Dilapidated Buildings In F'closure Continue Driving Tenants Into Streets; Deteoriating Conditions Force Fire Chief To Give Residents The Boot

In Swissvale, Pennsylvania, WTAE-TV Channel 4 reports:

• Residents at a Swissvale apartment building are being forced out because officials said the landlord has been ignoring citations for the past five years. "He's not doing what he's supposed to be doing," said 83-year-old tenant Sarah Kandor of her landlord, Michael Sturdivant.



• Sturdivant is facing a foreclosure lawsuit on the apartment building. He also owes more than $40,000 in back taxes.



• "We've had window sashes that have rotted to the point where windows have fallen out. We've had a ceiling collapse on a tenant in there. We had to go over and render medical aid and transfer her to the hospital for injuries from that," said Swissvale Fire Chief Clyde Wilhelm.

***

• [The landlord's] tenants are asking for more time to move out but Wilhelm said he knows granting it could cost them everything. "It's getting to the point where it's not if something's going to happen, it's probably when it's going to happen -- and we don't want that to occur," Wilhelm said. [...] The Salvation Army said tenants will be able to get help with moving expenses.

For the story, see Residents Forced From Home After Landlord Ignores Citations (Swissvale Residents Looking For New Homes).

See also, State Assisting Tenants Being Forced Out Of Apartments (Officials Say Swissvale Landlord Has Ignored Citations For 5 Years).

Financially-Strapped Multi-Unit NYC Residential Apartment Houses Sap Value From Neighboring Rental Buildings

In New York City, Crain's New York Business reports:

• Overleveraged residential buildings, properties that are not generating enough rental income to cover their mortgage payments and overall maintenance costs, as well as multi-family buildings that have gone through foreclosure are having a negative impact on neighboring properties, according to a new study released Thursday.



• Buildings within a 500-foot radius of overleveraged properties face a higher risk of physical deterioration and an increase in building code violations, said the study by the Citizens Housing and Planning Council and Enterprise Community Partners.



• The study, called "The Impact of Multifamily Foreclosures and Over-Mortgaging in Neighborhoods in New York City" looked at more than 1,100 multi-family buildings in Brooklyn, Bronx, Manhattan and Queens that were within 250 to 500 feet of overleveraged properties.



• “Our study suggests that proximity to an over-mortgaged building increases the likelihood of increased code violations, with New York City's Department of Housing Preservation and Development stepping in to carry out additional emergency repairs,” said Harold Shultz, senior fellow of Citizens Housing and Planning Council, in a statement. “As a result, the city should continue its efforts to closely monitor and prevent deterioration in those communities troubled by over-mortgaged multifamily buildings.”



• Buildings within a 500-foot radius of overleveraged building spend almost twice as much money on emergency repair expenditures conducted by the city, compared to buildings beyond that distance. In 2010, the study estimates that a building that neighbors a distressed property has roughly $1.9 million more in emergency repair charges than those beyond a 500-foot radius.



• Meanwhile, buildings within 250 feet of troubled properties had a tendency to have major housing code violations compared to buildings further away. These properties had a 13.7% increase in Class C, considered the most hazardous, code violations from 2008 and 2010.(1)

Source: Distressed buildings bring down their neighbors (A new study reveals buildings located 500 feet away from overleveraged and foreclosed properties face risk of deterioration and increased costs to maintain them).

(1) See also:

• The Real Deal: Foreclosures are contagious in NYC apartment buildings, too,
• The Wall Street Journal: City Feels Foreclosure Affects:
  
  "In single-family neighborhoods, you see empty homes and swimming pools filled with algae, in a way that you don't see them in multifamily neighborhoods," said Harold Shultz, a senior fellow at the housing and planning council.
  
  Instead, the parallel effect on neighboring apartment buildings can be measured in landlords making fewer repairs and a corresponding increase in housing-code violations, according to Mr. Shultz.
  
  The problem in New York City is widespread, but concentrated in northern Manhattan, the central and west Bronx and central Brooklyn, according to the report.

Law School Snags Local Vacant Firehouse; Will Be Future Home Of Institution's 10 Legal Aid Clinics

In Detroit, Michigan, the Detroit Free Press reports:

• The University of Detroit Mercy School of Law has purchased a vacant former Detroit firehouse downtown for use as the future home of its public legal aid clinics.

***

• The two-story facility will provide more than 6,000 square feet of space for the school's 10 legal aid clinics. Last year, UDM provided assistance for more than 1,450 people in its various clinics, including urban law, immigration and asylum, mediation, consumer defense and mortgage foreclosure. The school plans to open the new facility in December.



• The firehouse was built in the early 1900s and served as the home for the Detroit Fire Department's Engine 2 for many years. The building was used for other purposes after it was sold by DFD, but it retains much of its historic character including spiral staircases, exterior red fire doors and a lookout tower. UDM Law will keep the historic look in its redesign, the school said.

For the story, see UDM Law School buys former firehouse for legal aid clinics.

Bar Ethics Opinion Fails To Set Off Nuclear Bomb Effect With Florida Foreclosure Lawyers & Their Bankster Clients

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• A year ago, the Florida Bar issued an ethics opinion that was a warning for every mortgage lawyer who helps lenders foreclose on Florida homes. It must have made many of them squirm a bit, but maybe not enough.



• By then, everyone paying even a bit of attention knew huge numbers of foreclosure cases had been filed with iffy mortgage documents, most purporting to prove the plaintiff's right to foreclose.

***

• Though it seemed a fiasco, lenders' lawyers kept using the created-documents tactic. Most often, it still worked; most homeowners didn't even fight the case. The Bar ethics decision a year ago seemed likely to change that.



• It warned that lawyers could be suspended or disbarred if they knowingly filed iffy documents or, even in closed foreclosure cases, failed to tell judges about it now. Some predicted a nuclear bomb effect, all but wiping out the ability to foreclose.



• With all lawyers on notice, how could lawyers for lenders dare to keep glutting the courts with so many cases even if they were winning most without a fight?



• Well, there have been some effects. Lawyers are being more cautious, it seems. But that's about it. Sarasota County Circuit Judge Lee Haworth, a leader in helping courts handle the masses of such cases, says he hasn't heard of any lawyers coming forward to confess anything.

For more, see Lyons: Bar's ethics opinion little chill to foreclosures.

Prosecutors: Wife Torched Family Home To Conceal Pending Eviction From Unwitting Family; F'closure Stemmed From Loans Obtained By Forging Hubby's Name

In Alameda County, California, the Contra Costa Times reports:

• A mountain of debt cloaked in years of forged spousal signatures and a pending foreclosure were the motive for a Pleasanton woman to burn down her home in a 2008 fire, according to arguments given by prosecutors before the Alameda County grand jury. Deonna Zuffa, 43, was critically injured in the fire that she is accused of setting.



• During the grand jury proceedings, which ended with an indictment of Zuffa on Dec. 20, prosecutors presented testimony from witnesses who said Zuffa used gasoline throughout her east Pleasanton home to ignite it the morning of Dec. 8, 2008, three days before her unsuspecting family was to be evicted due to foreclosure.

***

• In the transcripts, Alameda County senior deputy district attorney William Denny describes Zuffa as a master of keeping things bottled up. Testimony and evidence presented showed Zuffa was able to hide bankruptcy, foreclosure and deep financial debt incurred over the years from her husband and two sons.

***

• Witnesses told the jury Zuffa kept track of the finances and had the only keys to the family's two P.O. boxes, helping to conceal the debt.



• Keith Zuffa testified that he didn't know his wife of 17 years had taken out loans against the house, which was in his name, and that as far back as 2001, she had been forging his signature. He knew nothing about the failed bankruptcy attempt he said, or an eviction notice delivered Dec. 4, 2008, four days before the fire.



• According to the transcripts, Keith Zuffa told the grand jury that his wife had kept secret that she borrowed money from his 401k, took a second loan on the home and forged his signature to give herself power of attorney, giving her authority to sign all loan documents. The deceit was revealed by investigators to Keith Zuffa in the days after the fire. He has since divorced his wife.



• "It was unbelievable to me that (Keith Zuffa) didn't know what was going on," Keith Batt, a Pleasanton police detective, told the grand jury. "But all the evidence showed he didn't know this was happening."

For more, see Grand jury testimony points finger at Pleasanton woman accused of arson.

Suit: Woman Holds Ex-Hubby's Home Hostage, Refusing To Release Lien Held Against His House Despite Receiving Full Payment Of Debt Owed To Her

In Galveston, Texas, The Southeast Texas Record reports:

• A divorced Galveston County couple is at odds over certain funds stemming from the sale of local property, recent court documents say.



• Richard See has filed suit against his ex-spouse Glenda G. Gordon, claiming she refuses to release the lien on the property despite receiving $20,000 from him. The suit filed Jan. 12 in Galveston County District Court states the property was awarded to See in the final decree of divorce three years ago. According to the suit, the lien prevented the release of $30,000 in proceeds to the plaintiff.



• According to the suit, co-respondent Alamo Title Co. held the money in question while Gordon maintained the lien. See says he paid the $20,000 owed to his former wife with the payments remitted to her attorney of record and fellow defendant, Elaine Michael, but the lien was still in place.



• Alamo provided alternative methods to free the lien while the plaintiff made repeated yet unsuccessful attempts to reach Gordon, according to the suit. The suit says See also provided Michael a copy of the affidavit essential to the lien's release, but the attorney refused to sign it notwithstanding the plaintiff's repeated requests.

Source: Divorced couple in dispute over property.

Couple Gets Three Years Probation For Creating, Using Bogus Lease To Hijack Possession Of Vacant Home In Failed Attempt To Snag 'Affordable' Housing

In Newport Beach, California, The Orange County Register reports:

• A husband and wife were sentenced to three years of informal probation after a guilty plea of illegally occupying vacant homes in foreclosure. Chris Wayne Duncan, 43, and Robin Ann Duncan, 37, both of Newport Beach, pleaded guilty to a court offer of one misdemeanor count of conspiracy to commit trespass and one misdemeanor count of trespass, according to a news release from the Orange County District Attorney's Office.



• Prosecutors filed the conspiracy count as a felony, but the court reduced it to a misdemeanor, according to the news release. The couple will also have to pay restitution, the amount of which will be determined at a later date, the district attorney's office said.



• In September 2010, prosecutors said, the Duncans drafted a fraudulent lease of 10 Hidden Pass – a foreclosed and vacant property in Newport Coast – and then broke in and illegally moved in.



• The district attorney's office said the couple claimed to be renters of the property and had utilities turned on in their names to give the appearance of legitimate tenancy. In October, when an appraiser went to the property as part of the short-sale process, prosecutors said the Duncans changed the locks and kept the appraiser from entering the home.



• The couple told the appraiser that they were legal renters and that the owner should contact the Duncans directly, prosecutors said. The owner then contacted the Newport Beach Police Department, which investigated the claim and arrested the Duncans.

Source: Husband, wife squatters get probation (The couple will also have to pay restitution, the amount of which will be determined at a later date, the Orange County District Attorney’s Office said).

North Texas Adverse Possession-Claiming Vacant Home Hijacker Faces The Boot As Foreclosing Lender Initiates Eviction Action

In Flower Mound, Texas, WFAA-TV Channel 8 reports:

• The man who made international headlines by claiming an abandoned $340,000 Flower Mound home with a $16 piece of paper now faces eviction in Denton County. Kenneth Robinson filed an affidavit for adverse possession in July, and his story on News 8 set off a frenzy of filings across North Texas.



• In court papers, Bank of America says it now owns the property in question and is asking for Robinson to be evicted. The bank says it took ownership through foreclosure on January 3. Papers say Robinson moved in when the previous owner walked out on his mortgage, and Robinson never had permission to be there. Bank of America says it asked Robinson to leave, but he did not vacate the property. News 8 e-mailed Robinson and stopped by the house. He would not comment about the case.



• If the court sides with the bank, Robinson will be the latest squatter to get the boot. At least eight people who sought his advice and claimed homes in Tarrant County have been evicted and charged with theft or burglary. Robinson was there when three of them appeared in court.



• Flower Mound neighbors say Robinson has been seen scouting out other potential homes for adverse possession. They are now counting the days until Robinson leaves town.



• Robinson tried to maximize his adverse possession claim with a speech at SMU's law school and in on-line seminars. He charged hundreds of dollars for sessions about how to file the paperwork.



• But when Tarrant County started making arrests, Robinson told News 8 that the others did not follow his advice to the letter. He said his case was different because he fully intended to pay property taxes and live in the house until he had clear title.



• Robinson is scheduled for a hearing in Denton County on February 6. If he fails to appear, he will forfeit his claim to the house.

Source: Original Flower Mound squatter gets eviction notice.

Title Hijacker Gets Five Years For Snatching, Selling Homes Belonging To Others; One Victim Discovers Occupant In House Recently-Inherited From Parent

From the Office of the U.S. Attorney (Birmingham, Alabama):

• A federal judge [...] sentenced a Birmingham man to five years in prison for a mortgage fraud scheme in which he sold three houses that he did not own, announced U.S. Attorney Joyce White Vance, [and others].



• U.S. District Judge Sharon Lovelace Blackburn sentenced DARRYL COBB, 54, on two counts of mail fraud in connection to the scheme. Cobb pleaded guilty to the charges in August. The judge also ordered Cobb to pay restitution of $262,861 and to forfeit $262,861 to the government as proceeds of his illegal activity.

***

• According to Cobb’s plea agreement with the government, his scheme was uncovered after the owner of a home in the 7900 block of 4th Avenue South complained to Birmingham police that someone was living in the house, which should have been vacant. The owner had gotten the house in a will from a deceased parent.



• The person living in the house said they had bought it from Cobb. Further investigation showed Cobb had filed false documents in Jefferson County court and with a mortgage company claiming to be the rightful owner of the property, according to the plea agreement.



• Records searches determined Cobb had conducted two other fraudulent transactions using identical methods to obtain control over two other properties, which he then sold under the false pretense that he was the rightful owner and seller.

For the U.S. Attorney press release, see Federal Judge Sentences Birmingham Man to Five Years in Prison for Mortgage Fraud Scheme.

Surplus Snatcher Gets Four Years For Embezzling Ex-Homeowners' Unclaimed Funds Generated From F'closure Sales; County, Insurer Left Holding $1.2M+ Bag

In Memphis, Tennessee, The Commercial Appeal reports:

• Former Chancery Court bookkeeper Brandon Gunn was sentenced Friday to four years in federal prison and ordered to repay more than $1 million in surplus tax foreclosure funds he embezzled from the office between 2008 and 2011. [...] The 47-year-old Gunn pleaded guilty in October to embezzlement, conspiracy and money laundering.



• U.S. Dist. Court Judge Samuel Mays Jr. told him he had stolen from taxpayers who were in a most vulnerable time of their lives. "The basis for this crime was sheer greed," Mays said, noting the theft was in seven figures. "That's an astonishing amount of money to steal from the public. The theft has caused people to lose faith with the government and the courts." U.S. Atty. Ed Stanton called Gunn's actions "a flagrant abuse of the public's trust."



• Gunn was involved in an office function in which delinquent property taxes are paid by selling a homeowner's property, with the remainder or surplus to be placed in an escrow account the homeowner can claim.



• The embezzlement scheme came to light when one homeowner seeking to claim a surplus discovered that it had been paid to a company set up by Gunn. Gunn admitted to writing 38 checks ranging in amounts from $5,761 to $72,241 and sending them to his company or to other entities linked to him between May 2008 and March 2011.



• He told the court earlier that he targeted old tax accounts, including some that had gone unclaimed for as many as 17 years. When he was first caught, he tried to pay back money by stealing even more money.



• On Friday, Gunn was ordered to make restitution of $1,063,903, most of which will go to the county's former insurance carrier. The county's loss not covered by insurance was placed at $179,596.

***

• A second man, Correy Isom, 35, a restaurant employee who allegedly conspired with Gunn, faces three felony counts and has pleaded not guilty.

For the story, see Chancery Court embezzler Brandon Gunn gets 4 years in prison (Ordered to repay more than $1 million purloined).

San Bernardino DA: Duo Hijacked Possession Of Vacant Foreclosed Homes, Then Fraudulently Squeezed Banksters For Thousand$ In "Cash For Keys" Racket

From the Office of the San Bernardino County District Attorney:

• A woman alleged to have operated a "cash for keys" scam in Rancho Cucamonga has been charged with Burglary, Forgery and Grand Theft. Quddusa Lynette Anderson, 38, of Patton, was arraigned Thursday in Rancho Cucamonga Superior Court.



• Investigators from the District Attorney's Real Estate Fraud Prosecution Unit have issued a felony arrest warrant for John Woodrow Smith, 48, of Roseville, who is suspected of taking part in the scam. Smith also uses the alias Eimbari Kemet.



• Anderson and Smith are alleged to have conspired to defraud mortgage giants, Freddie Mac and Bank of America, and taxpayers, by illegally occupying foreclosed homes and applying for relocation assistance known as "Cash for Keys."



• To avoid a lengthy eviction process, mortgage lenders like Freddie Mac, Fannie Mae, and Bank of America offer legitimate tenants what is known as "Cash for Keys," to move out of the residence by a specific date and leave the property in turnkey condition.

***

• The homes selected by defendants were vacant and they would gain unlawful entry into the locations, change the locks, and have utilities turned on in their names to establish residency. One defendant even moved into a Rancho Cucamonga residence.



• Shortly after moving into the residence, the defendants contacted Bank of America's Mortgage Department and signed a Move Out Agreement between them and Bank of America. After signing the agreement, defendants were paid $7500 to move out of the residence.



• The investigation determined that one of the defendants was paid $2500 through Freddie Mac to move out of another foreclosed home located in Rancho Cucamonga.

For the San Bernardino County District Attorney press release, see Woman Arraigned In Cash For Keys Scam.

Lawyer Dodges Pokey, Scores Conditional Jail "Buy Out' w/ 'Pay Restitution' Promise After $360K+ Ripoff; Prison Cell Awaits If Victims Stiffed: Judge

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

• A disbarred lawyer was spared a prison sentence Friday by a Broward judge who said she was giving him a chance to make things right with the elderly couple he bilked out of $362,000. Gerald Lindor, 52, was sentenced to 20 years of probation and ordered to pay $110,000 to Joscelyn and Herma Passley, a couple going through foreclosure because Lindor misappropriated more than $360,000 they gave him as part of a deal to refinance their Miramar home.



• Lindor, who entered a no contest plea to seven grand theft charges on Jan. 24, was also ordered to pay the couple $2,000 a month until the balance is met. The plea came with no promise from prosecutor Catherine Maus that prison time would be reduced from the 13 to 30 years allowed by law.



• Lindor, who worked out of Pembroke Pines, begged Broward Judge Cynthia Imperato to keep him out of prison and give him a chance to pay restitution to his victims. He also looked directly at the Passleys and offered a tearful apology. "I am so sorry," he said, promising to do everything he could to help them keep their home. "I give you my word. Give me the opportunity to make this right."



• Imperato withheld sentencing on one of eight charges of grand theft and warned Lindor that she would send him to prison for 13 to 30 years if he does not make good on his promise to repay the Passleys.



• Lindor lost his license to practice law in 2008, after he admitted to stealing more than $3 million from numerous clients over a period of more than 10 years. His lawyer, David Vinikoor, said the cycle of misconduct began when Lindor found himself saddled with a $40,000 shortfall in a botched transaction.



• The money Lindor took came from mortgage lenders and was put into a trust he managed. Instead of forwarding the money to the seller as required by law, Lindor used a portion to pay off the debt. When the seller demanded payment, Lindor would take money from the next mortgage transaction to settle the last one. Interest and penalties compounded with each misappropriation. Vinikoor said none of the misappropriated money went to Lindor personally, an assertion disputed by prosecutor Maus.



• By the time the Passleys sold their New York property and gave the money to Lindor in a refinancing deal, Lindor was behind more than $1 million and finally realized he would never catch up, Vinikoor said. "He was always in the hole," Vinikoor said. "Finally, he did what he should have done from the beginning. He self-reported the misappropriation to the Florida Bar and consented to his disbarment."



• It was Vinikoor who suggested that Imperato withhold sentencing on one of the charges to force his client to pay his debt to the Passleys, the only victims who have not had their troubles resolved. "Payment of restitution outweighs the need for prison," Vinikoor said. "If he does not make them whole, sentence him to whatever you think is appropriate."



• Herma Passley, 72, told Imperato she did not believe Lindor would be able to repay the full amount, and she feared the consequences. She said she wanted Lindor to spend the rest of his life in prison if he cannot repay his debt. "I am 72 years old," she said. "Where am I going to live? Should I end up in a shelter because he made mistakes?" Her husband, Joscelyn, 82, attended Friday's sentencing hearing in a wheelchair. Suffering from dementia, he did not speak to the judge.



• Maus echoed the victims' lack of confidence in Lindor. She accused the defendant of taking the money to "maintain a lifestyle he could not afford." She also questioned how he could raise the money he owes in any time reasonable enough to benefit the Passleys. [...] Imperato said she will revisit the case in a year to determine sentencing on Lindor's last remaining grand theft charge.

Source: Disbarred lawyer spared prison, but must repay victims.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

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

Ex-Paralegal Gets 100 Months For I.D. Theft, Forgeries In Connection With Ripoffs Of Employer/Law Firm, Clients' Trust Accounts

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):

• Bonnie Sweeten, 40, of Pennsylvania, was sentenced [] to 100 months in prison for fraud schemes in which she stole in excess of $600,000 from her employer and family members. Sweeten pleaded guilty June 21, 2011 to wire fraud and aggravated identity theft. In addition to the prison term, U.S. District Court Judge William H. Yohn, Jr., ordered Sweeten to pay restitution in the amount of $1,091,831 and a special assessment of $200. Sweeten remains in federal custody.



• Sweeten stole funds from family members, from the law office where she had been employed, and from the law firm’s clients. She used the identity of another person and posed as another person while using false identification and forging signatures on various documents including a property settlement.



• Additionally, Sweeten stole the identity of a friend and fellow employee and used the identity to facilitate her flight from the jurisdiction. She also forged a signature of a judge on a court order for the purpose of fraudulently withdrawing client funds from a bank. As part of her scheme to defraud, Sweeten concocted an elaborate hoax that she and her daughter had been kidnaped in order to deceive family members and law enforcement as toher whereabouts.

For the U.S. Attorney press release, see Bonnie Sweeten Sentenced For Fraud Schemes.

For an earlier post, see Philly Feds Probe Alleged Rogue Paralegal For Fraud, Theft; Six-Figure Sums Stolen From Law Clients; Bad Acts Lead To Boss' Disbarment: Attorney.

Illinois AG Lawsuit: Ratings Agency "Used Every Trick Possible To Give [MBS] Deals High Ratings In Order To Retain Clients & Generate Revenue"

From the Office of the Illinois Attorney General:

• Attorney General Lisa Madigan [] filed a lawsuit against Standard & Poor's for its fraudulent role in assigning its highest ratings to risky mortgage-backed investments in the years leading up to the housing market crash.



• Madigan filed her lawsuit today in Cook County Circuit Court, alleging that Standard & Poor's, or S&P, compromised its independence as a ratings agency by doling out high ratings to unworthy, risky investments as a corporate strategy to increase its revenue and market share. The Attorney General's lawsuit alleges that S&P ignored the increasing risks posed by mortgage-backed securities, instead giving the investment pools ratings that were favorable to its investment bank client base and S&P's profits.



• "Publically, S&P took every opportunity to proclaim their analyses and ratings as independent, objective and free from its desire for revenue," Madigan said. "Yet privately, S&P abandoned its principles and instead used every trick possible to give deals high ratings in order to retain clients and generate revenue. The mortgage-backed securities that helped our market soar – and ultimately crash – could not have been purchased by most investors without S&P's seal of approval."

For the Illinois AG press release, see Madigan Sues Standard & Poor's For Enabling Financial Meltdown (Lawsuit: 'Profits Were Running the Show' at Leading Credit Ratings Agency).

For the lawsuit, see People v. The McGraw Hill Companies, Inc. et ano.

Fed. Judge 'Green-Lights' Consumer Suit Attacking Bill Collector's Crappy Paperwork In Obtaining State Court Judgment In Credit Card Collection Action

Lexology reports:

• A debtor’s assault on the quality of documentation used by a debt collector to obtain a state court judgment against him in a credit card collection action was held by a Tennessee federal court to be sufficient to state a claim that the debt collector, by filing the state court action, had violated the Fair Debt Collection Practices Act.



• The January 25 decision in Simmons v. Portfolio Recovery Associates, LLC provides yet another example of how collection-related documentation used by the non-mortgage consumer lending industry is increasingly coming under fire. While the case involved FDCPA claims against a debt collector, its analysis could be followed by courts considering claims made under state debt collection laws that mirror the FDCPA prohibitions against creditors collecting their own debts.



• The debtor alleged the debt collector had falsely represented the character, amount, or legal status of the debt in violation of the FDCPA in two ways: (1) as a result of its intentional business decision not to obtain a copy of the written contract or other documentation evidencing the debt prior to filing the state court action, and (2) by submitting an affidavit in support of the action executed by an individual who had no personal knowledge of the statements made in the affidavit, did not review any records of the card issuer, and did not make any other efforts to determine if the debtor actually owed the amounts claimed.

***

• [U.S. District] Judge [Thomas A.] Varlan noted that, unlike the claims in prior cases, the complaint in Simmons included allegations that the debt collector made false representations or used deceptive means to collect the debt. Most significantly, even though the judge acknowledged that the debtor had “not pointed to any specific statements in the affidavit about [his] account or the debt that [he] allege[d] to be factually false,” the judge nevertheless found the debtor’s allegations of falsity and a pattern and practice sufficient to survive a motion to dismiss.



• In light of the criticism that has been directed at mortgage foreclosure documentation, it is not surprising there is growing scrutiny by governmental agencies and consumer groups of collection-related documentation used in non-mortgage lending.

For more, see Tennessee Federal Court allows FDCPA claims based on documentation challenge (may require subscription; if no subscription, TRY HERE; or GO HERE - then click the appropriate link).

For the ruling, see Simmons v. Portfolio Recovery Associates, LLC, No. 3:11-CV-280 (E.D. Tenn., Knoxville Div. January 25, 2012).

'Zombie Debt' Buyer Accused Of Tricking Consumers Into Paying On Stale Debts To Restart Clock On Statute Of Limitations Squeezed By Feds Out Of $2.5M

The New York Times reports:

• The Federal Trade Commission signaled on Monday that it would continue to crack down on debt collectors who harass consumers for money they may not even be legally obligated to pay.



• In the second-largest penalty ever levied on a debt collector, the F.T.C. said that Asset Acceptance, one of the nation’s largest debt collection companies, had agreed to pay a $2.5 million civil penalty to settle charges that the company deceived consumers when trying to collect old debts.(1)

***

• Asset Acceptance, based in Warren, Mich., was charged with a variety of complaints, including failing to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The company’s collectors also failed to inform consumers that paying even a small portion of the amount owed would revive the debt — in other words, making a payment would extend the amount of time the collector could legally sue.



• Debt collectors have only a certain number of years to sue consumers. The statute of limitations varies by state, but typically ranges from two to 15 years, Mr. Dolan said, beginning when a consumer fails to make a payment. But borrowers often do not realize that making a payment on the old debt may restart the clock.(2)

For more, see F.T.C. Fines a Collector of Debt $2.5 Million.

For the Federal Trade Commission press release, see Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception (Firm Also Will Notify Consumers with "Time-Barred" Debt That It Will Not Sue to Collect).

Go here for more on zombie debts.

(1) For some of the relevant court documents in this matter, see:

• Complaint for Civil Penalties, Injunctive and Other Relief,
• Consent Decree,
• Joint Motion for Entry of Consent Decree.

(2) For more from the FTC on zombie debts, see:

• Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts,
• Tick-Tock, Tick-Tock: Time-Barred Debts: What’s that, and why should I care?,
• Watch what you're doing with time-barred debts.

Suit: Loan Servicers/Trustees Failed To Register With Nevada Regulator As Out-Of-State Debt Collectors, Resulting In Illegally-Conducted Foreclosures

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• More than 20,000 Nevadans were foreclosed on by companies that are accused of doing business illegally in the state. That's according to a new class action lawsuit filed in Las Vegas. The class action lawsuit is against five companies hired by banks to collect debts and begin the eviction process. This lawsuit is one of the first of it's kind in the country.



• The suit alleges a number of foreclosure servicing firms failed to register as out of state collection agencies with the Nevada Financial Institutions Division. The suit was started by 16 Nevada homeowners who recently had their homes foreclosed.



• "These companies not being licensed and didn't have the ability to legally do the things that they did. Send notices out, foreclose on them, get them out of the house, move for eviction," attorney Shawn Christopher said.



• The lawsuit targets: Quality Loan Service, MTC Financial, Meridian Trust Deed Service, National Default Servicing and California Reconveyance company. Only one of those companies, Quality Loan Service, returned 8 News NOW's phone call Monday. They said they do not comment on pending litigation.

Source: I-Team: Nevada Homeowners File Class Action Lawsuit After Foreclosures.

NY AG Bangs Big Banksters, MERS With Suit Alleging Creation, Use Of Registry System Instrumental In Filing Deceptive, Bogus Foreclosure Court Filings

From the Office of the New York State Attorney General:

• Attorney General Eric T. Schneiderman [] filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process.



• The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as "MERS certifying officers," have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.



• The lawsuit further asserts that the MERS System has effectively eliminated homeowners' and the public's ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.



• “The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman.



• “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

For the NY AG press release, see A.G. Schneiderman Announces Major Lawsuit Against Nation's Largest Banks For Deceptive & Fraudulent Use Of Electronic Mortgage Registry (Complaint Charges Use Of MERS By Bank Of America, J.P. Morgan Chase, And Wells Fargo Resulted In Fraudulent Foreclosure Filings; Servicers And MERS Filed Improper Foreclosure Actions Where Authority To Sue Was Questionable; Schneiderman: MERS And Servicers Engaged In Deceptive and Fraudulent Practices That Harmed Homeowners And Undermined Judicial Foreclosure Process).

For the NY AG lawsuit, see People v. J.P. Morgan Chase Bank, N.A., et al.

Thanks to Bill Collins at Frontier Abstract, Rochester, NY for the heads-up on the story.

Illinois AG: F'closure Document Prep Sweatshop Utilized "Assembly Line Process" To Create Dubious Paperwork Used To Improperly Take People's Homes

In Chicago, Illinois, Bloomberg reports:

• Illinois Attorney General Lisa Madigan sued Nationwide Title Clearing Inc., a Florida company she claims caused the filing of faulty documents with county clerks. [...] Nationwide Title Clearing prepares documents for mortgage servicers to use against borrowers in default, foreclosure and bankruptcy, Madigan said. Among the documents are mortgage assignments used by lenders in foreclosures.



• NTC employees signed forms used in Illinois foreclosures as officers of the foreclosing financial institutions and not Nationwide, often without reading or verifying the documents they signed, Madigan said.



• “NTC creates documents through an assembly-line process,” Madigan said. “NTC signers typically have little or no role in the actual creation of documents that they sign.” Their sole role is to affix their signatures, she said.



• The complaint, which accuses the Palm Harbor, Florida-based company of unfair and deceptive acts, was filed [] in state court in Chicago.

For more, see Nationwide Title Clearing Sued by Illinois Over Foreclosure Documents.

See also, Courthouse News Service: Illinois A.G. Goes After Robo Signer.

For the Illinois Attorney General press release, see Madigan Files Suit Over Faulty Mortgage Assignments Filed With County Recorders (Attorney General Alleges Faulty Practices in Foreclosing on Homeowners in Crisis).

For the lawsuit, see People v. Nationwide Title Clearing, Inc.

Utah App. Court: Photocopy Of Promissory Note In Lieu Of Original OK In F'closure Where Borrower Fails To Establish Basis For Questioning Authenticity

Lexology reports:

• In a victory for lenders, a Utah appellate court has ruled that a photocopy of a note is ordinarily acceptable in court, and that a borrower who demands the original note must establish a basis for questioning the authenticity of the copy.



• In Howard v. PNC Mortgage, the Utah Court of Appeals rejected a plaintiff’s argument that PNC Mortgage should have been required to produce the original note—not just a photocopy—to support its claim that it is now the holder of the note.

For more, see Lender’s use of photocopied note ok’d by Utah court (may require subscription; if no subscription, TRY HERE; or GO HERE - then click appropriate link for the story).

For the ruling, see Howard v. PNC Mortgage, 2012 UT App 19 (Ut. App. January 20, 2012)

Failure To Give Pennsylvania Homeowner Notice Of Right To Have Face-To-Face Meeting With Lender Within 30 Days Sinks Subsequent Foreclosure Sale

The Pennsylvania Superior Court recently affirmed a trial court order setting aside a foreclosure sale where the foreclosing lender failed to satisfy certain requirements to provide notice to the homeowner.

In the trial court, the homeowner contended that the trial court lacked subject matter jurisdiction over the matter because the lender failed to comply with the notice requirements of the Homeowner's Emergency Mortgage Act, 35 P.S. §§ 1680.401c et seq. ("Act 91").

According to the appeals court:

• More specifically, Appellee [homeowner] maintained that the Act 91 notice she received from Appellant [foreclosing lender] failed to inform her that she had thirty days to have a face-to-face meeting with Appellant.
  
  After holding a hearing, the trial court agreed with Appellee that the Act 91 notice was deficient. The court issued an order setting aside the sheriff's sale and the judgment; the order also dismissed Appellant's complaint without prejudice.

For the reasons set forth in the three-judge Superior Court panel's ruling, the trial court's order was affirmed.

For the ruling, see Beneficial Consumer Discount Company v. Vukman, 2012 PA Super 18 (Pa. Super. January 30, 2012).

Missouri Homeowners Tire From Banksters' Sleazy Practices; Begin Mounting Challenges To State Foreclosure System

In St. Louis, Missouri, the St. Louis Post Dispatch reports:

• John Kevin Kennedy was an engineer at Anheuser Busch for 30 years. Then came the sale to InBev, and the big downsizing at the brewery left Kennedy out on the street along with much of his department.



• With no job, he asked his mortgage lender for a lower payment on his home in Barnhart. What happened next set in motion a lawsuit challenging the way foreclosures are done in Missouri. By raising questions about which lender actually owns the mortgages, the suit claims certain foreclosures weren't properly done and it asks the courts to give "hundreds, even thousands" of Missourians their foreclosed homes back.



• Kennedy's is part of a broader legal movement nationwide challenging the foreclosure process, which debtors say is slanted against them.

***

• In Missouri, lenders can foreclose without a judge's order. Unless the homeowner files suit to stop it, the house can be sold at a foreclosure sale on the mortgage holder's word alone. People who can't pay their mortgages usually can't afford lawyers, so foreclosures almost always go unchallenged. In Illinois, court approval is required before a foreclosure.



• But Kennedy, 62, had something that most troubled homeowners don't - money in a 401(k) retirement plan. He used it to hire lawyer Greg White, who specializes in fighting foreclosures.



• White teamed up with three other law firms to file a lawsuit challenging the state's foreclosure system. They hope to convert the case into a class-action suit.

For more, see Suits challenge Missouri foreclosure law.

Colorado Lawmaker Moves To Tighten Up State Foreclosure Procedures, Minimize Sleazy Conduct From Banksters, Lawyer-Sweatshops

In Denver, Colorado, The Denver Post reports:

• A years-old practice allowing foreclosure attorneys simply to attest with a signature that a bank has the right to take someone's home rather than produce the actual mortgage documents is the target of new legislation.



• The bill, introduced last week by Rep. Beth McCann, D-Boulder, aims to ensure thousands of Colorado homeowners facing foreclosure each year know that whomever is trying to take their house is legally entitled to do so.



• The foreclosure process has come into question nationwide because banks and lenders for years have bought, sold and traded mortgages as securities, but rarely recorded those transfers in property records. As a result, homeowners are often left wondering how a bank they'd never done business with could possibly be foreclosing without paperwork proving they had that right.



• "To me it's the integrity of the process we're trying to protect," McCann said. "This bill prevents a lawyer from saying a bank can foreclose simply on their say-so. That's a huge presumption."

***

• Currently, judges near-automatically approve the auctions during a process called a Rule 120 hearing. Their job is only to determine a homeowner is in default and that they're not currently serving in the military.



• Consumers once had the right to challenge a bank's standing to foreclose, thanks to a 1989 Colorado Supreme Court decision. But that disappeared following 2006 legislation that let lawyers proceed with a foreclosure based only on their signature rather than actual mortgage documents.



• Homeowners could still file a lawsuit to challenge a foreclosure, but most were already in too much of a financial bind to afford an attorney. If filed, the lawsuits might not yield a result until long after a house is auctioned.



• "They say people are in default anyway, so what's the big deal," McCann said of foreclosing lawyers. "But a homeowner is entitled to know it's all being done properly and legally."

***

• With the 2006 change to state law — written largely by the attorneys who handle the highest volume of foreclosures in the state and quietly slipped into a broader piece of legislation — Colorado became a state in which it took little more than a lawyer's signature to take someone's home.

For more, see Colorado bill targets foreclosures based only on a lawyer's OK.

Federal Judge OKs Banksters' Sleazy, Illegal Conduct During F'closure Litigation Where Homeowners Fail To Immediately Raise Issues During Proceedings

In Greenbelt, Maryland, The Baltimore Sun reports:

• A class-action lawsuit over alleged foreclosure "robo-signing" was thrown out of federal court in Greenbelt last week when a judge ruled that the plaintiffs could have raised those complaints during their foreclosure cases.

***

• The class-action suit was filed after a former paralegal at the defendant Shapiro & Burson, a law firm based in Virginia that has handled many Maryland foreclosure cases in recent years, complained to regulators and prosecutors, alleging that robo-signing there was routine.



• An attorney for Shapiro & Burson suggested that the ruling could be a blow for other suits seeking damages for alleged foreclosure misconduct. The decision by U.S. District Court Judge J. Frederick Motz said homeowners could have raised the issue during their foreclosure cases and thus are barred from bringing it up in a later suit.

***

• The law firm of JR Howell & Associates, which represented the plaintiffs, alleged in the April suit that robo-signing at Shapiro & Burson meant the firm's legal fees and other charges were "fraudulently obtained" and improperly passed on to the homeowners.



• The homeowners argued that allegations of robo-signing at Shapiro & Burson weren't made until after their foreclosures were complete, so they couldn't have raised the issue earlier.



• But Motz dismissed that argument in his written decision Thursday, pointing to the so-called "doctrine of claims preclusion" in Maryland law. "The fact that plaintiffs may not have been aware of the existence of their claims during the litigation of the previous action does not render the doctrine of claims preclusion from being applicable 'where the means of obtaining such knowledge existed and the knowledge could have been obtained with ordinary diligence,'" Motz wrote, citing a 1978 case.(1)

For more, see Md. 'robo-signing' case thrown out of federal court (Complaints should have been raised in the earlier foreclosure cases, judge says).

(1) Singer v. Steven Kokes, Inc., 39 Md. App. 180, 384 A. 2d 463 (1978).

Law Firm Faces Bar Probe For Allegedly Using Trust Funds To Advance Anticipated Proceeds From Check That Subsequently Bounced; Left Holding $285K+ Bag

In Orlando, Florida, the Orlando Sentinel reports:

• The Florida Bar is investigating practices by the KEL law firm that may have played a role in it being bilked out of more than $285,000 in a high-tech flim-flam, the Bar confirmed this week.



• Staff investigators are looking at whether the Orlando law firm violated the Bar's rules of financial conduct when it moved funds in and out of a trust account while becoming ensnared in the international scam, a spokeswoman said.

***

• In the latest incident, KEL finds itself both the victim of wrongdoing and the target of the complaint that accuses it of flouting Florida Bar rules. U.S. Attorney Robert E. O'Neill for the Middle District of Florida announced last week that KEL had been defrauded and that federal authorities have taken action to recover $285,833 stolen from the firm. The U.S. has filed a civil-forfeit lawsuit against JPMorgan Chase Bank as part of that effort, O'Neill said.

***

• According to a Secret Service investigator's affidavit, KEL was contacted by phone last summer by a prospective client named "David Benson," who claimed to be a business consultant. He wanted to sue a former boss, identified as "Fred Sanders," for wrongful termination. The sum in dispute: $90,000.



• After receiving a $500 retainer check, KEL took the case, contacted Sanders and obtained a settlement, the affidavit states. The firm later received a check in the mail for $285,833. It deposited the check in its business account and wired the money to Benson before the check cleared, apparently feeling "obligated" to get the money to him as soon as possible, according to the investigator.



• But KEL didn't have enough money in the business account to wire the full amount, so it transferred funds from its title-work subsidiary account, the federal affadavit states. When it wired the money to Benson at an account in Shinsei Bank in Japan, someone withdrew the entire amount.



• Later, both the retainer check and the settlement check were found to be counterfeit; and everything else about the people involved had been fabricated, according to the affadavit. KEL's money was gone, and the law firm had never met its client face-to-face.

For more, see Bilked by scam, KEL law firm draws Florida Bar scrutiny.

Wisconsin High Court Nixes Request From Advocates For Poor To Create Right To Free Counsel In Civil Cases Involving Housing, Other Basic Needs

In Madison, Wisconsin, The Capital Times reports:

• Courts in Wisconsin will not have to provide lawyers for poor people embroiled in cases that involve basic human needs, the state Supreme Court ruled last week. But the court gave its blessing to starting a pilot project in one or more counties that would provide attorneys in certain cases.



• The court's decision at Thursday's administrative conference was in response to a petition by Legal Action of Wisconsin(1) asking the court to adopt "civil Gideon," which takes its name from the landmark 1963 case Gideon vs. Wainright, which established the right to counsel for criminal defendants.



• Civil Gideon advocates sought to establish a similar right in civil court for low-income people litigating matters involving basic needs like shelter, food, clothing, heat, medical care, child custody and safety.



• Legal Action filed the petition, with 1,320 supporting signatures, in September 2010. John Ebbot, executive director for Legal Action, says he was "deeply disappointed" by the court's decision. "I'm concerned that this pilot project is going to be an excuse to wait for that to be concluded before courts start to appoint counsel," he says.



• No state has enacted a comprehensive civil Gideon policy, but a few states have done pilot projects. Last year California embarked on an $11 million project.

For more, see Crime and Courts: Supreme Court rejects court-appointed lawyers for poor in civil cases.

(1) Legal Action of Wisconsin is a non-profit law firm that provides free legal services for low-income people in Wisconsin, having offices in six cities serving 39 southern counties.

Property Insurer Seeks Court Guidance On To Whom To Pay Policy Proceeds Where Multiple Claims Made On Same 'Ike-Destroyed' Home

In Galveston, Texas, The Southeast Texas Record reports:

• American Modern Lloyds Insurance Co. is embroiled in a dispute over Hurricane Ike-related claims with three East Texas residents. The insurer filed suit against Orange resident Melvin Cook and Lumberton locals Stephen and Debora Dzenowski on Jan. 13 in Galveston County District Court, stating the respondents may expose it to "multiple liability" because of their alleged "rival claims."



• The suit shows American Modern provides property damage coverage with a total limit of $43,000 to a Crystal Beach house which was completely destroyed by Hurricane Ike in 2008.



• According to the original petition, American Modern "has indicated its willingness to pay the proceeds of the policy, but conflicting claims have arisen from the plaintiffs." "The defendant is unable to determine which, if any, of the defendants are entitled to the policy proceeds," the suit says.



• "There is an issue between the named insureds regarding insurable interest and ownership of the insured property."



• American Modern insists it claims "no interest in the proceeds of the policy, which the plaintiff has at all times been willing to pay to the person or persons entitled to payment."

Source: Insurance proceeds for destroyed beach house delayed by rival claims.

Oregon Foreclosure Trustee Accused Of Secret Markups For Published Legal Ads, Passing Jacked-Up Costs To Homeowners, Others

In Portland, Oregon, The Oregonian reports:

• A lawyer representing The Bulletin of Bend and the Redmond Spokesman newspapers has filed an ethics complaint with the Oregon State Bar against an executive of the Northwest's largest foreclosure trustee, accusing the company of secretly marking up the cost of foreclosure legal ads to its lender clients.



• Michael Dillard, of the Karnopp Petersen law firm in Bend, filed the complaint last week against David Fennell, a lawyer and a principal owner of Northwest Trustee Services, which by its own account has handled more than 250,000 foreclosures.



• Dillard alleges that Northwest Trustee and its advertising operation, FEI, charged its clients an undisclosed 18 percent premium over the actual price. These "deceptive and dishonest" tactics, Dillard said, allowed FEI to collect from its clients about $360,000 more than it actually paid for the foreclosure notices published in the Redmond newspaper just since 2009. Those costs were then presumably passed on by banks to homeowners and others, Dillard said.



• Stephen Routh, CEO of Northwest Trustee Services, denied that FEI was charging a secret premium. "The markup was fully disclosed to it customers," Routh said. "It's how they make a profit."



• The complaint is intriguing on several levels.

For more, see Portland foreclosure attorney hit with ethics complaint due to premiums.

Illinois AG Hits Debt Collector With Suit Alleging Variety Of Intimidation Tactics To Illegally Squeeze Cash From Consumers

From the Office of the Illinois Attorney General:

• [T]he Attorney General took action against a Skokie-based debt collector, PN Financial Inc., filing suit in Cook County Circuit Court. Madigan said PN Financial emerged last year as one of the most egregious cases of illegal debt collection during her tenure as Attorney General.

***

• Madigan’s lawsuit against PN Financial and owner, Nelson Macwan, of Skokie, alleges numerous violations of state and federal laws that protect Illinois consumers from off-limits debt collection tactics. Madigan alleged PN Financial acted illegally by:
  
  Revealing information about debts to people other than the consumer, including employers or family members;
  
  Fronting as a law firm and intimidating consumers with fake court case numbers on letters sent to consumers to falsely represent they had been sued for failure to pay a debt;
  
  Debiting more money from consumers’ bank accounts than consumers authorized, causing some to incur overdraft fees; and
  
  Accessing consumers’ credit reports without authorization to intimidate them to pay alleged debts.
  


• Additionally, Madigan said in some instances PN Financial attempted to collect debts it was not authorized to collect. As a result, some consumers paid PN Financial, without realizing they didn’t owe any outstanding balances to the collection company, and reported losing at least $9,000. PN Financial also contacted other consumers over debts that had already been paid off.



• Fifty-two consumers have filed complaints with Madigan’s office against PN Financial. The Chicago Better Business Bureau has received 82 complaints against the company.

For the Illinois AG press release, see Madigan: 2011 Consumer Complaints Show Debt Collectors Using Illegal Abusive Tactics.

For the lawsuit, see The People of the State of Illinois v. P.N. Financial Inc.

Novice Homebuyer Pockets $8K 1st Time Buyer Tax Credit, Uses Funds To Fix House Only To Learn He Purchased Worthless Land Contract From Slick Operator

In Dearborn Heights, Michigan, WXYZ-TV Channel 7 reports:

• The complaints keep coming about Leonard Bale. 7 Action News Investigator Bill Proctor broke the story about the man who has been selling foreclosed homes to families who say they have lost their lifesavings on these deals. Now one city is taking on Bale, who may be facing major fines.



• Leonard Bale will go before a Dearborn Heights board where he already faces $42,000 in fines for failing to maintain rental properties.(1)
But those who say they are victims of Bale continues to grow.


• “We were making our payments on schedule,” says Clayton Waldroup a father of five. He says he had hoped that the Dearborn Heights home he thought he was buying from Leonard Bale on a land contract would be the ideal place for his family for years to come.



• Like so many of Bale’s customers, Waldroup took advantage of the federal first-time home buyers program, and received a substantial check to fix up the house.



• “We moved in. We took the $8,000 we got from the federal government, replaced the furnace. We rewired the home, repaired the plumbing, put new cabinetry in it, refinished the floors, repaired walls, put windows in it,” says Waldroup. “We spent that money, plus all our cash reserves because this was going to be our home.”



• But like these families, and so many others who say they are victims Bale, the Waldroups would find out months after buying and renovating, and putting heart and soul into the place that Bale was no longer the owner. They learned their land contract was no good.



• “There were foreclosure notices,” says Waldroup, which is how he found out his land contract was no good.(2)

For the story, see More families comes forward to accuse Leonard Bale.

(1) See Controversial landlord now facing thousands in fines.

(2) Inasmuch as the so-called tax 'credit' is nothing more than a 15-year, interest free loan, this scam victim may now find himself on the hook for immediate repayment to the IRS of the entire amount of the credit (less any amount he may have already paid back). See Internal Revenue Service Information Release: IR-2008-106, Sept. 16, 2008: Tax Credit to Aid First-Time Homebuyers; Must Be Repaid Over 15 Years:

• The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.

***

• However, some exceptions apply to the repayment rule. They include: [...]
  
  If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. [...] If you sell your home, all remaining annual installments become due on the return for the year of sale.

Fire Drives Unwitting Recent Homebuyer From Residence Shortly After Learning His Property Purchase Was Worthless Land Contract Fleecing Him Of $48K

In Vacaville, California, KTXL-TV Channel 40 reports:

• The home Johnnie Carabajal was living in went up in smoke [earlier this month], but the fire was the last in a long list of bad things that happened to him and his four kids.



• Earlier in the month, he had been told to get out of the house he was trying to buy. "It went into foreclosure I lost it for hiring a bad realtor he's in court for embezzlement for 1.5 million dollars," said Carabajal.



• FOX40 backed up his claim on the FBI’s website. Alonzo Brown III was indicted on mortgage fraud charges this past summer. The nine-count indictment states Brown took out loans in the names of friends and used the money to buy property without their knowledge. Carabajal was not named in the case, but he says he used Brown to help him through the short sale.



• "I've given him almost 48 thousand dollars cash throughout the whole time," said Carabajal. That cash never made it to the bank. "The bank doesn't even know who I am on this house they look at me as a squatter on this house and I've been squatting in this house for two years," said Carabajal.



• FOX40 tried to contact Brown today, he did not answer the phone. Wells Fargo is looking into the situation. For now Carabajal is living in a motel and is trying to find a rental in the school district his kids attend.

Source: Fire Uncovers Possible Real-Estate Fraud.

Unwitting Family Who Recently Lost Home In Tax F'closure Clipped For $5500 From Alleged Scammer Claiming To Be New Owner Offering To Sell Back House

In Southfield, Michigan, WJBK-TV Channel 2 reports:

• A family loses their home to foreclosure. A man claiming to be the new owner of the house tells them to pay up or pack up. They gave him more than $5,000. Where did the money go?

For more, see Ex-Convict Accused of a Dirty 'Deed'.

Dangers Of Buying Or Selling Real Estate With Land Contracts, Lease/Options

From SummitDaily.com:

• It happens innocently enough: A seller wants to sell real property and a buyer wants to buy it, only the buyer does not have the ability to obtain traditional financing. So, the parties make an arrangement.



• Perhaps the seller “leases” the property to the buyer for a period of time with the buyer having an “option” to purchase the property at some time in the future.



• Perhaps the parties agree to an installment land contract (ILC) whereby the buyer makes payments over time and the seller agrees to deliver a deed when the purchase price is paid. What can go wrong? It turns out a lot.

For more, see Mountain Law: Dangers of leases with purchase options (And installment land contracts).

Sloppy Loan Servicers Continue Victimizing Homeowners With Crappy Recordkeeping

Reuters reports:

• In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.



• Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month - a nice chunk to help with gas and groceries.



• But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son's student loans and throwing the whole family into foreclosure. All, they say, even though they didn't miss a single mortgage payment. The Bowers aren't alone.



• More and more, homeowners say that mortgages they thought were dead and buried are springing back to life, sometimes haunting them all the way into foreclosure. "It's the most egregious manifestation of an industry that's seriously broken," said Ira Rheingold, a lawyer who is the executive director of the National Association of Consumer Advocate.



• Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. "The record-keeping on the part of the mortgage servicers is not to be trusted."



• The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures. Now it's becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was.



• Depositions from "affidavit slaves" depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 a day, to pose as bank vice presidents, assistant secretaries and corporate attorneys.



• These "robosigners" became a national sensation in the fall of 2010 when it was revealed that they faked titles, forged documents and backdated affidavits so they could make up for the bypassed procedures and foreclose on properties.



• They passed around notary stamps as if they were salt. They did all of this, they testified, without verifying a single word in any of the documents - as is required by law. And it was all done, they say, to foreclose on as many homeowners as fast as possible.

For more, see Old mortgages rise from the dead, haunt homeowners.

Elderly Couple Says Misapplied House Payments, Force Placed Insurance Racket Victimized Them Into F'closure; Compelled To Hire Attorney To Stall Sale

In Baird, Texas, the Abilene Reporter News reports:

• It's been enough to make Virginia Tollett sick with worry. "If we hadn't went and got an attorney, they would have auctioned our house on the courthouse lawn," said Tollett, 72, her voice rising. "They would have sold our house."



• Tollett and her husband, Jim, 74, have turned to the courts in an effort to prevent lender JP Morgan Chase from foreclosing on the Baird home they bought for $300,000 in 2006 with the help of a $200,000 loan. The banking giant did not respond to a request for comment.



• Tom Watson, the Abilene attorney representing the Tolletts, said a judge stepped in to prevent a sale of the home, scheduled for January. The status of the house remains uncertain, however, as a lawsuit remains pending in federal court that claims JP Morgan Chase wrongfully foreclosed on the home.



• "What we are alleging is they took money that we submitted for payment to the principal and interest and instead applied it toward insurance," Watson said.



• But the couple claim that they already had insurance, so the lender was wrong to take out the home insurance policy.



• "My husband and I truly believe that we were paying our payments," said Tollett, 72, explaining that the couple paid roughly $1,500 monthly. Chase wants about $10,000 to bring the account up to date, Watson said. "I don't know how they arrived at that amount," Watson said.



• He added: "We don't know how the payments were applied. Their records don't disclose that to us, at least in what I would call an intelligible, understandable form." The claim also seeks recovery of the couple's $100,000 down payment.



• Tollett said she has cried and even been sick to her stomach since first receiving a foreclosure notice last fall. [...] The experience has caused her to "hate this beautiful home." She said she's been embarrassed by the courthouse foreclosure postings and doesn't know how she wants things to end, recalling her initial enthusiasm for the house.

For the story, see Baird couple facing foreclosure claims house payments wrongly uncredited to mortage loan.

Elderly Woman Faces The Boot From Home Of 40+ Years After Unwittingly Signing Over Premises To Convicted R/E Scam Artist Assisted By Then-L.A. Cop

In Los Angeles, California, NBC Los Angeles reports:

• A tangled web of fraud allegedly involving an ex-LAPD officer and a self-proclaimed Bishop has ensnared an 89-year-old woman who is losing to foreclosure the Lynwood home she paid off more than two decades ago, police say.



• Vistula Graham bought the three-bedroom ranch house more than 40 years ago, and owned it free and clear after paying off the mortgage in the late nighties, said her daughter, Keta Davis, who grew up there. Now the house is scheduled to be auctioned off. “I want the foreclosure to stop because we’re not at fault,” Davis said.



• The story begins with Leroy Dowd, a 74-year-old, self-proclaimed, charismatic leader of a now-defunct South LA church called Triumph Church of God. “Bishop Dowd is a con artist," Davis said. "Bishop Dowd preyed on my mom.”



• Dowd conned Graham into giving him money and unknowingly sign over the house, Davis said. “He called himself a bishop he called himself a prophet,” she said. Profit off her mother is more like it, she said.



• Her mother "didn’t know what she was signing,” Davis said. Davis claims the Bishop opened a $150,000 credit line with Bank of America using her mother’s information and the house as collateral. Checks signed with her mother’s name were forged, Davis said.



• Dowd also added his name to a Wells Fargo account. Wells Fargo and BofA both determined it was fraud and canceled those loans. But the last loan Dowd allegedly obtained, through IndyMac Bank, for $410,000 is the one in foreclosure.



• Two years ago, Dowd pleaded guilty to one count of grand theft for forging a grant deed and stealing another church member’s house. That victim was 87.



• “Mr. Dowd is a smooth con artist,” said Claremont Detective David DeMetz who has a thick file on Leroy Dowd, from that case. The victim “had no idea what she was signing or that she gave her house away to Mr. Dowd.”



• Sound familiar? Dowd was sentenced to 3 years in prison on that case, but in the case of Vistula Graham, the Los Angeles District Attorney didn’t press charges because the primary witness, Graham, can no longer talk. Davis has offered to testify on behalf of her mother.



• But the story doesn’t end there. Sheriff’s investigators say Leroy Dowd could not have been working alone. Detectives suspect he was working with Darcy Greenfield, who was an LAPD officer at the time and had a real estate business on the side.



• Deed records on the Lynwood house show that in 2007 the house was put in Greenfield’s company name: Greenfield and McCall. Documents show Greenfield and McCall were named beneficiaries of the IndyMac Bank loan, and a received a payout of more than $261,000.



• Keta Davis says the loan is clearly “fraudulent.”(1) “I’d never heard of them,” she said. Davis was stunned to learn that not only did a stranger own her family house, but that the stranger was an LAPD officer. Greenfield was never charged in Graham’s case, but the former LAPD officer was charged last May in a San Bernardino fraud case.



• Greenfield has been charged with ten felony counts all pertaining to real estate fraud, said San Bernardino deputy district attorney Vance Welch who specializes in real estate fraud. Greenfield has pleaded not guilty, and her attorney Grover Porter has not returned numerous calls to his office.



• Greenfield’s connection to Dowd is the subject of a broader investigation by the LAPD and FBI.

For the story, see Elderly Woman Falls Victim to Con, Loses House to Foreclosure (Elderly woman loses home in tangled web involving an ex-LAPD officer and self-proclaimed Bishop).
(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:

• A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)
  
  A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)

If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:

• A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

• In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."

For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Go here for more on void and voidable deeds.

DeedVoidVoidable

Sale Leaseback Peddler Squeezed By Norfolk Feds 'Scores' 54 Month Stay In Federal Prison After Copping Plea For Running Home Equity Stripping Racket

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

• Kathleen Harps, 51, of Chesapeake, VA, was sentenced [] in Norfolk federal court to 54 months in prison for operating a foreclosure rescue mortgage fraud scheme. [...] Harps previously pled guilty on August 23, 2011.



• According to court documents, during 2006 Harps owned and operated the now defunct Hampton Roads businesses, New Beginnings Group, LLC, and IMAK Group, LLC, which specialized in “foreclosure rescue.”



• Through these businesses, Harps and others solicited homeowners in financial distress and facing foreclosure, to agree to sell their homes to Harps or straw buyers working with her.



• Harps promised the homeowners that, during a one year period after the sale, they could remain in their homes without having to pay the mortgage, while simultaneously putting their financial affairs back in order, so that they could buy back their homes at the end of the year.



• This, however, failed to occur. Instead, court records show that Harps and her straw buyers made assorted false statements to fraudulently obtain mortgage loans, upon which they later defaulted.



• As a result, foreclosures soon followed and the homeowners lost both their homes and substantial sums of homeowner equity, which was siphoned out of the closing transactions and paid to Harps’ businesses.

For the U.S. Attorney press release, see Business Owner Sentenced to Prison for Foreclosure Rescue Scheme.

(1) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Minneapolis Feds Pinch Two In Alleged Sale Leaseback Rescue Peddling Scheme, Stripping Home Equity From Dozens Of Homeowners Seeking Financial Help

In Minneapolis, Minnesota, the Star Tribune reports:

• Two Bloomington residents were arraigned Thursday in Minneapolis on charges that they ran an $8 million equity-stripping scheme under the guise of a nonprofit that claimed to help troubled homeowners avoid foreclosure.



• Richard Scott Spady, 38, and Michele Denise Sengstock, 48, were each charged Jan. 19 in a sealed indictment with conspiracy, fraud and money laundering involving transactions that took place from 2005 through October 2007.



• Spady owned and operated Unified Home Solutions, which he promoted as a nonprofit but ran as a for-profit entity, the indictment says. He also owned and operated American Mortgage Lenders, a mortgage brokerage that facilitated the transactions. And Sengstock owned and operated a company called MLAA Holdings, which also played a role, the government says.



• According to the indictment, Spady told homeowners facing foreclosure that Unified Home Solutions offered a rescue program backed by investors who would buy their homes and sell them back after they'd regained their financial footing in a year or two.



• The homeowners could live in the homes and pay rent and upkeep in the meantime. Some homeowners only learned that their homes were being sold when they attended the closing.(1)



• The indictment says mortgages were obtained with fraudulent financial information, a common pattern in such schemes. Investors collected a "risk fee," generally 3 percent of the purchase price, but most of the equity in the home went to Unified Home Solutions and American Mortgage Lenders in the form of "undisclosed kickbacks," according to an affidavit filed in the case by IRS criminal investigator Angela Johnson. She said Spady and his companies facilitated the sale of about 79 properties; fewer than five avoided foreclosure.



• Spady closed the two companies in 2008 and opened new firms that he's believed to be operating, Johnson said. They include New Start Homes, Start to Finish Realty, RVenture Inc. and RInvestment I. None of those firms was mentioned in the indictment, however.

For the story, see Bloomington duo accused of mortgage fraud (Indictment says they preyed on homeowners facing foreclosure and stripped away the remaining equity).

For the U.S. Attorney press release, see Two Bloomington residents indicted in mortgage fraud scam.

For the indictment, see U.S. v. Spady, et ano.

(1) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).