclosure disaster.

• "Given the volume of foreclosures and the number of people seeking help, it's just becoming ever more impossible to provide legal services to the people that need it," said attorney George Castrataro,(1) who works with Legal Aid. "We haven't seen an increase in funding since this foreclosure event started, yet the number of folks requiring assistance quadrupled, if not even more."(2) The problem Legal Aid faces comes at a bad time for homeowners in Broward County. The latest number showed 27,000 foreclosure actions have been filed in the first six months of 2008.

For the story, see Foreclosure Hurt Legal Aid Agencies (Legal Aid of Broward County is having to get selective of the cases they can help) (read story) (watch video).

For Florida homeowners who fear they may soon be unable to make their mortgage payments or have already missed payments and need help getting an attorney free of charge, try Florida Attorneys Saving Homes toll-free hotline, (866) 607-2187.

(1) According to the story, Castrataro says Legal Aid receives around 250 calls a week from poor and indigent people who need help fighting foreclosure. But, with the manpower and funding problems the agency faces, the agency will have to be more selective.

(2) The situation is just as tough for legal services firms in Northern & Central Florida. See:

• Florida Legal Services Firm Inundated With Foreclosure / Bankruptcy Clients; Campaign On To Raise Operating Funds,
• Central Florida Legal Services Firm Opens Walk-In Clinics To Address Rising Needs Of Homeowners In Foreclosure As Calls For Help Double.

NY Court Denies Tenant Eviction After Foreclosure Sale; Failure To Name, Serve All Occupants As Parties In Foreclosure Action Fatal To Removal Attempt

A February, 2008 lower court decision in Nassau County, New York addressed a situation involving the attempted eviction of four occupants in a home, the title to which was acquired by a mortgage lender in a foreclosure sale that foreclosed the ownership interest of the last owner of record, one Angello Bernard. The court described the four occupants as follows:

• [Kesha] Springer(1) resides in the Premises with her mother, Lecreta Springer, her sister, Cherryann Dalrymple and Cherryann Dalrymple's twelve year old son. She avers that she has lived in the Premises since 1997.(2) The Premises were previously owned by her parents. When Kesha's father died, her mother had trouble making the mortgage payments. To avoid foreclosure, Lecreta Springer transferred the property to Bernard, who refinanced the property.(3) Although Bernard owned the property, Lecreta Springer made the mortgage payments. Lecreta Springer was again unable to make the mortgage payments and the Property was foreclosed. Lecreta Springer and Kesha have been negotiating with the Bank to purchase premises but have been unable to do so.

In denying the foreclosing lender's motion for a writ of assistance to evict the occupants after the foreclosure sale, the court said:

• While a writ of assistance may be issued evicting [Kesha] Springer and Bernard from the property, a writ cannot be issued terminating the occupancy of Lecreta Springer, Cherryann Dalrymple or her son. Lecreta Springer, Cherryann Dalrymple and her son were not named or served as parties in the foreclosure action.(4)

The occupants were represented by attorney Lawrence S. Lefkowitz, Hempstead, New York.

For more, including the court's discussion of the New York law it applied in reaching its decision in this case, see MERS, Inc. v Bernard, 2008 NY Slip Op 50308(U) [18 Misc 3d 1134(A)]; February 19, 2008, Supreme Court, Nassau County.

(1) Along with Angello Bernard, Kesha Springer was named as a defendant in the foreclosure action and served with the foreclosure complaint.

(2) It is important to note that the occupants were living in, and were in possession of, the home prior to the commencement of the foreclosure action. The court's decision in this case may very well have been different had the occupants moved in after the commencement of the action, or more precisely, after the recording of the lis pendens once the action was initiated.

(3) I wonder if this was an equity stripping, foreclosure rescue scam???

(4) Apparently, the fact that one of the home's occupants was only 12 years old was no bar to his due process right to be named as a party in the foreclosure action and be served with the lawsuit. Presumably, if there were more minor children living in the household, they, too, would have been entitled to their due process right to be named and served in the foreclosure action, regardless of age. I wonder how many attorneys for foreclosing lenders ever bother naming and serving any occupants who are minors.

The fact that the foreclosing lender named "John Doe" & "Jane Doe" to designate any of the home's occupants as additional defendants in the foreclosure action was apparently, at least in this court's view, insufficient to cut off their occupancy rights in the home after completion of the foreclosure. For more on the use of "John & Jane Doe" alias when naming unknown tenants in foreclosure actions, see yesterday's post, Failure To Name Tenant In Home Foreclosure Action Thwarts Subsequent Eviction Attempt; Use Of "John Doe" Alias Ruled Ineffective Absent Due Diligence. (I can't help wondering how often some attorneys representing foreclosing mortgage lenders mindlessly utilize the "John & Jane Doe" mechanism to name unknown tenants & occupants without exercising any diligence in attempting to ascertain their actual names - maybe as often as they mindlessly use "lost note affidavits" in cases where they don't have physical possession of the actual promissory note). TenantRentSkimmingAlpha

Failure To Name Tenant In Home Foreclosure Action Thwarts Subsequent Eviction Attempt; Use Of "John Doe" Alias Ruled Ineffective Absent Due Diligence

Last month, a Nassau County, New York trial court ruled that, under the specific facts of the case, the failure by a mortgage lender to name a tenant as a defendant in a home foreclosure proceeding kept the tenant from being subsequently evicted after the foreclosure sale. In addressing the lender's failure to name the tenant in the foreclosure action, the court made these observations (citations footnoted for ease of reading):

• [T]he respondent [tenant] was not properly named as a party in the foreclosure proceedings [...]. "In order to cut off the interest of an occupant of the premises, the occupant must be named as a party in the foreclosure proceedings."(1) The respondent was not named in the foreclosure proceedings and therefore her rights were "not affected by the judgment of foreclosure and sale."(2)

• The respondent, as the sole tenant, is a necessary party to the foreclosure proceeding (see 78 NY Jur. 2d Mortgages §588). As a necessary party who was not named in the foreclosure proceeding, the respondent's rights were "unaffected by the judgment and sale, and the foreclosure sale may be considered void as to the omitted party."(3) Thus, a tenant or occupant who was not named as a party in the foreclosure action retains his or her possessory rights and a right of redemption.(4)

***

• The foreclosure action has a designation for "John Doe" so as to include any unknown persons. The fact that the respondent [tenant], as a necessary party, was not named or served in the foreclosure proceeding would not be remedied, even if she, as an unknown person, were considered to be a "John Doe." CPLR 1024 [of the New York statute] permits a plaintiff to proceed against an unknown party but would be inapplicable in regard to the respondent. "Before naming a party as a "John or Jane Doe", the plaintiff must establish that it has made a genuine effort to ascertain the name of the party but has been unable to do so."(5) If the plaintiff knew or could have discovered the actual names of the parties named as "John or Jane Doe" with the exercise of due diligence, then the summons naming such parties as unknowns is jurisdictionally defective.(6)

Representing the tenant was the non-profit firm Nassau/Suffolk Law Services Committee, Hempstead, New York.

For the court decision, see Countrywide Home Loans, Inc. v Williams; 2008 NY Slip Op 51319(U) [20 Misc 3d 1111(A)]; July 1, 2008, District Court Of Nassau County, First District.

(1) Mers, Inc. v. Bernard, 18 Misc 3d 1134(A) [SCt, Nassau County 2008] (citing Douglas v. Kohart, 196 App Div 84 [2d Dept 1921]; and Krotchka v. Green, 121 Misc 2d 471 [Yonkers City Ct, 1983]).

(2) Id. (Citing Polish National Alliance of Brooklyn, U.S.A. v. White Eagle Hall Co., Inc., 98 AD2d 400 [2d Dept, 1983] and Empire Savings Bank v. The Tower Co., 54 AD2d 574 [2d Dept, 1976].

(3) 6820 Ridge Realty, L.L.C. v. Goldman, 263 AD2d 22, 26 [2d Dept, 1999] (see Si Bank & Trust v. Sheriff of the City of New York, 300 AD2d 667, [2d Dept, 2000]).

(4) Id.; and Davis v. Cole, 193 Misc 2d 380 [SCt NY, 2002].

(5) Mers, Inc. supra, citing Tucker v. Lorieo, 291 AD2d 261 [1st Dept, 2002] and Porter v. Kingsbrook OB/GYN Associates, P.C., 209 AD2d 497 [2d Dept, 1994].

(6) Id. citing ABCKO Industries, Inc. V. Lennon, 52 AD2d 435 [1st Dept, 1976].

Convicted Southern California Con Man Found Guilty In Alleged Deed Theft, Rent Skimming Scams

In Los Angeles, California, Fox News 11 reports:

• A Mission Hills man was convicted Monday of 14 felony charges involving real estate foreclosure and investment fraud. A San Fernando Superior Court jury deliberated about an hour before finding 51-year-old James Anthony Rojas guilty of grand theft, forgery and attempting to file false or forged grant and trust deeds. He also was convicted of three misdemeanor counts of rent skimming.

For more, see James Anthony Rojas Convicted in Real Estate Fraud Case.

See also, KHTS Radio AM 1220: Rojas Convicted Of Real Estate Fraud.

For earlier stories, see:

• The trial of James Rojas on fraud and theft charges was underway on last Tuesday,
• Real Estate Advisor Faces 82 New Felony Counts,
• Stevenson Ranch Fraud Victim Reaches Out To Others (Victim of fraud and forgery losing house, looking to talk with other victims).