Saturday, March 31, 2012

Ohio AG Tags Suspected Debt Settlement Racket With Civil Suit Alleging Deceptive Practices, Failure To Deliver Promised Services

From the Office of the Ohio Attorney General:

  • Ohio Attorney General Mike DeWine [] announced a lawsuit against Jeremy Nelson of Trabuco Canyon, California, and his two companies for operating debt settlement businesses that took money from consumers to settle their debts but failed to deliver on their promises.


  • According to the Attorney General’s lawsuit, filed in the Franklin County Court of Common Pleas, Jeremy Nelson is the president of Jackson Hunter Morris & Knight, a Nevada corporation that represents that its principal place of business is in Newport Beach, California. Mr. Nelson was also the president of Nelson Gamble & Associates, which previously was a Colorado corporation and represented that its principal place of business was in Irvine, California. Neither business was registered with the Ohio Secretary of State to do business in the state.

  • Through his businesses, Mr. Nelson advertised that his businesses could help consumers settle their debts. He advertised online and gave consumers the impression that they were getting professional services associated with legal counsel.

  • Representatives told consumers over the phone that the business would negotiate with consumers’ creditors so that they could settle their debts by paying only a portion of what they owed. According to the Attorney General, consumers paid money for these services but did not have their debts settled.

  • The Attorney General’s lawsuit charges Jeremy Nelson and his businesses with violating Ohio’s Consumer Sales Practices Act and Debt Adjuster Act. Specific counts include failure to deliver, misrepresentation, and charging higher fees than Ohio law allows. Through the lawsuit, the Attorney General seeks injunctive relief, civil penalties, and consumer restitution.

For the Ohio AG press release, see Attorney General DeWine Sues California Man for Operating Unfair Debt Settlement Operation.

For the lawsuit, see State of Ohio v. Nelson Gamble & Associates, et al.

Foreclosure Auction Purchaser Swears Out Felony Complaints Against Former Tenants Claiming Missing Light Fixtures Were Swiped

In Roanoke, Virginia, The Roanoke Times reports:

  • A man who purchased two Roanoke buildings at a foreclosure auction last month has taken out felony warrants against a former tenant and her fiance, claiming they stole light fixtures that belonged to him.

  • Richard Bishop, who put in the winning bid on the Grandin Village real estate at the Feb. 29 auction, swore out the warrants against Benjamin Ward and Nicole Coleman on March 11, according to court documents. Ward, a former manager of The Isaacs Mediterranean Restaurant, and Coleman, who co-owns the restaurant, were arrested March 13 and released on their own recognizance.

  • The Isaacs, which was housed at 1910 Memorial Ave. S.W. since 2007, closed March 10. Ward and Bishop have said the two parties could not strike a new lease agreement.

For the story, see Buyer says Isaacs operators stole fixtures.

Wedding Venue Operator Goes Belly Up After Knowingly Pocketing Customer Cash While In Foreclosure, Leaving Brides Scrambling For New Place To Tie Knot

In Memphis, Tennessee, WMC-TV Channel 5 reports:

  • The owner of a Memphis wedding venue knew her business was going into foreclosure months before the brides who booked with her knew. Brides who spent thousands of dollars just to reserve Le Pavillion have been abandoned by the well known Memphis attorney who owned the building. The event venue in East Memphis is in foreclosure.

  • "The most disturbing part is that the foreclosure happened in November and nobody told us," said bride Stephanie Maynard. "They still collected our second half of the payment in January."

  • Action News 5's investigation revealed the building was owned by Memphis attorney Gail Mathes. Brides never imagined that in October of last year, Mathes would begin foreclosure proceedings and abandon her East Memphis real estate with almost $90,000 in back property taxes. A foreclosure document, which ironically reads "to have and to hold," is the legal transfer of Le Pavillion to Commercial Bank and Trust. Mathes no longer occupies her downtown Memphis office. She did not answer her cell phone Thursday and no one answered at Le Pavillion.

  • Now, brides who are out thousands of dollars in deposits are scrambling to find another place to tie the knot. Mathes did not return Action News 5's calls Thursday. Documents show she also began bankruptcy proceedings but missed a filing deadline that would have protected her from creditors.

Source: Brides left scrambling after East Memphis wedding venue foreclosed.

Friday, March 30, 2012

Palm Beach County Says 'Enough Already!' To Property Owners Claiming Undeserved Property Tax Benefits From Improper Homestead Claims

In West Palm Beach, Florida, The Palm Beach Post reports on how the county's homestead fraud squad inspectors track down people trying to get double duty on homestead exemptions and are otherwise claiming undeserved property tax benefits.

For the story, see County's homestead fraud squad targets ineligible exemptions (requires subscription).

Baltimore City Triples Spending On Program Targeting Fraudulent Claims Resulting In Undeserved Homestead Real Estate Tax Benefits

In Baltimore, Maryland, The Baltimore Sun reports:

  • The number of city workers charged with rooting out property tax fraud and errors would triple — from one employee to three — under Mayor Stephanie Rawlings-Blake's budget proposal for next fiscal year.

  • The "billing integrity" program, launched last spring, has focused on finding homestead property tax credits that go to owners who don't live in the homes receiving the break, which violates the rules. The Finance Department wants extra staff to audit all tax credits and investigate the accuracy of property assessments.

  • William Voorhees, the department's director of revenue and tax analysis, said Rawlings-Blake "is dedicated to making sure that we get every dollar the city is due." The budget request triples spending on the program to $337,000, which would more than pay for itself, Voorhees said.

  • An investigation by The Baltimore Sun has found multiple problems that reduce city tax collection, particularly in the homestead program — "double-dippers" collecting on multiple properties, breaks going to boarded-up homes and homestead credits inflated by errors.

  • So far, the city has requested the state revoke over $1.3 million in homestead credits from 2,157 properties — rentals and vacant homes — and almost $1 million in tax exemptions on properties that the city believes do not actually qualify for the nonprofit break. The Finance Department expects to soon forward a list of several thousand more homestead credits to the state to revoke, potentially $2 million in breaks, Voorhees said.

  • Though the city is responsible for billing, the state Department of Assessments and Taxation oversees the homestead program and makes the call on revocations. [...] Voorhees said the city looked for properties receiving homestead credits even though they are registered as rentals, were cited for not registering or have been slapped with a vacant-building notice. The new staffer members would allow the department to ferret out even more properties getting undeserved homestead credits.

For more, see Mayor wants to expand property-tax effort ('Billing integrity' program aims to stamp out fraud, mistakes).

Zsa Zsa's Kid: Ailing Mom's Hubby Is Keeping Her Increasingly Isolated & Heavily Sedated While Draining Equity From $10M Mansion Now In Foreclosure

In Los Angeles, California, CNN reports:

  • Francesca Hilton, Zsa Zsa Gabor's daughter, is asking a judge to appoint a conservator to oversee the 95-year-old actress's finances and medical care. The Hungarian-born actress was once one of Hollywood's most glamorous women, but a broken hip and leg amputation in the past two years have left her confined to a bed.

  • "What Ms. Hilton is seeking here is for the court to make sure that Zsa Zsa's best interests are not being sacrificed for the selfish interests of anyone involved in Zsa Zsa's life," her lawyer, Kenneth Kossoff, said.

  • A conservatorship petition that Hilton's lawyer said he will file in a Los Angeles court Tuesday contends that Gabor's ninth husband, Prince Frederic von Anhalt, is keeping her "increasingly isolated" and "heavily sedated."

  • The filing questions von Anhalt's handling of Gabor's finances, saying he recently borrowed against on Gabor's $10 million Bel Air mansion, but the house is in foreclosure after several missed mortgage payments.

  • "In spite of her conflicts with von Anhalt, Francesca has been hoping he had Zsa Zsa's interests at heart," Kossoff said. "However, having just recently learned that he took out a $700,000 loan, and that there was a notice of default recorded against the property in late February 2012 because he apparently has not been paying Zsa Zsa's mortgage payment, it became clear to Francesca that if she did not seek to protect her mother, no one else would."

  • Hilton and von Anhalt have publicly battled for several years over Gabor's finances and her access to her mother. "He's basically taken my mother away from me," Hilton told CNN in an interview a year ago.

For more, see Judge asked to intervene in Zsa Zsa Gabor's care.

Thursday, March 29, 2012

City To Hire Criminal Investigator Dedicated Strictly To San Diego Upfront Fee Foreclosure-Related, Loan Modification Probes/Prosecutions

In San Diego, California, KGTV Channel 10 reports:

  • The San Diego City Attorney's Office announced [] that will spend a $57,000 state grant to hire a part-time investigator to look into allegations of mortgage and foreclosure fraud.

  • The investigator will focus on loan modification and foreclosure consultant businesses that take advance fees in violation of state law.

  • "Violators must be stopped before they take large amounts of money from victims or waste critical months of homeowners' time with false promises and representations," City Attorney Jan Goldsmith said. "By proactively pursuing these bad actors at the beginning of their business dealings with misdemeanor prosecution, we can save many potential victims a lot of heartache."

Source: City Attorney To Hire Mortgage/Foreclosure Investigator ($57K State Grant To Be Used For Hire).

F'closing Bankster Scores Sleazy Win Over Unwitting Tenant; Boots Family Of 11 Receiving Sec. 8 Rent Subsidy By Failing To Ask For, Collect Back Rent

In Washington, D.C., WJLA-TV Channel 7 reports:

  • A family of 11 people in the District is on the street Tuesday night after getting caught in a foreclosure nightmare. The family got a shocking surprise Tuesday morning when a team of marshals showed up to throw them out of their home.

  • Janice Johnson knew a bank foreclosed on the house she rented through Section 8 for the past four years. She says she repeatedly talked with the bank about continuing in the federal housing program and assumed she could remain here.(1)

  • Johnson says the bank simply had to request it and would get back rent. Johnson says had she known in advance she would have found another space. On Tuesday night, while neighbors take some of her things off the street, others are scrambling to find a mother and her children somewhere to stay.

  • “There's a place were on Rhode Island Avenue we are going to go talk to to see what options are available,” Rev Robert Childs, of Berean Baptist Church says. While she wonders where her family will end Tuesday night, Johnson worries about her children returning from school to find their things on the street. “They should not have to come home from school to walk into something like this,” she says.

Source: D.C. family evicted after foreclosure nightmare.

(1) In the case of a tenant receiveing a Section 8 federal rent subsidy (ie. a "Section 8" tenant), federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have these special rights granted by Federal law (even if they do, may be unable to find and/or afford competent legal representation).

See generally, Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program.

Elderly Homeowner Sues To Recover Home Lost In Tax Foreclosure Sale; Says 'I Was Never Properly Notified Of My Redemption Rights!'

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

  • A Jackson County woman who lost her home is seeking to get it back after the company that bought it failed to follow state law in taking ownership of it. Ora B. Thomas filed a property dispute lawsuit against NAJ, LLC in Jackson Circuit Court. In her complaint filed Feb. 17, Thomas, 86, alleges NAJ, a real estate holding company located on Timberline Drive in Charleston, failed to properly redeem her property it bought in a tax sale two years ago.

  • According to her suit, Thomas took ownership of her property on Ravenswood Pike in Ripley on June 13, 2003. When she became delinquent in paying her 2007 taxes, NAJ bought it on Nov. 19, 2008, at a sale administered by Jackson County Sheriff Michael G. Bright. According to the Jackson County Assessor's Office, Thomas bought the property for $45,000.

  • In the tax sale, NAJ paid $1,563 for it. By law, before NAJ could formally claim title to the property, it had to notify Thomas of her right to redeem it. In her suit, Thomas alleges NAJ made little, if any, effort. Though she does not provide specifics, Thomas maintains NAJ attempted to notify her via certified mail to an unspecified address, but the notice was returned as "undelieverable."

  • Also, she alleges NAJ failed to take "additional reasonable steps" to notify her about redeeming the property including "constructive notice by publication" in a newspaper of general circulation.

  • Nevertheless, a deed giving NAJ title to the property was executed May 18, 2010, by Jackson County Clerk Jeff Waybright. The deed was recorded in the Clerk's Office the next day.

  • Along with an order setting aside the deed, Thomas seeks compensation in the amount of not only what would have been required to redeem the property, but also the taxes that have been paid on it since May 2010 along with 12 percent interest, court costs and attorney fees.(1)

Source: Jackson woman files suit to reclaim home.

(1) In a similar case, New York State's highest court, in reversing a state appeals court ruling, recently found that notification of redemption rights to a homeowner in a tax foreclosure action is not necessary and results in no due process rights violation. See NYS High Court: No Due Process Violation Where Municipality Fails To Inform Property Owners Of Buyback Rights In Tax Foreclosure.

In the current West Virginia case, unlike the New York case, in which it was the foreclosing municipality that screwed up on giving proper notification, it is a private, tax lien investor who is alleged to have fumbled the ball on properly notifying the property owner. It may be that the New York court was loathe to rule against the municipality for its screw-up (which may have resulted in a tremendous burden for municipalities across the state regarding the process by which they collect property taxes, not to mention all the crappy land titles that would have arisen from the screw-up); accordingly, it 'reverse engineered' the necessary logic needed to support a (predetermined?) 'conclusion' that no due process rights were violated.

In the current West Virginia case, because it is a private, tax lien investor rights involved (as opposed to a state tax collecting authority), the state court may be less reluctant to rule against said investor because no imposition would be created for said tax collecting authorities. The burden would be on each individual tax lien investor to clean up the mess created by its own screw-up.

Oregon Tax Foreclosure Law That Resulted In Entire Loss Of Home Equity For Elderly Siblings Eliminated From The Books

In Eugene, Oregon, The Register Guard reports:

  • No one is sure how the state law that required the city of Eugene in 1994 to sell John and Betty Neely’s $65,000 Santa Clara house for no more than the $7,411 the Neelys owed on an improvement lien got on the books.

  • But it did. And, despite the repeated efforts of Vida resident Scott Rohter to change it in the nearly two decades since the high-profile Neely dispute, the law stayed in place until this year.

  • It’s hard to imagine what (lawmakers) were thinking of,” said Dave Hunnicutt, president of Oregonians in Action — an advocacy group that lobbies for property owners’ rights — when the Legislature long ago required that cities, when foreclosing on a property to cover an improvement lien, could not sell that property for a penny more than the amount of the lien. That meant that those rare homeowners who were foreclosed on for failing to pay improvement liens would lose all their equity.

  • This year, however, Rohter — helped by Hunnicutt and state lawmakers Rep. Jim Weidner, a Yamhill Republican, and Sen. Floyd Prozanski, a Eugene Democrat — secured unanimous approval in the Legislature for House Bill 4111, which addresses the issue. Gov. John Kitzhaber signed the bill into law last week.

  • HB 4111 requires local governments to sell such property for at least 75 percent of its assessed value, and that any money left over after the lien is paid goes back to the home­owner.

  • The long-drawn-out Santa Clara dispute, and the bitter outcome for the Neelys, has long galled Rohter, a Lane County appliance repairman. Siblings John and Betty Neely, who were 76 and 65 at the time, got nothing when they were evicted from their home in 1994 after refusing, for years, to pay their share of a Eugene-mandated sanitary sewer improvement in their Santa Clara neighborhood. The Neelys initially owed $5,000 for the sewer line, which grew to $7,411 as they stalled and the city tacked on fees.

  • At the time, many Santa Clara residents were reluctant to be absorbed into Eugene. Many preferred remaining in county jurisdiction, hooked up to wells and septic systems. “It was a rural setting at the time,” Betty Neely, now 83 and living in Cupertino, Calif., said in a recent interview. “People there wanted to live out of the city.”

  • Santa Clara residents never had a chance to vote on whether they wanted the new sewer lines, Betty Neely remembers bitterly to this day. “We didn’t get a vote,” she said. “That’s very important in this America.”


  • The Neelys moved in with neighbors, and John Neely died later that year. Courtroom battles over the legality of imposing the sewer improvements without a public vote continued for several years. “It took a lot out of both of us,” Betty Neely said. “It was dirty business. I will always think so.”

  • The property was purchased in a foreclosure sale by Leroy Bench and Marilyn Goss for $7,411 in 1994. Under state foreclosure sale law, the city had to put the property up for sale for the amount owed on it. Five years later, the new owners sold the property for $100,650, county property records show.

For more, see Bizarre Oregon foreclosure law finally off the books (The law was at the center of a dispute that led to the sale of a foreclosed home for $7,411 — the amount of a sewer lien — in 1994).

Wednesday, March 28, 2012

Feds Warn Of Upfront Fee Scams That Claim Affiliation With OCC; Ripoffs Target Homeowners Facing Foreclosure

From the Department of the U.S Treasury, Office of the Comptroller of the Currency:

  • The Office of the Comptroller of the Currency (OCC) has been notified that a group using the names “855LAW5559” and “National Legal Help” has misrepresented that the OCC has directed their organization to send foreclosure grant review correspondence to banking consumers.

  • The OCC has no knowledge of or affiliation with the group responsible for sending the letters and did not direct it to send any letters to consumers.

  • Letters were apparently sent to homeowners facing mortgage foreclosure. The letters claim the recipient’s lender is being investigated for wrongdoing by banking regulators. The letters also state that the recipient’s mortgage loan is being reviewed for foreclosure fraud.

  • The letters inform the recipient of his or her approved eligibility to receive $10,000 in grant assistance and ask the homeowner to use the services of National Legal Help by mailing the organization a payment of $10,000 by a specific due date.

  • Based upon the OCC’s review of information and National Legal Help’s Web site (, the program does not appear to be legitimate and instead is likely an “up-front-fee scam.”

For the OCC press release, see Misrepresentation of Involvement by the Office of the Comptroller of the Currency in Independent Foreclosure Grant Review Scam.

Feds Score Wins In Civil Suits Shutting Down Scams Peddling Mass Joinder Lawsuit Participations, Forensic Loan Audits

In Santa Ana, California, the Los Angeles Times reports:

  • The offers of help arrive at a particularly vulnerable time for troubled homeowners, promising legal tactics that can fend off foreclosures or slash mortgage balances and rates. But the so-called mass joinder lawsuits against lenders often are only the latest foreclosure-rescue frauds designed to extract payments from financially strapped borrowers, the Federal Trade Commission warns.

  • "The firms involved in this scam promise relief but generally don't deliver," the FTC said in a consumer alert posted on its website Thursday. "In fact, many of the firms fail to use qualified attorneys or pursue homeowners' cases, and often leave their clients in worse financial shape than before."

  • The FTC said that at its request a judge this week shut down one of the alleged scams, a Santa Ana mortgage-relief operation headed by Sameer "Sammy" Lakhany, 31, of Chino Hills. The operation — five companies and three websites controlled by Lakhany — took in more than $1 million from hundreds of consumers, according to an FTC lawsuit filed in U.S. District Court in Santa Ana. Gerald Werkman, an Irvine attorney representing Lakhany, declined to comment, saying his firm had "just been retained in this matter."

  • The FTC suit identified Lakhany's companies as Credit Shop, Fidelity Legal, Titanium Realty, Precision Law Center Inc. and Precision Law Center LLC.(1) His websites —, and — were shut down on orders from U.S. District Judge Cormac J. Carney, who issued a temporary restraining order against the companies and froze their assets.

  • The websites, featuring republished news stories describing the mortgage industry's legal troubles, suggested that the operation was a nonprofit effort to help right wrongs suffered by borrowers, said FTC consumer protection attorney Mark L. Glassman.

  • "They wrapped themselves in the cloak of good deeds that others are actually doing on behalf of consumers," Glassman said.

  • The FTC lawsuit is the second high-profile legal attack in California on lawsuits in which numerous plaintiffs team up to sue mortgage companies. State Atty. Gen. Kamala D. Harris in August sued several law firms and individual attorneys who allegedly operated a nationwide scam by deceptively marketing mass joinder suits. That litigation, including counterclaims against the state by the defendants, is pending, Harris spokesman Shum Preston said.

  • Mass-joinder lawsuits are similar to class-action suits in pitting many plaintiffs against a common defendant. But whereas class actions allege that all victims were harmed in the same way, the allegations and damages in mass joinder suits vary from plaintiff to plaintiff.

  • The FTC's lawsuit, its first targeting mass-joinder cases, said Lakhany's operation charged homeowners $6,000 to $10,000 each to join lawsuits against lenders. The pressure created by the suits was supposed to result in pretrial settlements that could stop foreclosures or produce major concessions, such as cutting the homeowners' interest rate in half or reducing their principal to 70% of the home's value. The lawsuits were filed but allowed to languish or dismissed, the FTC said.

  • In another alleged scam, the operation charged homeowners $795 to $1,595 for a "forensic loan audit" that borrowers were told would find violations by a lender at least 90% of the time, the FTC said.

  • The violations would supposedly give a homeowner leverage to get his or her mortgage modified. If the audit did not turn up any violations, the homeowner got the promise of a 70% refund while still getting a mortgage modification, the FTC said.

  • The companies also falsely described themselves as nonprofit, free, accredited or as housing counselors certified by the federal Housing and Urban Development Department, the FTC said.

Source: FTC cracks down on foreclosure-rescue scheme (The agency wins a court order shutting down a Santa Ana operation that charged struggling homeowners as much as $10,000 each to jointly sue mortgage firms).

For the FTC press release and links to relevant court documents, see FTC Legal Action Halts Alleged Mortgage Relief Scammers Who Lured Homeowners with Bogus Claims (Defendants Falsely Promised They Could Help Desperate Consumers Who Joined Group Lawsuits Against Their Lenders).

For more information from the FTC, see Mass Joinder Lawsuits: A New Twist on Foreclosure Rescue Scams.

(1) According to the FTC press release, to convince consumers that they should hire Precision Law Center, telemarketers working for the alleged racket followed up by mailing material to them promising that the mass joinder suit would result in:

  • “Forgiveness of all delinquent payments, fees and penalties,”
  • “Halt and reverse (sic) foreclosure proceedings,”
  • “Credit restoration,”
  • “Possible compensatory damages in the amount of $22,500.00,” and
  • “Possible punitive damages in the amount of $52,500.”

Trial Set After Plea Negotiations Break Down For Florida Cop Charged With Claiming Fraudulent Homestead Claim That Resulted In Lower Property Tax Bill

Down On the Florida Keys in Monroe County, Florida, reports:

  • Negotiations over a plea deal for a suspended Keys state law enforcement agent charged with homestead-exemption fraud have fallen through, and now he's set for trial on April 23 in Key West. Following the breakdown in talks, Vince Weiner, 47, demanded a speedy trial and on Thursday, Monroe County Circuit Court Judge Mark Jones set the trial for the Freeman Justice Center.

  • The Florida Department of Law Enforcement arrested the Key West-based Weiner, an FDLE agent, last Aug. 17. He's charged with felony grand theft and misdemeanor homestead-exemption fraud.

  • Florida homeowners are allowed one homestead exemption, which allows for a property-tax break on their permanent residence. It can be claimed only when the owners live in the house.

  • Prosecutors say Weiner bought a Big Pine Key house in 2005, then got assigned to Fort Myers in 2006. While living in Fort Myers, Weiner rented his Keys house out but claimed the homestead exemption, they say.

  • The FDLE says Weiner claimed the Big Pine exemption for the tax years 2007 to 2010. As a result, the FDLE says, Weiner received at least $5,918 in tax exemptions to which he was not entitled.

  • Weiner had hoped he could cop a plea that would allow him to retain his state police certification. But prosecutors wouldn't go for a misdemeanor plea.

  • Weiner was assigned back to the Keys from Fort Myers in May 2010. He has worked in Fort Myers or Key West since becoming an FDLE agent in 1993. He previously was a Florida Highway Patrol trooper.(1)

Source: Trial set for suspended Keys FDLE agent.

(1) If, after Weiner was assigned to Fort Myers (assuming he didn't claim a homestead exemption for another residence in the interim), he had a good faith intention to ultimately move back to his home in Big Pine Key, it would seem unfair that Weiner would not be entitled to keep his tax exemption allowed under Article VII, Section 6 of the Florida Constitution. Certainly, he would have been entitled to maintain the exemption if, rather than renting it out, had he simply kept the home vacant, or even let people live there rent-free.

Further, there are Florida Supreme Court rulings that have allowed for the temporary rental of a homestead where the homeowner was entitled to keep the tax exemption associated with homesteads. See:

  • L'Engle v. Forbes, 81 So. 2d 214 (Fla. 1955) (in the context of a member of the armed services who was called away for military service and who intended to return to his home when his military obligation was satisfied; he was deemed not to have involuntarily abandoned his homestead despite the fact that he rented out the home during the entire period of his absence. Accordingly, he was entitled to the homestead exemption for the time he was away in the military);
  • City of Jacksonville v. Bailey, 30 So. 2d 529 (Fla. 1947) (holding that homestead was not abandoned where the property owner resided in home for six years; the owner rented the home out during the winter season; and during the course of the rental, left his personal items on the property);

See also:

  • Poppell v. Padrick, 117 So. 2d 435 (Fla. 2d D.C.A. 1959) (where an intermediate appeals court held that a property owner who rented his home during the winter months, over the course of several years to live with his widowed mother, and maintained his personal property in the homesteaded property did not abandon homestead and was entitled to the property tax benefit);
  • Florida Att’y Gen. Op. 058-229 (where the state Attorney General opined that a property owner who rents a home in another county for work purposes did not abandon homestead where property owner had maintained homesteaded address for voter registration and voted in the subject county).

However, subsequent to these court rulings, in 1959 (possibly in an attempt to nullify or otherwise minimize the significance of these court rulings), the legislature slipped a provision into the statute (See 196.061, Florida Statutes: Rental of homestead to constitute abandonment), that specifically states that, in the context of the tax exemption for homesteads, a rental of an entire homestead constitutes an abandonment (the legislature does carve out an exception to this rule for a "member of the Armed Forces of the United States whose service in such forces is the result of a mandatory obligation imposed by the federal Selective Service Act or who volunteers for service as a member of the Armed Forces of the United States", possibly to reflect the fact pattern in the aforementioned case, L'Engle v. Forbes). See, generally, Florida Bar Journal: The Loss of Homestead Through Rental.

Whether Section 196.061 constitutes an improper exercise by the legislature to change the provisions of the Florida Constitution, as interpreted by the then-existing case law, through legislative action has never been addressed by the Florida Supreme Court (keep in mind that the Florida Constitution can only be changed, altered , modified, etc. by constitutional amendment to be voted on by the citizens of the State, not by legislative fiat). Arguably, however, the wording of Article VII, Section 6 of the Florida Constitution is such that it does permit the state legislature some leeway in passing laws to implement the intent of the state Constitution (unlike the constitutional provisions in Article X, Section 4, which deals with the homestead exemption relating to forced sales, lien attachments - where no such leeway is permitted).

Use Of Contracts For Deed On The Upswing, As Are The Complaints

In Minneapolis, Minnesota, the Star Tribune reports:

  • Contracts for deeds have nearly doubled between 2004 and 2010 to 1,200. Experts say the actual number is likely three times higher because most contracts are informal and are never recorded.

  • But with that rapid growth has come an increasing amount of complaints about the terms of such deals. While a popular last resort for house hunters who can't get financed otherwise, contracts for deeds are largely unregulated and are ripe for abuse.

  • Some housing advocates warn that these arrangements have now taken the place of the mortgage scams that contributed to the fall of the housing market six years ago. [...] The most common problems are associated with terms that favor sellers, including high interest rates and short repayment terms.

  • Typically, a contract for deed is offered by a seller who doesn't have a mortgage on the property. The sales price is paid in installments. Often, the interest rate is a couple of percentage points higher than market rate and the term is usually five to seven years, which requires the buyer to refinance or make a large balloon payment when the contract expires. Once all the payments have been made, the owner gives the buyer the deed to the property.

  • Some sellers tout the low cost of executing a contract because an appraisal isn't required, but that's risky because a buyer could agree to pay more than the house is worth, making an eventual refinancing impossible.

For more, see Seller-financed contracts skyrocket, but so do gripes (An alternative financing form, contracts for deeds are becoming increasingly popular among people who might not otherwise qualify for a mortgage. But buyers need to be cautious of their terms).

(1) Use of contracts for deed and other similar arrangements (ie. land contracts, conditional/installment sale contracts, agreements for deed, lease/options, lease-purchases, rent-to-own, etc.) are among favored methods for scam artists to rip off unwitting homebuyers in real estate deals for property the scammer can't otherwise unload through a conventional sale (due to structural defects, title defects, over-mortgaged/underwater homes, etc.). See, for example:

Couple Buy Purportedly Tax-Foreclosed Home From Upstate NY County, Spend Cash On Improvements, Then Find Out They Don't Have Good Title To Residence

In Livingston County, New York, WHEC-TV Channel 10 reports:

  • Imagine buying a home, putting money into it, then months later finding out you don't really own it. Seems crazy, but it happened to a Mount Morris couple. Apparently, Livingston County sold them a home claiming it was foreclosed on, but in reality the bank had the rights to it. Anne Sapienza, the town of Leicester's sole assessor says it all happened.

  • Sapienza said, "It was a mistake, and it was missed but I don't know why it was missed." The home was classified as a single family dwelling, but you can see it is actually a mobile home. Sapienza says it was classified that way so they could value it properly, but to be clear it was described as a mobile home on the town's website. Something, she says, was missed when the county looked into foreclosing the home. Sapienza said, "If someone went out and took a picture you can see it was a manufactured home."

  • All the problems started after the county sold it for $53,000 at a tax foreclosure auction in July. News10NBC spoke to Kevin Van Allen, the lawyer representing the family who bought the home.

  • Van Allen said, "Fast forward a few months later, they received an eviction notice saying that the bank from a prior owner that lent the money to the prior owner, was trying to collect. Basically recover the mobile home." The bank had a lien against the mobile home and is who it really belongs too.

  • Sapienza said, "The lien was sitting there, why in the title search it wasn't found, I don't know." News10NBC was told that New York State mobile homes are personal property, so they can't be foreclosed on.

  • Sapienza said, "The fact is there was a bank, just like if you bought a car, and took a loan out for the car. There was someone who had a lien out against that property. And because it was personal property under banking and titling laws, they literally could go in and pull the home off." Basically, the family spend thousands of dollars to own just the land here.

  • Van Allen said, "They had actually invested some of their own money, which is obviously a big concern for them, if the bank is trying to reclaim that. They just want this behind them as quickly as possible."

  • News10NBC contacted the Livingston County attorney David Morris, but he said he didn't have time to talk to us about this. The lawyer representing the family who bought the home says they are doing everything possible to resolve this quickly. He adds the county and bank are working them.

Source: Home wrongfully sold in Livingston County.

Tuesday, March 27, 2012

Ex-NY F'closure Mill King, Affiliated Document Preparation Sweatshop To Cough Up $4M In State AG Civil Suit Settlement Over Alleged Legal Work Abuses

Bloomberg reports:

  • Steven J. Baum PC, the largest foreclosure law firm in New York until it shut down last year, reached a $4 million settlement with the state over abuses in its legal work.

  • Part of the money paid by the firm, Pillar Processing LLC, Steven Baum himself and managing partner Brian Kumiega will be used to help homeowners facing foreclosure or victims of predatory lending, New York State Attorney General Eric Schneiderman said today in a statement. Baum formed Pillar in 2007 to process foreclosure documents.


  • In October, the firm, based in Amherst, New York, just north of Buffalo, reached a $2 million agreement related to its foreclosure practices with Manhattan U.S. Attorney Preet Bharara. After that settlement was announced, Fannie Mae and Freddie Mac, the mortgage-finance companies under U.S. conservatorship, dropped Baum from their lists of law firms eligible to handle foreclosures. The firm then said it would close.

For the story, see Baum Foreclosure Firm Settles With New York for $4 Million.

Pair Pinched On Multiple Grand Theft, Foreclosure Consultant Fraud Charges In Alleged Loan Modification Racket; Each Remains Free On $100K Bail

In Ventura County, California, the Ventura County Star reports:

  • An Oxnard woman and a Los Angeles man were charged with four counts of grand theft on allegations they collected thousands of dollars in fees on promises to reduce a woman's mortgage loan and save her home from foreclosure, prosecutors said.

  • Gloria Becerra, of Oxnard, and Hector Menendez, of Los Angeles, also were charged with 11 counts of foreclosure consultant fraud and one count of attempted grand theft, according to prosecutor Dominic Kardum.

  • Both were arrested Tuesday and remain free on $100,000 bail each, jail records show. Becerra, 46, and Menendez, 55, ran a fraudulent home modification and foreclosure rescue program, Kardum said in a news release. They used the business names of Sunset Beach Management, Financial Wellness for Homeowners LA and California Sky Premiers, Kardum said.

  • The victim received no services from the defendants. She lost thousands of dollars and her home to foreclosure, according to Kardum. Becerra and Menendez are due in court for a hearing April 16, court records show. If convicted, both could get up to 12 years and eight months in jail, Kardum said.

  • People who think they might have been deceived by Becerra and Menendez may call the Real Estate Fraud Unit at 662-1750.

Source: Oxnard woman, other person charged with theft in mortgage fraud.

Duo Who Ran Loan Modification Ripoffs Go Down On Theft, Foreclosure Fraud Charges; Approx. 400 Victims Fleeced Of Nearly $2M

In Santa Clara County, California, the Gilroy Dispatch reports:

  • Rene Alvarez and Mariano Ortega, the co-owners of M & R Contemporary Solutions, a Campbell foreclosure consulting firm, pled guilty and no contest Monday to theft and foreclosure fraud charges. The charges related to a scheme that, over a year, bilked about 400 mainly Hispanic homeowners out of close to $2 million.

  • A total of 10 victims were from South County: seven from Gilroy, two from Morgan Hill and one from San Martin, according to Mike Fitzsimmons, Deputy District Attorney for the real estate fraud unit.

  • Victims, who were in various stages of the foreclosure process, were told that M & R Contemporary Solutions would save their homes from foreclosure by facilitating the purchase of their existing lender's loan by a third party at a discounted price.

  • Ostensibly, the homeowners would then be offered a new reduced principal loan that would have significantly lower monthly payments. Homeowners paid from $3,000 to $10,000 each to M & R depending on how far along they were in the foreclosure process. The collection of up front fees from homeowners in foreclosure is a felony under California law regulating the conduct of foreclosure consultants.

  • In many instances, victims paid $10,000 even though they had already lost title to their homes via foreclosure. No M & R client ever received a new loan.


  • Sentencing for Alvarez and Ortega is scheduled for May 21 in Santa Clara County Superior Court, Department 30. They will receive a five year sentence of jail and mandatory supervision under the new California realignment law. A third defendant in the case, Cydney Sanchez, is still pending trial in the matter.

  • Investigators have seized $257,000 from M & R's bank accounts which may be applied toward restitution. Victims of M & R who seek information on the sentencing or restitution should contact the Santa Clara County District Attorney's Office Real Estate Fraud Unit at (408) 792-2879.

Source: Foreclosure consulting firm owners convicted of defrauding homeowners.

Upfront Fee Loan Mod Scammer Buys Out Of Hard Time; Gets 6 Months-County Jail vs. 3 Yrs-State Prison In Exchange For Flimsy Promise To Pay Restitution

In Salinas, California, the Monterey Herald reports:

  • After an emotional and sometimes tense hearing, a Gonzalez woman was remanded into custody [] for a real estate scam that bilked 57 people. Judge Adrienne Grover sentenced Maria Ponce to a three-year prison sentence but suspended imposition, saying her priority was for Ponce to pay full restitution to her victims. She placed Ponce on probation and ordered her to serve 180 days in jail.

  • To further facilitate the possibility of restitution, she said Ponce can apply to serve the sentence on home confinement. In the meantime, due to the seriousness of the crime and Ponce's failure to pay any restitution since she pleaded no contest in November, she was immediately sent to jail.

  • Ponce, 55, who suffers from severe rheumatoid arthritis, could not reach her arms behind her back to be handcuffed. On the day her trial was to begin, Ponce admitted her role in the Ponzi scheme that took $145,000 from 57 people facing foreclosure.


  • The victims described themselves as poor, desperate people who trusted Ponce despite their misgivings, paying her with "money we earned with our sweat." "We are all humble people," said Alicia Hernandez. "You believe anything they tell you when you're desperate."


  • The judge ordered her to get a job or show her probation officer regular proof she was seeking one. [...] She warned Ponce that if she did not meet the terms of her probation and did not make an effort to pay restitution, she would impose the three-year prison sentence.

For more, see Gonzales woman who ran real estate scam ordered to pay restitution (Bilked 57 people of $145,000).

Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes

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

  • Anthony J. DeMarco, III, 33, of Conshohocken, pleaded guilty [] to conspiracy and fraud charges in connection with a mortgage fraud scheme involving more than $30 million in loans. From 2006 through July 2009, DeMarco owned and operated DeMarco REI, Inc., a foreclosure rescue company.

  • A 15-count indictment charged DeMarco with conspiracy, mail fraud, wire fraud, bank fraud, and money laundering. Three others were charged in the conspiracy with him. Michael Richard Roberts, Sean Ryan McBride, and Eric Bascove previously pleaded guilty. DeMarco will be sentenced on June 27, 2012. He faces approximately 210 to 262 months in prison under sentencing guidelines.

  • DeMarco REI, Inc. was headquartered in Center City and employed Roberts and Bascove. DeMarco’s business claimed to be able to assist homeowners facing imminent foreclosure. Between June and December 2008, the defendants would scour public records filings to find homeowners in financial distress and pitch a “sale-leaseback” arrangement to them.

  • The pitch was that DeMarco REI would buy the homeowner’s house, the homeowner would remain in the house and pay rent to DeMarco REI, and when the homeowner got back on his or her feet financially, the homeowner could buy back the house. The defendants solicited straw buyers for properties, used fraudulent documents to obtain mortgage loans from lenders, stole the sellers’ equity in the homes at closing, and eventually failed to make the monthly mortgage payments. DeMarco used the sellers’ equity to run his company and to pay lavish personal expenses.

  • The houses went into foreclosure with the straw buyers listed on the mortgage, the original homeowners facing eviction from their own homes, and the mortgage lenders stuck with loans in default.

  • Only one couple ever acquired the means to repurchase their home but, after they wired approximately $245,000 to DeMarco at his direction and for that purpose, DeMarco instead used their money to purchase a Ferrari for himself and jewelry for his girlfriend, and to pay miscellaneous expenses.

  • McBride was a title agent and Chief Financial Officer at Settlement Engine, Inc. in Pittsburgh, Pennsylvania. Settlement Engine closed approximately 30 loans for DeMarco REI from June 2008 to early December 2008. McBride pleaded guilty to conspiracy, wire fraud, bank fraud, and faces a sentence of approximately 63 to 78 months in prison when sentenced on June 27, 2012; Roberts pleaded guilty to conspiracy, wire fraud, bank fraud and faces approximately 78 to 87 months in prison when sentenced on May 7, 2012; Bascove pleaded guilty to conspiracy and bank fraud and faces approximately 78 to 97 months in prison when sentenced on June 27, 2012.

  • At the time of indictment, the U.S. Attorney's Office Civil Division filed a verified complaint and temporary restraining order to help the original homeowners save their homes. The complaint and temporary restraining order sought novel relief that would bring all the individuals and entities that have a stake in the homes before the Court in an orderly process by which the damage caused by the defendants' alleged fraud could be mitigated.

  • In 2011, U.S. District Court Judge Michael Baylson approved conversion of the temporary restraining order into an injunction that stopped foreclosures and evictions that were related to the alleged fraud, and that set forth the details of the mediation process. Currently, the majority of the banks and the original homeowners are still in the process of attempting to reach resolutions.

For the U.S. Attorney press release, see Foreclosure Rescue Scammer Pleads Guilty.

For the charges brought by the Feds in this criminal/civil, 'dual' prosecution, see:

Feds, Colorado AG Shut Down National Foreclosure Rescue Scam That Ripped Off Homeowners Through Fraudulent Sale Leaseback Deals

From the Office of the Colorado Attorney General:

  • The United States Attorney for the District of Colorado, John F. Walsh, and the Colorado Attorney General, John W. Suthers, announce the end of a national foreclosure rescue scheme. The perpetrators, operating through Bella Homes LLC, had promised hundreds of distressed homeowners that Bella Homes would help homeowners avoid foreclosure.


  • The Civil Action that put an end to the scheme was filed in the United States District Court for the District of Colorado on February 14, 2012, and resulted in a Consent Judgment, in which Bella Homes “admits the allegations in the Complaint and acknowledges its role in defrauding homeowners who signed over title to their homes to Bella Homes.”


  • The Scheme: As alleged in the Complaint, the Defendants, through Bella Homes, engaged in a fraudulent scheme in which they solicited homeowners to convey title to their homes to Bella Homes for no consideration and to enter into purported lease agreements under which the homeowners, instead of making their mortgage payments, paid Bella Homes monthly “rent.”

  • To entice homeowners into this arrangement, Defendants made or caused to be made numerous material misrepresentations to homeowners to convey the false and fraudulent impression that:

    1) Bella Homes would stop any foreclosure on the home;

    2) Bella Homes would purchase or otherwise settle the existing mortgage on the home from the lender;

    3) Federal law provided the homeowner the right to remain in the home for the duration of the lease with Bella Homes; and,

    4) The homeowner would have an option to repurchase the home in three years from Bella Homes for significantly less than the amount currently owed on the mortgage.

For the entire press release, see National foreclosure rescue scheme permanently enjoined.

Monday, March 26, 2012

Outfit Found Liable In Illinois Civil Case Involving Tax Lien Auctions Now Under Scrutiny By Feds In Alleged NJ 'Round-Robin' Bid Rigging Racket

Bloomberg reports:

  • M.D. Sass Investors Services Inc., a closely held manager of more than $5 billion, participated in an auction of New Jersey tax liens that has come under the scrutiny of U.S. antitrust investigators probing rigged sales.

  • A representative of M.D. Sass, whose tax-lien funds have as much as $110 million in assets, was among seven bidders vying for liens in the New Jersey borough of Newfield, according to records of a March 5, 2007, auction. Three people associated with the seven bidders pleaded guilty to antitrust charges and are cooperating with prosecutors.(1) The Justice Department subpoenaed records of the auction on Feb. 15. M.D. Sass hasn’t been accused of wrongdoing.

  • The U.S. records request comes amid a widening probe into rigged liens sales in New Jersey. Since August, five men have pleaded guilty to conspiracy charges. The guilty pleas were to an overall conspiracy and not to the particular auction in Newfield, 35 miles south of Philadelphia.

  • Units of Royal Bank America, which operates branches in Pennsylvania and New Jersey, co-owned lien-buying firms with one of the men admitting guilt. The units are subjects of the probe, regulatory filings show. Royal Bank America is a unit of Royal Bancshares of Pennsylvania Inc.

  • Justice Department prosecutors want “all tax sale bidder information,” according to a copy of the subpoena disclosed by Newfield in response to a request under the state’s public records law. That includes “the name and address of each person who attended the relevant tax lien sale,” according to the subpoena.

  • “M.D. Sass companies have no comment on any activity or investigation that may be under way at the Department of Justice,” Mark Rotert, a lawyer for the New York-based firm, said in an e-mail.

  • Separately, M.D. Sass was found liable last year in a Chicago trial over civil racketeering claims involving tax liens.


  • New Jersey municipalities seeking revenue sell about $100 million a year in local tax debt on commercial and residential property to investors, said Vincent Belluscio, executive director of the Tax Collectors and Treasurers Association of New Jersey. Firms that buy liens at auctions pay the tax liability in full and then seek to collect from the property owner. They may earn as much as 30 percent on their investment, Belluscio said in a phone interview. In addition to interest of as much as 18 percent on delinquent taxes, the firms may add penalties of as much as 12 percent, he said.

  • Bidders on the liens are supposed to compete fairly for the right to buy them and collect taxes on property. Buyers, who seek the return of their principal investment and interest, begin bidding at 18 percent interest and then lower that rate with each bid.

  • Each of the 59 liens sold in the Newfield auction went for 18 percent, according to borough records. That suggests the seven participants didn’t bid against one another, Belluscio said in a phone interview.

  • It makes it a little suspicious,” he said. “It’s very strange if you have that many lines up for sale, and they’re all going up for 18 percent.”

  • M.D. Sass bought four liens, including the two largest. Other firms purchased as many as 11, according to records. Daniel Lebar, a lawyer and tax lien investor who bought three, said participants at the auction chose not to compete because there were many liens available for the few bidders who showed up.

  • The sense was the list is long, we all know each other, there is no need to kill each other, so we’ll just bid round- robin,” Lebar said in a phone interview. “It was really just spur-of-the-moment,” he said. “There was no conspiracy.”

  • Lebar said lien buyers sometimes followed that practice at other New Jersey auctions including some in Camden County. “It’s a niche business,” said Lebar, 55, who followed his father into the business. “We have camaraderie among each other. If we get a sense that there’s enough for everybody, we’ll bid round-robin.”

  • Harry First, who teaches antitrust law at New York University School of Law, said such spur-of-the-moment decisions may violate antitrust law. “If you agree beforehand, there’s no requirement how beforehand it has to be,” First said in a phone interview. “If people show up and agree to allocate the bids, and there’s no bidding, they’ve done it.”

  • The Newfield auction attracted individuals or firms associated with individuals who pleaded guilty to an antitrust conspiracy charge in federal court in Newark, New Jersey. The three pleading guilty were Robert Stein, David Farber and William Collins. Stein’s lawyer, Paul Zoubek, and Farber’s attorney, Michael Mustokoff, didn’t return calls. Collins’ lawyer, Jack Wenik, declined to comment.


  • M.D. Sass has been buying tax liens since 1993, according to testimony in October at the unrelated civil racketeering trial in federal court in Chicago. The firm has invested hundreds of millions of dollars buying liens in states including New Jersey, Kentucky and Massachusetts, Kirk Allison, a vice president at M.D. Sass Investors Services, testified at the trial.


  • A federal court jury found in favor of two lien-buying firms that claimed that M.D. Sass and other companies secretly worked together to buy and trade liens, according to court records. The damages awarded will exceed $10 million, said Jonathan Quinn, a lawyer at Reed Smith who represented the plaintiffs.

  • Rotert, the lawyer for M.D. Sass at the trial, said the firm plans to appeal. “We believe the verdicts are incorrect as to the facts and we think certain errors of law took place before and during the trial,” Rotert said.

  • The Chicago case is Phoenix Bond & Indemnity Co. v. Bridge, 05-cv-04095, U.S. District Court, Northern District of Illinois (Chicago).

For more, see New Jersey ‘Round Robin’ Tax Lien Auction Spurs Probe.

(1) Another example of squealing schemers abandoning a 'sinking conspiratorial ship', winning the race to the prosecutor's office and seeking to take down fellow co-conspirators by 'throwing them under the bus' to score a better break on a plea deal. Vrooooom!!! As noted by one learned Federal judge:

  • "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) (referring to the not-uncommon 'race to the prosecutor's office' that breaks out among participants in an 'about-to-fall-apart' criminal conspiracy).

Where Are The Indictments?

Blogger Abigail C. Field writes:

  • Let’s be clear why there’s a mortgage deal: the banks broke the law. Several laws in fact, in ways that appear criminal as well as civil. Limiting their liability is the only reason the banks did a deal.

  • In this post I’m going to look at what the banks could be held liable for; how much liability “their” money persuaded law enforcers to ignore will be the next post. But one important kind of peace has not been bought: criminal.

  • So as I detail the wrong doing exposed by the deal, I highlight the crimes our law enforcers seem to allege the bankers committed. After all, a liability release isn’t simply what it says, it’s what law enforcers do with their remaining freedom to act. If crimes were committed, and indictments don’t follow, the release is much broader than its text.

  • A close read of the complaint and the related language that precedes the releases (see Exhibits F and G) reveals: [...]


  • In all, at least three types of criminal conduct–False Claims Act violations, Servicemember Civil Relief Act violations, and False Statements violations–appear to have been substantiated.

  • So where are the indictments?

For more, see Where are the Indictments?

NC Appeals Court: Summary Judgment Improper In Suit On Defaulted Note Where Creditor Fails To Prove Merger With Predecessor Note Holder

A recent ruling from the North Carolina Court of Appeals reversed a lower court screw-up and said that the party suing on an allegedly defaulted promissory note was not entitled to summary judgment where the note was in the name of the original creditor, despite the fact that the suing party claimed that it had acquired the original creditor through merger.

On review of the lower court ruling, the appeals court pointed out that although the plaintiff argued that it now stands in the place of the original creditor on the note due to a merger between the two entities, neither the complaint nor any other documents in the record which were presented to the trial court revealed any evidence of a merger or explained why the party bringing suit named itself as plaintiff instead of its alleged predecessor.

For the ruling, see T.D. Bank, N.A. v. Mirabella, No. COA11-1178 (N.C. Ct. of App., March 20, 2012).

Consumer Lawsuit Alleges Creditor's Agent Violated Federal Debt Collection Law; Says 'Bill Collector Sued Me In The Wrong Court!'

In Marshall, Texas, The Southeast Texas Record reports:

  • A Gilmer County consumer has filed a lawsuit against several debt collectors for violating the Fair Debt Collection Practices Act by filing a lawsuit in a distant court.

  • Roberta Ford filed suit against Samara Portfolio Management, Law Office of Joseph Onwuteaka P.C. and Joseph Onwuteaka on March 7 in the Eastern District of Texas, Marshall Division.

  • At issue is a retail installment contact that Ford signed on Dec. 16, 2003, for the purchase of a 2004 Kia Sorento, which was signed in Gregg County. According to court documents, the defendants filed a lawsuit against Ford in a Justice Court in Houston, Harris County on Jan. 24, 2011. The lawyers are attempting to recover a deficiency judgment of $8,376 and attorney's fees of $1,600. The case is currently pending and has not been set for trial.

  • Ford claims that the defendants are in violation of the Fair Debt Collection Practices Act by filing the lawsuit to collect on a consumer debt in a distant forum,(1) the suit states. The plaintiff is asking for an award of statutory damages, attorney's fees, and court costs.

  • Ford is represented by Richard Tomlinson of Lone Star Legal Aid in Houston.(2)

Source: Consumer sues debt collectors for filing lawsuit in a distant court.

(1) If the allegations are true, this case appears to be a slam dunk win for the consumer. See §811(a)(2) of the Act (15 USC 1692i(a)(2)):

  • (a) Any debt collector who brings any legal action on a debt against any consumer shall—

    (2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity

    (A) in which such consumer signed the contract sued upon; or
    (B) in which such consumer resides at the commencement of the action.

Reportedly, the consumer allegedly signed the contract in Gregg County and apparently resided in Gilmer County at the time the debt collector filed its lawsuit - which the debt collector filed in Harris County.

(2) Lone Star Legal Aid is a non-profit service provider of free legal aid having 13 offices throughout east, southeast, and northeast Texas serving 72 Texas counties and four southwest Arkansas counties.

Note that in the event the consumer prevails in this litigation, the consumer's law firm will be entitled to clip the debt collector for legal fees (despite the fact that it's a non-profit law firm providing no-cost/low cost legal services to its clients), as awarded by the court. See §813(a)(3) of the Act (15 USC 1692k(a)(3)):

  • (a) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title with respect to any person is liable to such person in an amount equal to the sum of—

    (1) [...];
    (2) [...]; and
    (3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court.

Defect In Mtg. Assignment Sinks Lender's Post-F'closure Sale Attempt To Boot Ex-Homeowners; May Not Have Had Power To Foreclose When Proceedings Began

The Court of Civil Appeals of Alabama recently reversed a lower court ruling favoring a foreclosing lender and nixed an attempt by the lender to boot the homeowners out of their home after the foreclosure sale already took place.

In the case, the lender filed an action seeking possession of certain real property that was in the possession of the homeowners, who were using it as their residence. the lender claimed that it had acquired title to the real property through a foreclosure sale and that the homeowners had unlawfully detained the real property following the termination of their right of possession in the home.

The homeowners filed a pro se answer generally denying the allegations in the complaint, saying that "we can show that our property was foreclosed on without just cause."

The basis for the reversal revolved around a conflict with the date the mortgage was assigned to the foreclosing lender. According to the facts, a notary certified that the document was signed on April 20, 2009. On the other hand, the lender attached an affidavit by an employee indicating that it had acquired the mortgage via a sale effective December 30, 2009.

Meanwhile, the evidence showed that the foreclosing lender accelerated the debt as of December 11, 2009, and that the notice of the foreclosure sale was first published on December 15, 2009, prior to the date the mortgage was acquired by the lender according to its affidavit.

Based on the foregoing dates, it was established that the foreclosure proceedings might have been initiated by the lender without first having acquired a valid assignment of mortgage, creating a genuine issue of material fact as to whether it had the power to foreclose and sell the property when the foreclosure proceedings were initiated.

The court ruled that the foreclosing lender may have lacked standing to initiate the foreclosure process when it did which would have rendered the foreclosure deed void. Accordingly, it reversed the lower court ruling indicating otherwise.(1)

For the ruling, see Byrd v. MorEquity, Inc., No. 2100734 (Ala. Ct. of Civ. App. March 16, 2012).

(1) From the court ruling:

  • The conflict as to the date of assignment materially impacts the standing issue. In Sturdivant, this court held that, in order to conduct a foreclosure sale, a party must have the power to foreclose and sell the property as of the date of the initiation of the foreclosure proceedings, ___ So. 3d at ___, which is the date the party "accelerates the maturity date of the indebtedness and publishes notice of a foreclosure sale," Perry v. Federal Nat'l Mortg. Ass'n, [Ms. 2100235, Dec. 30, 2011] ___ So. 3d ___, ___ (Ala. Civ. App. 2011), impliedly overruled on other grounds by Ex parte Secretary of Veterans Affairs, [Ms. 1101171, Feb. 10, 2012] ___ So. 3d ___ (Ala. 2012).

    The undisputed evidence in this case shows that the debt had been accelerated as of December 11, 2009, and that the notice of the foreclosure sale was first published on December 15, 2009, which was long after the alleged April 20, 2009, assignment date but over two weeks before the alleged December 30, 2009, assignment date.

    If the latter date is accurate, MorEquity would not have had authority to initiate the foreclosure proceedings; only Wilmington Finance, Inc., or MERS could have started foreclosure proceedings at that time.

    Pointedly, two December 11, 2009, letters submitted by MorEquity, notifying the Byrds individually of the acceleration of the debt, and the notices of foreclosure sale published beginning on December 15, 2009, all indicate that Wilmington Finance, Inc., had invoked the foreclosure process, implying that the assignment had not yet occurred by mid-December, as the document attached to Schutte's affidavit reflects.

    MorEquity did not present a prima facie case of standing because its own evidence creates a genuine issue of material fact as to whether it had the power to foreclose and sell the property when the foreclosure proceedings were initiated on December 15, 2009.

Sunday, March 25, 2012

MERS Tagged Again With Another Suit By Municipality Accusing Bankster With Dodging Recording, Fee Payment Requirements

In Le Mars, Iowa, the Sioux City Journal reports:

  • Plymouth County has filed a class-action lawsuit against a national electronic mortgage registry company it says has enabled banks to avoid paying Iowa mortgage recording fees.

  • Plymouth County Attorney Darin Raymond filed the suit on behalf of all 99 Iowa counties against MERSCORP Holdings Inc. and Mortgage Electronic Registration Systems Inc., known as MERS, which tracks mortgages sold and traded among banks that subscribe to the company's service. The suit also names several of the nation's largest banks and mortgage companies.

  • In the lawsuit, Raymond said MERS has allowed banks to skirt Iowa's public information and recording laws by trading mortgages through an electronic registry that lists MERS as the mortgage holder, even though the banks are buying and selling the mortgages.

  • Iowa law requires a document called an assignment of mortgage to be filed in the county recorder's office when a mortgage is sold. The MERS system enables banks to avoid that practice and the payment of the accompanying filing fees, the lawsuit said.

  • Plymouth County is asserting claims of unjust enrichment and civil conspiracy, is seeking an unspecified amount of damages and has asked that the defendants record all past mortgage transactions that were not recorded from Jan. 1, 1998, through the present.

  • The suit was originally filed in Plymouth County District Court, but was transferred last week to U.S. District Court in Sioux City. No hearings have been scheduled. Plymouth County is not the first to file suit against MERS to recover recording fees. Similar lawsuits have been filed in Pennsylvania, Texas and North Carolina.

For more, see Plymouth County sues over mortgage recording practices.

For the lawsuit, see Plymouth County, Iowa v. Merscorp, et al.

Fired CBO Analyst Continues Asking Why Federal Watchdog Agency Appeared To Sweep Securitization, Robosigning Shams Under Rug When Informing Congress

ABC News reports:

  • Lan Pham, an economist fired by the Congressional Budget Office two years ago, is still asking whether the watchdog agency appeared to "diminish or deny" the problem of foreclosure fraud while providing analysis to Congress.

  • As lawmakers enter budget season in Washington D.C. and wrangle over House Republicans' new budget blueprint, Pham is hoping to draw more attention to the housing market's woes.

  • "Why is one of the most powerful government agencies that can determine the direction of the nation's policies appearing to diminish or deny that the issue of mortgage securitization is a problem?" she said. "If it is a problem, we have a $7 trillion in mortgage-backed securities that has brought chaos to homeowners, whether or not they are in foreclosure."

  • Pham said her questions like those have led attorneys general to reach the $25 billion foreclosure abuse deal announced last month, and could affect not just underwater homeowners across the country but the entire U.S. housing market.

  • With a Ph.D. from the University of Minnesota, Pham worked for the Congressional Budget Office (CBO) for only two and a half months before she was fired in December 2010. In Pham's termination letter, her supervisor, Deborah Lucas, CBO's assistant director, said "a number of performance issues are the basis for the decision."

  • But Pham said she was fired for providing an analysis about the banking sector and foreclosure fraud issues involving mortgage-backed securities and robosigning that she said displeased her bosses.

  • Pham said the main issues of foreclosure problems relate to securitization, the pooling of mortgages that collateralize mortgage-backed securities, and the Mortgage Electronic Registration System, which has electronic records of ownership on about 65 million mortgages, about half in the country.

  • In her first interview since releasing a letter addressed to Sen. Chuck Grassley, R-Iowa, through the website Zero Hedge on Thursday, Pham said she is less concerned with losing her job but rather with bringing more transparency to her former employer.

  • "Because you see the losses around the country from those who purchased homes with banks foreclosing on homeowners that don't have the title to the mortgage, this is an issue where financially we're talking about a $7 trillion mortgage backed securities problem," Pham, who is looking for employment, said. "To me, talking about my career is just beside the point."

  • Pham said she was assigned to write a brief, or short paper, about foreclosures and that her supervisor rejected her discussions on the decline in property taxes, home prices, and the impact of foreclosures on homeowner assets or wealth.

  • Pham said her supervisor handed her policy thoughts from Morgan Stanley and Goldman Sachs which "appeared to minimize the exposure of banks to securitized mortgage problems." She said her supervisor said foreclosure problems were just media "sensationalism," and asked, "Don't you want house prices to go up?"

For more, see 'Whistleblower' Says Mortgage Securitization Still an Issue for U.S. Homeowners.

For even more, see, Zero Hedge: Terminated CBO Whistleblower Shares Her Full Story With Zero Hedge, Exposes Deep Conflicts At "Impartial" Budget Office:

  • The bottom line is that the CBO was warned at least by Ms. Pham (and possibly others) over the dangers of precisely the issue that Attorneys General are scrambling to shove under the rug in exchange for a wristslap to all mortgage originators (i.e., the same banks that somehow are now getting bailed out by taxpayers and the GSEs on an annual basis).

  • And just like every other issue that merely gets a cosmetic and very transitory liquidity facelift, nothing ever is actually fixed.

  • As Ms. Pham says: "It is unclear how the recent State attorney generals’ agreement to a proposed yet unpublished terms of the $25 billion robo-signing settlement would repair the chain of title issues that continue to mutate. In January 2011, the Massachusetts Supreme Judicial Court reversed the foreclosure actions of two banks for lacking proof of clear title, followed by a decision in October 2011 that a buyer who purchased a house that was improperly foreclosed upon does not make the buyer the new owner of the house; the sale does not transfer the property."

Distinction Between 'Mortgage' & 'Deed Of Trust' Significant Under California Law Governing Foreclosures

In San Francisco, California, the San Francisco Chronicle reports:

  • Does slipshod paperwork provide legal grounds to overturn a foreclosure? In Massachusetts, courts have said "yes" in two landmark cases upheld last year by the state's highest tribunal, the Supreme Judicial Court. Judges in other states have ruled likewise.

  • But California courts have consistently refused to void foreclosures even when banks botched the process.

  • Now a case argued in an appeals court in San Francisco last week might get the California Supreme Court to weigh in. The case hinges on a single word in a civil statute written over a century ago.


  • One of the biggest barriers for homeowners in foreclosure lawsuits turns out to be the definition of "mortgage." California Civil Code 2932.5, enacted in 1874, says lenders must record their ownership of a mortgage before foreclosing or selling a property. That sounds crystal clear.

  • But nowadays, almost no home in California is secured with a mortgage. Instead the state uses a slightly different instrument called "deed of trust."

For more, see Is it important who forecloses?

Chase, BofA Top Scofflaw List When Producing Required Documents Under Nevada Foreclosure Mediation Program

In Las Vegas, Nevada, the Las Vegas Sun reports:

  • When homeowners headed for foreclosure sit down with their bank to see if they can work out an agreement, state law requires the lender come equipped with documents proving who owns the home, among other things. In one-third of those mediation meetings, however, banks failed to produce the required documents, according to an analysis of the last six months of 2011.

  • The figures appear to provide statistical evidence to support what many homeowners have claimed — that banks aren’t negotiating in good faith to help them stay in their houses.

  • JP Morgan Chase had the highest rate of noncompliance with the state law. It failed to produce required documents in 52 percent of mediations, which homeowners may request before a bank forecloses. The figures were released Thursday by the state’s Foreclosure Mediation Program.

  • Bank of America, by far the biggest private lender in Nevada, did not produce the necessary documents 41 percent of the time.

For more, see A third of the time, lenders don’t have paperwork in foreclosure mediation sessions.