Saturday, September 18, 2010

Disabled Vet Gets Boot With No Notice After Landlord Loses Rental Home To Foreclosure

In Stuart, Florida, WPTV-TV Channel 5 reports:
  • A local veteran is desperate for help after being put out of his home. He says the home he was renting went into foreclosure and he was told it was okay for him to stay there until everything was worked out. But on Thursday he was handed an eviction notice and watched as movers moved all his belongings into the street.

  • It's tears of frustration and desperation from 62-year-old Vietnam Veteran Ramsey Harris. "I cry like a baby and I'm a about to burst into tears right now," said Harris. He hides his face as he is overwhelmed with emotion not knowing where he will go or do next. "It's kind of tough... it's just not right," Harris said.

  • Harris says he moved to Stuart from Maryland after he was told he could receive better medical care at the VA hospitals in South Florida. "They're going to fuse my back and hope that solves some of the pain and problems that I have," said Harris.

***

  • Neighbors are still in disbelief. "I was surprised at sort of the brutality of it the throwing a person's possessions on the street and leaving him to his own devices," said one neighbor. [...] And many of his belongings are still out on the street. He says some of the items have been taken by people thinking it's just junk.

For the story, see Vietnam Veteran homeless after home he's renting goes into foreclosure.

Struggle Continues For Homeowners With Chinese Drywall Problems As Few Companies Step Forward To Accept Responsibility

In Plant City, Florida, The New York Times reports:
  • Linda and Randall Hunter own their dream house in Plant City, Fla., with an oversize master bedroom, granite countertops in the kitchen and a screened-in pool. The problem is they cannot bear to live there. For the last several months, the Hunters have been camped out in the side yard in a trailer — uncomfortable mattresses and all — because faulty drywall left the house smelling awful. “Living in the trailer is no easy thing,” Ms. Hunter said. “But I count my blessings that I have someplace to go.”

***

  • Complaints about the drywall, or wallboard, which was mostly made in China, first surfaced a few years ago, and hundreds of lawsuits have been filed in state and federal court to recover money to replace it. The federal Consumer Product Safety Commission has received 3,500 complaints about the drywall and says it believes thousands more have not reported the problem.

  • But so far the relief has been negligible. Most insurance companies have yet to pay a dime. Only a handful of home builders have stepped forward to replace the tainted drywall. Help offered by the government — like encouraging lenders to suspend mortgage payments and reducing property taxes on damaged homes — has not addressed the core problem of replacing the drywall. And Chinese manufacturers have argued that United States courts do not have jurisdiction over them.

  • They are hiding behind the ocean,” said Arnold Levin, lead lawyer in a lawsuit against the manufacturers of Chinese drywall in federal court in New Orleans.

***

  • The Hunters decided to buy the trailer — it cost $18,000 — after their insurance company told them it would not cover their home for vandalism or theft if they moved. They are now gutting their house with their own money and hope to eventually recoup their expenses in court. “The trailer is a life raft,” said Ms. Hunter, 57.

For more, see Limited Relief for Owners of Homes With Drywall Flaws.

Bill To Protect Innocent Tenants' Credit History In Evictions Resulting From Landlords' Foreclosure Needs Schwarzenegger Sign-Off

In San Francisco, California, Beyond Chron reports:
  • Tenants evicted through no fault of their own frequently have their credit history damaged for years. In California, where hundreds of thousands of tenants are being evicted by banks because their landlords went into foreclosure, these credit impacts are particularly harsh. Fortunately, a bill by state senator Ellen Corbett (D – San Leandro) would limit this collateral damage to innocent renters.

***

  • Tenants Together has set up an online petition to urge Governor Schwarzenegger to sign SB 1149. Please sign the petition today. Tenants should not be blacklisted because of evictions arising from their landlords' failure to pay the mortgage.

For more, see Legislature Passes Bill to Protect Innocent Tenants From Having their Credit Ruined by Banks (Will Governor Sign or Veto?).

Tenants In Government-Assisted, Low Income Housing Complex In Foreclosure Found Living In Squalor As Management Faces Allegations Of $600K+ Ripoff

In Edmonton, Alberta, the Edmonton Journal reports:
  • Health inspectors found dead mice, bedbugs, mouldly walls, graffiti, blood-stained carpets and filthy hallways in low-income housing units run by the Amisk Housing Association, health records show. Inspection reports released by Alberta Health Services [...] show inspectors found the deficiencies around the same time that three directors allegedly took more than $600,000 from Amisk's publicly funded bank accounts.

***

  • Court records show that government funding agencies have alleged that Lawrence Thomas Willier, Mel H. Buffalo and Geordy Saulteaux were part of a board that managed the Amisk Housing Association and the Umisk Affordable Housing Society so poorly that health inspectors expressed concern about the state of the buildings, and banks started foreclosure proceedings. [...] Cheques and other court records show most of the money was withdrawn for "travel expenses." There is no evidence the expenses were substantiated or that any of the money was repaid.

For more, see Tenants lived in squalor, health records show (Three managers allegedly misused public funds earmarked for affordable housing).

Hundreds Fear Eviction From Now-Foreclosed Amarillo Trailer Park

In Amarillo, Texas, KFDA-TV Channel 10 reports:
  • Change of ownership could be coming again to an area trailer park already plagued with confusion. It was a month ago [] that NewsChannel 10 was the first to tell you about massive foreclosure notices going out at an area trailer park.

  • Those came after the land was foreclosed on and people living there weren't sure who to pay their bills to anymore. Well now the web site for CIII Asset Management Sales says Amarillo Estates is "available for sale." People living in the park say they're scared of being kicked off if a developer buys the land.

Source: Hundreds Facing Eviction.

Niece Gets 14-84 Months In $92K Home Equity Ripoff Of Now-Deceased, Dementia-Stricken Aunt; Scammer's Son Triggers Probe Leading To Mom's Imprisonment

In West Chester, Pennsylvania, Local Daily News reports:
  • Mary Ellen Ashton has had a problem with housing. Over the years, she has defaulted on two mortgages – one in Chester County and another in Montgomery County – and ultimately stole more thousands of dollars from an aging and senile aunt to pay rent at a Chester Springs home.

  • Her housing concerns, however, are settled now -- at least for 14 to 84 months. [...] Common Pleas Court Judge William Mahon sentenced Ashton, 57, formerly of Phoenixville, to that amount of time behind state prison bars for the scheme that defrauded her aunt, the late Margaret Voytowicz, of $92,000 and nearly cost the woman the home she had lived in for more than 50 years.

***

  • According to court records and testimony at her trial in July, the case against Ashton began in 2006, when Ashton’s son, Michael Ashton, who lives in California, learned that his great aunt, Voytowicz, was facing eviction for failure to make any payments on the $92,000 mortgage she had taken out with Chase Manhattan Bank. Voytowicz had told him that Ashton convinced her to take out the mortgage, even though she did not need it or want it. Ashton needed it, Voytowicz said, “because her son was being injected with the AIDS virus.”

***

  • Michael Ashton and attorneys hired by Voytowicz’s family were able to save her from eviction after settling the mortgage account with Chase Manhattan for $50,000 in 2008.

  • At the same time, officials at the Chester County Department of Aging hired Exton psychologist Bruce Mapes to assess Voytowicz’s mental state at the time that the mortgage had been taken out. Mapes found that although Voytowicz lived alone and appeared able to fend for herself in some ways, she was suffering from early stage dementia. [...] Voytowicz died in November 2008 at the age of 84.

For more, see Woman gets jail for stealing from elderly aunt.

Another Home Sold Out From Under Owner, Despite Continued Payments To Bank On Loan Modification Agreement

In Cape Coral, Florida, WINK News reports:
  • A woman's beloved home, sold out from under her by the bank. It's the third such case uncovered by the WINK NEWS Call for Action team. And not only did the woman lose her home, but the bank still collected payments four months after selling it!

For more, see Woman says Wells Fargo sold her dream home and didn't know it.

Foreclosure Of Predatory Loan, Subsequent Boot From Home Saves Family From Tragedy

In San Mateo County, California, The Daily Journal reports:
  • The house at 1720 Earl Ave., less than a 200 feet from where a 167-foot-long and 26-foot-wide crater is now, sits empty with a red tag on it unable to be occupied. It was the home of the Nesbitt family up to July 20 when it was foreclosed upon by the bank.

  • In what was a traumatic financial tragedy mirroring the housing collapse for many across the nation, now seems like a miracle after it, along with blocks of other homes in the Glenview neighborhood of San Bruno, were completely destroyed or substantially damaged in [last week's] devastating explosion and fire. “I was shocked, and then realized that but for the grace of God we were spared,” said Fred Nesbitt, who lived in the house for 15 years until the foreclosure. It is now owned by the bank.

***

  • Up until this year, Nesbitt had lived in the house with his wife of 41 years, Vicki, his son and his wife and three daughters, his daughter, her husband and son. He imagined that if he had not fallen victim to a questionable mortgage and lost $400,000 in equity in his home, that they would have all been sitting down to dinner when the blast shook the neighborhood and forever changed the lives of so many.

For more, see Foreclosure saves family from tragedy.

See also, Southern California Public Radio: Gas pipeline blast probe looks for link with sewer line work (Fred Nesbitt wasn’t there because he’d lost the house to foreclosure three weeks earlier. He calls himself the luckiest man in San Bruno).

Friday, September 17, 2010

Lender Threatens To Grab Five Torahs In F'closure Action Against Synagogue; "Oh, Too Bad!" Says Bank Prez When Told It Was Holiest Time Of Jewish Year

In Boynton Beach, Florida, The Palm Beach Post reports:
  • When Jews at Congregation Chabad-Lubavitch west of Boynton Beach gather Friday for the start of Yom Kippur, the holiest of Jewish holidays, they will be under a cloud of uncertainty.

  • A bank is seeking to grab the Chabad's property and assets to pay off a delinquent loan. Among those assets are the congregation's five Torahs. Threatening to seize the Torahs is "a desecration," said Howard Dubosar, a Chabad attorney. "This is a bank playing hardball." David Seleski, president of Stonegate Bank, said the bank isn't trying to attack the Chabad through its religion. "We just want to get paid," Seleski said.

***

  • Stonegate is seeking to proceed with a foreclosure of the Chabad property, despite the synagogue's Chapter 11 bankruptcy filing in June. Normally, Chapter 11 puts a halt to all litigation. But earlier this month Stonegate filed a motion with the U.S. Bankruptcy Court to allow its foreclosure lawsuit to go ahead anyway, arguing that the Chabad's bankruptcy filing was done in bad faith and was simply a bid "to stall for more time." The motion was filed on Sept. 10, which was Rosh Hashana, the Jewish New Year.

  • Phil Landau, the Chabad's bankruptcy lawyer, said it was "disrespectful" for the filing to be made on this day. "It could have been filed a few days before or a few days after," Landau said. Dubosar went even further, saying that the filing was "calculated to harm the psyche of this religious institution. This is the holiest time of the year. It's like foreclosing on a church on Christmas Eve."

  • Stonegate's Seleski said the Rosh Hashana filing date was not deliberate. But he was not bothered by charges that the filing was inappropriate. "Oh, too bad," Seleski said. "I don't think it's appropriate that they're not paying their loan back. I'm not aware of any holiday. My job is to collect as much money as I can for our shareholders."

For more, see Bank sues Boynton synagogue over delinquent loan; threat to seize Torahs spurs outrage.

Ohio AG Tags Three More Foreclosure Rescue Operators With Civil Suits Alleging Outfits Ran Illegal Upfront Fee Loan Modification & Related Rackets

From the Office of the Ohio Attorney General:
  • Ohio Attorney General Richard Cordray has filed three new lawsuits against foreclosure rescue operations for bilking Ohioans out of tens of thousands of dollars. In the lawsuits, Cordray is seeking to shut down these outfits in Ohio with full restitution to homeowners.

***

  • In Franklin County Common Pleas Court, Cordray filed suits against National Homeownership Assistance Foundation Ltd. (NHAF),(1) located in Worthington, and Stephens Investment & Financial Services dba Lifeline Financial Legal Home Solutions,(2) located in Fort Lauderdale, Fla. [...] Additionally, Cordray filed a suit in Stark County Common Pleas Court against 1st American Law Center Inc.(3) based in Oceanside, Cal.

For the Ohio AG press release, see Cordray Sues Three Foreclosure Rescue Businesses.

(1) Cordray accuses NHAF and its managing partner, Casimir S. Suwinski of Delaware, its general manager, Casimir S. Suwinski Jr. of New Albany, and its president, Arden Banks of Grove City, of charging homeowners on average $2,500 for foreclosure prevention services, such as securing loan modifications from mortgage servicers, and then not providing the service. view the lawsuit against NHAF and motion for attachment, see State of Ohio v. National Homeownership Assistance Foundation Ltd. et al.

(2) In the case against Lifeline, Cordray accuses the operation of claiming that it could “reduce your payments up to 10-50%,” or “lower your interest rate.” After charging thousands of dollars, the company failed to deliver the service. Lifeline also misled consumers by misrepresenting its legal expertise and the availability of legal services, including “retained legal experts.” To view the lawsuit against Lifeline, see State of Ohio v. Stephens Investment & Financial Services.

(3) In the filing, 1st American is accused of charging homeowners as much as $4,000 for foreclosure prevention assistance services such as negotiating loans and accepting payment for these services without delivering on its promises. To view the lawsuit against 1st American, see State of Ohio v. 1st American Law Center Inc.

BofA Accused Of Wrongfully F'closing On Property It Sold Months Earlier In All-Cash Deal; Buyer Says Lender's Subsidiary Issued Title Insurance Policy

In Galveston, Texas, The Southeast Texas Record reports:
  • Claiming its property in Galveston was wrongly foreclosed, American Furnishing Inc. has filed suit against Bank of America N.A. and BAC Home Loans Servicing LP. The plaintiff argues that Bank of America had no lien on the property in question and the defendants covertly planned the foreclosure, according to the original complaint filed Aug. 31 in Galveston County District Court.

  • American Furnishing acquired the lot in the Pointe West Subdivision on Galveston's West End from Bank of America in April. During the transaction, Bank of America instructed Landsafe Title of Texas, Inc., its indirect subsidiary, to issue the plaintiff its owner's title policy.(1)

  • The suit claims that BAC Home Loans Servicing prepared the property for foreclosure in favor of Bank of America during the conveying process. The defendants then had one of its employees, Steve Leva, conduct a foreclosure sale on or around June 1 without any notice to the plaintiff, court papers add. Leva is a co-defendant in the case.

  • American Furnishing, which learned about the alleged events last month, insists it paid cash for the property and was free and clear of mortgage. "To make matters worse, defendant Bank of America in August 2010 trespassed upon the property, publicly advertising the property as its own property, and offering the property for a bargain sale," the suit says.

Source: Furniture company claims bank wrongly foreclosed.

Go here for links to other reported Bank of America foreclosure screw-ups.

(1) Owning or otherwise exercising dominion and control over the title insurance agent may be a slick way for lenders and loan servicers to unload recently foreclosed properties with potentially crappy titles resulting from irregularities in the foreclosure process (ie. lack of standing to foreclose, defective/fraudulent assignments, affidavits, etc.).

1st Time Home Buyer Faces Loss Of $8K Federal Tax Credit As Town Drags Its Feet On Sewer Line Hook-Up

In Middle Township, New Jersey, The Press of Atlantic City reports:
  • Anthony Soto expected that owning his first home would be an exciting milestone. Instead, the last few months have been full of unexpected delays and he faces the potential loss of an $8,000 tax credit because his new home has yet to be hooked up to a sewer line that the township promised to complete in time for the credit.

***

  • [I]n order to move in, Soto and his family must wait for their property to be hooked up to a not-yet-completed operating sewer line. Soto’s patience is wearing thin. The $8,000 first-time home buyer’s tax credit expires at the end of the month, and he doesn’t believe the township’s sewer project will be completed in time. “I’m going to end up losing (the tax credit) because this isn’t done yet,” Soto said. [...] The deadline to take advantage of the tax credit was moved to Sept. 30 but the project doesn’t look like it will be finished in time, according to [real estate agent Richard] Parker.

For more, see Family can't move into home, may lose tax credit due to Middle Township sewer delay.

Florida Appeals Court Revisits Earlier Ruling Dealing With Two Lenders Simultaneously Foreclosing The Same Mortgage In Separate Legal Actions

A Florida appellate court recently re-addressed a one-paragraph ruling originally issued in June that dealt with two mortgage lenders who were foreclosing on the exact same mortgage in two seperate foreclosure actions. The re-issued ruling doesn't change the ultimate result in the case, but merely adds a brief statement of the procedural history in the case that led up to the defendant/homeowner filing an appeal. The re-issued ruling also drops language that was included in the earlier ruling about the trial judge abusing his discretion in allowing one the foreclosure actions to continue, despite the existence of the second action.

An excerpt from the reissued ruling:
  • The unique circumstances surrounding this case involve a rather confusing situation caused by two banks—the appellee, HSBC, and American Home Mortgage Servicing, Inc. ("American Home Mortgage")—because they were simultaneously attempting to foreclose the same mortgage.

***

  • Based on the unique circumstances set forth above, we conclude that the order under review must be reversed, and the cause remanded for further proceedings, with directions to allow the defendants to file an answer and affirmative defenses and to require HSBC to respond to the defendants' discovery requests. The record clearly demonstrates that the defendants' failure to file a timely answer and affirmative defenses in the action filed by HSBC was due to the confusion caused by American Home Mortgage and HSBC when they were simultaneously attempting to foreclose on the same exact mortgage in two different divisions of the circuit court.

For the re-issued ruling, see Ruscalleda v. HSBC Bank USA, Case No. 3D09-997 (Fla. 3rd DCA, September 15, 2010.).

Thursday, September 16, 2010

Federal Criminal Prosecution Of Major Maryland Sale Leasback Foreclosure Rescue Scam Concludes With Sentencing Of Final Defendant To 38 Months

From the Office of the U.S. Attorney (Greenbelt, Maryland):
  • U.S. District Judge Roger W. Titus sentenced Rolando Alonzo Cousins, a/k/a “Junior,” age 32, of Bowie, Maryland, [] to 38 months in prison, followed by five years of supervised release, for conspiracy to commit mail fraud and wire fraud in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. Judge Titus also ordered that Cousins pay restitution of $471,702.25. With Cousins’ sentencing all 11 defendants in the Metropolitan Money Store case have now been convicted and sentenced.

For the U.S. Attorney press release, see Senior Loan Officer With Metropolitan Money Store Sentenced To Over 3 Years In Prison In Mortgage Fraud Scheme (Eleventh and Final Defendant Sentenced in the Metropolitan Money Store Case).

(1) According to Cousins’ plea agreement, he was the senior loan officer with the Metropolitan Money Store, in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Cousins also owned and operated Prosper Investments LLC. In 2005, Joy Jackson and Jennifer McCall incorporated Metropolitan Money Store. Also at that time, Jackson, Jennifer McCall, Jackson’s husband, Kurt Fordham, and McCall’s husband, Clifford McCall and others incorporated Fordham & Fordham Investment Group, Ltd. (F&F) and Burroughs & Smythe Financial Services, Inc. (B&S), based in Lanham and Greenbelt, Maryland, to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.

Cousins admitted that from September 2004 through June 2007, he, Jackson, McCall and others, operating through several companies, including the Metropolitan Money Store, fraudulently promised to help homeowners avoid foreclosure, keep their homes and repair their damaged credit, by directing the homeowners to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a one year period, during which time the defendants would help the homeowners obtain more favorable mortgages, improve their credit rating and eventually return title to their homes to them. Cousins, Jackson, McCall and others told the homeowners that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit.

Federal Judge Again Boots Baltimore "Reverse Redlining" Suit Against Alleged Ghetto Loans Peddler; Extends Invitation To City For A 3rd Try

In Baltimore, Maryland, The Baltimore Sun reports:
  • A complaint filed by the city alleging that Wells Fargo Bank is liable for lost property tax revenue because some houses that went into default were in poor condition was denied by a U.S. District Court judge Tuesday.

  • Judge J. Frederick Motz dismissed the city's complaint, the second against the bank, alleging that vacant houses fell into disrepair as a result of Wells Fargo's steering residents toward more expensive subprime loans, causing them to default. However, he permitted the city to file a third amended complaint by the end of next month.

  • Motz's opinion said the city should pursue the third complaint "if it can prove property-specific injuries inflicted upon it at properties that would not have been vacant but for the allegedly improper loans made by Wells Fargo."(1)

For more, see Judge denies city complaint tying Wells Fargo to blight (City says dishonest loans caused unnecessary foreclosures, loss of tax revenue) (if link expires, TRY HERE).

Go here for prior posts on the earlier "ghetto loans" allegations made against Wells Fargo.

(1) In the latest complaint, the city's attorneys reportedly focused on the alleged damages caused by more than 250 properties identified as blighted houses because of unnecessary foreclosures resulting from dishonest loans. Vermin, repeated visits by police and firefighters, and sometimes up to a half-dozen visits by housing code inspectors per year are recorded for most houses listed, the story states. The city's complaint reportedly also included declarations from 11 homeowners who live next to Wells Fargo foreclosure properties, contending that the vacant houses have led to additional problems, such as fires set by squatters, pit bulls running wild in yards and one case of a cockroach from a vacant house becoming lodged in a child's ear.

National Effort Partnering State, Local Governments & Nonprofit Groups Target Upfront Fee Loan Modification Scams

Public News Service reports:
  • The fight against loan modification scammers continues [...], and now homeowners have a new weapon. It's called the Loan Modification Scam Prevention Network, and it's part of a national effort partnering with state and local governments and nonprofit organizations. The goals are to identify who the scammers are and to warn and educate potential victims.

***

  • If you feel that you have been scammed by a company that promises loan modifications and charges you a fee, you can visit www.preventloanscams.org to fill out a form to be logged into the national database. Information about what to watch out for and how to prevent being scammed is also available.

For more, see New Weapon in Fight Against Loan Modification Scammers.

Wednesday, September 15, 2010

Glendale Cops Begin Dipping Into $150K Grant Money As Battle Escalates Against Foreclosure Scams, Other Real Estate Rackets

In Glendale, California, the Glendale News Press reports:
  • Glendale police detectives have begun using a $150,000 grant to investigate real estate fraud as more scam artists take advantage of homeowners looking to refinance their mortgages, officials said. The funding has been used to look into tips that may result in lengthy real estate fraud investigations, Lt. Susan Hayn said. Details about the cases were not disclosed because they are under investigation.

***

  • Investigating real estate fraud can be time consuming.(1) Detectives must often work long hours to track suspects and information, Hayn said. The unit's large caseload was one critical component for the large grant amount, said county Deputy Dist. Atty. Dan Baker of the Real Estate Fraud Section. So far this year, Baker said his section is working on 50 cases with about seven prosecutors. The cases logged 134 defendants, which he said is common for real estate fraud.

  • Because real estate fraud cases are complicated, he said prosecutors rely heavily on a police department's investigative skills and ability to organize evidence clearly. The number of real estate fraud cases throughout the county is overwhelming, Baker said.

For more, see Police fight real estate fraud (Grant money is helping to pay for hours of overtime investigating mortgage, foreclosure scams).

(1) Reportedly, one particular real estate fraud case was investigated for three years where a Glendale homeowner contacted police after his home was sold by scam artists without his knowledge. But an investigation into the home sale began to unravel a more complicated scheme. Detectives discovered that a pair of scam artists had represented themselves as real estate facilitators and recruited fraudulent mortgage brokers and notaries to submit fake loan applications and appraisals to lenders for six properties, police said. The pair was eventually convicted of the scheme and sentenced to more than 25 years in prison, the story states.

California Regulator To Step Up Education, Enforcement Efforts In Response To Alarming Escalation Of Short Sale Fraud

The Bakersfield Californian reports:
  • The California Department of Real Estate says it has noticed an alarming escalation of short sale fraud and will step up education and enforcement efforts to combat it.

***

  • "It's just starting to take shape," said Department of Real Estate spokesman Tom Pool. "I kind of equate it with the loan modification fraud, where we started out with just a few complaints and saw a swelling of it over time. "The fraud has shifted over to the short sales."

***

  • A variety of deals have come up since then that cross legal or ethical lines, Pool said. That's why this week, California Real Estate Commissioner Jeff Davi sent letters to lenders warning them to be on guard.

  • For one thing, a growing number of short sale negotiators are demanding upfront payments to work out an agreement with a lender on a borrower's behalf, then failing to do anything in return for that fee. Upfront payments are illegal without prior approval from the state, which mandates that money is held in escrow until after services are rendered and there's a full accounting of how the money was spent. Some short sale negotiators also are compelling buyers to pay their fee and failing to disclose that payment to lenders.

  • A more costly form of fraud is short sale flipping. That's when a lender is told of a short sale purchase offer that is described as reflective of a property's fair market value, when in fact the offer is much too low. The lender accepts the offer, believing it's the most it can get, and after the deal closes the house is immediately resold for its true, higher value. The perpetrators of the fraud, who could be agents, brokers, appraisers or straw buyers, then pocket the difference between the two sale prices.

***

  • The California Mortgage Bankers Association says it has definitely seen an increase in short sale fraud, and appreciates Davi's effort to call attention to the problem. "It affects everyone," said spokesman Dustin Hobbs. "It disrupts the market and takes business away from honest brokers and agents, because the majority of the perpetrators in these cases are unlicensed people who really shouldn't be operating in the first place."

For more, see Real Estate Department warns of rise in short sale fraud.

California Appeals Court Allows Homeowner's Class Action Suit Alleging Loan Modification Misconduct Against Attorney To Continue

In Southern California, Metropolitan News Enterprise reports:
  • The Fourth District Court of Appeal has ruled that a former client can proceed with a suit alleging that Irvine attorney Sean Rutledge, who resigned from the State Bar in November amid accusations of loan modification misconduct, engaged in capping and charged illegal fees.

  • Reasoning that Cu Phan established a probability of prevailing on his claims, Div. Three on Friday in an unpublished opinion affirmed an order denying Rutledge’s motion to strike Phan’s complaint as a strategic lawsuit against public participation.

  • Phan filed a class action in September 2009 claiming that Rutledge and his firm, United Law Group Inc., violated state law by using telemarketers to make cold calls to individuals who were in default or faced foreclosure on home loans. Under state law, Phan contended, such conduct constitutescapping,” a practice sometimes referred to in other contexts as “ambulance chasing.”

  • He also alleged that Rutledge and the firm required clients to pay purportedly “non-refundable” advance fees. Rutledge, who was admitted to the State Bar in 2008, tendered his resignation with disciplinary charges pending,(1) and his firm filed for bankruptcy protection following Phan’s suit. He was ordered enrolled as an inactive member earlier that month under Business and Professions Code Sec. 6007 for an alleged pattern of client neglect involving failing to perform, failing to communicate, and/or failing to refund unearned fees in 14 matters.
For more, see C.A.: Suit Accusing Attorney of Capping Can Proceed.

For the court's ruling, see Phan v. Rutledge, No. G042983 (Cal. App. 4th District, Div. 3, September 10, 2010).

(1) Reportedly, State Bar Court Judge Richard Honn wrote that Rutledge “promised to help troubled homeowners—many of whom were in arrears or on the brink of foreclosure—modify their home loans and maintain financial stability,” but instead “took their money and time and offered little or nothing in return,” leaving them in a worse position than when they sought his help.

Tuesday, September 14, 2010

Loan Modification Scammer Wastes No Time With Guilty Plea As Indictment Remains Pending Against Two Others

From the Office of the Nevada Attorney General:
  • Doninador Palalay a.k.a. Dominador Palalay has pled guilty to Theft-Obtaining Money in Excess of $2500 by Material Misrepresentation, a category B felony, for his role in operating a foreclosure rescue scam in Las Vegas during 2008 and 2009 under the business name of PDM Financial Group, Inc.

***

  • On August 30, 2010, Palalay, along with co-defendants Marie Tejada Medina and Benjamin Aquino Moraleda III, were indicted by a Grand Jury for their roles in operating a foreclosure rescue scheme.(1) The Indictment alleges that Palalay and his co-defendants operated a document preparation and loan modification business that charged one percent of the victims’ loan balance(s), or between $2,600.00 to $3,700.00, for loan modification and document preparation services. They also misled customers by falsely claiming their services would prevent foreclosures on their homes and/or they would obtain loan modifications. The State alleges that the services were not performed.

  • The Indictment further alleges that Palalay, Medina and Moraleda defrauded consumers by having them sign false Deeds of Trust that gave the Defendants liens on the victims’ homes based on false promissory notes that deceptively claimed loans had been made on the properties. In fact, the loans had not been made. The Indictment alleges this was done to cloud the title to the home and prevent the legitimate lenders from foreclosing on the victims’ properties.

For the Nevada AG press release, see Guilty Plea Announced In Foreclosure Rescue Scam.

(1) Reportedly, the Indictment remains pending against Medina and Moraleda for their alleged roles in the foreclosure rescue scheme; Moraleda is currently a fugitive from justice. Inasmuch as it took Palalay less than two weeks from the time of his arrest to plea guilty, one can safely proclaim him the clear winner of the "race to the prosecutor's office." Expect that he will now “belly up” and tell what he knows about his "ex-colleagues" in order to snag the best deal when sentenced. See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observation, made in the context of drug conspiracy cases, involving the so-called "race to the courthouse/prosecutor's office" but, in my view, is equally suited to other types of major, multi-defendant felony cases:

  • In practical terms, drug conspiracy cases have become a race to the courthouse. 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.

(A similar approach may be worth some consideration in going after and bringing down the "phony-document-manufacturing" foreclosure mills.)

Couple Dodges The Boot After Buying Home On A Land Contract, Then Discovering Undisclosed Title Flaw After Making Significant Property Improvements

In Racine, Wisconsin, The Journal Times reports:
  • A family that was threatened with eviction after investing thousands to improve a home will apparently be allowed to stay. Racine County Sheriff Robert Carlson said there are no plans to evict Noelia and Joaquin Raygoza from the home at 1404 Buchanan St. The eviction had been scheduled for Thursday.

***

  • As reported in The Journal Times, the Raygozas signed papers in January to buy the house on a land contract and spent thousands to renovate a building that neighbors had watched deteriorate over the years. Although everyone agreed the family had fulfilled all of its obligations, a mix-up in a previous foreclosure threatened to void their ownership and force the Sheriff's Department to evict them.

  • Last month Carlson postponed the eviction proceedings to allow the Raygozas, the various financial institutions and the sellers to work out another solution.

Source: Threat of eviction lifted after mix-up.

For earlier post on this story, see Another Novice Homebuyer Gets Screwed Over In Land Contract Deal; Sinks $15K Into Property Rehab, Now Faces The Boot Over Undisclosed Title Claim.

Lender's Improper Calculation Of Interest Sinks Foreclosure Action, Leaves It Holding A Criminally Usurious Mortgage Loan Subject To Cancellation

A recent court ruling by a Florida appeals court shows how a private mortgage lender, by engaging in certain practices, can find itself unwittingly holding the bag on what a court finds to be a criminally usurious loan that is unenforceable and subject to cancellation. A summary of the facts, adapted from the court's opinion, follow:
  • One, Velletri, obtained a loan with a face amount of $250,000 from Providence Mortgage Corporation, which was a mortgage servicing company acting on behalf of Dixon, a private lender. The loan proceeds were to be used to purchase and renovate a commercial property in St. Petersburg.

  • The loan was an "interest only" loan, and the loan documents indicated that Velletri would make twenty-three "interest only" payments of $3150 followed by a final balloon payment of $253,150. The stated interest rate of the loan was 15 percent.

  • According to the closing documents, Providence withheld $12,500 from the loan proceeds as an "origination fee." It also withheld $513.70 as "interest."

  • Further, to ensure that the proposed renovations were actually performed, Providence also withheld an additional $65,000 at closing as "construction loan funds," and it placed those funds into an escrow account from which Velletri could apply for reimbursement as the renovations progressed.

  • However, despite the withholding of sums totaling $78,013.70 from the loan proceeds at closing, the $3150 "interest only" payment was calculated based on a 15 percent interest rate on the full $250,000 face amount of the loan.

  • Providence assigned the note and mortgage to Dixon at closing.

  • Ultimately, Velletri defaulted on the loan and Dixon filed his foreclosure action against the property.

  • Velletri defended against the foreclosure action by raising the defense of usury. Velletri contended that the loan was criminally usurious from its inception and that therefore the note and mortgage were unenforceable.

  • Dixon argued that the loan was not usurious because he had not received the funds withheld at closing and because he had no usurious intent.

  • The Florida appeals court ultimately determined that, as a result of the lender charging interest on the entire face amount of the loan, without any abatement to reflect the withheld loan proceeds, the recalculated interest pushed the actual rate charged to over 25%, which under Florida law, constitutes criminally usurious interest, the remedy for which is cancellation of the debt itself and a return of any loan repayments made by the borrower.(1)

Grissim H. Walker, Jr., of Consumer Law Center, P.A., Bradenton, represented the borrower.

See Velletri v. Dixon, Case No. 2D08-6251 (Fla. App. 2nd Dist. September 10, 2010) for the ruling, along with the actual number-crunching involved in the determination that the interest charged on this loan exceeded the maximum amount (25%) allowed on this type of loan under Florida law.(2)

(1) The court's identification of the applicable Florida law in this case follow (bold text is my emphasis, not in the original text; my [alteration] added; cited statutes are found in Chapter 687, Florida Statutes:

  • Sections 687.03, 687.04, and 687.071 provide statutory causes of action which allow a borrower to seek affirmative relief against a lender who has made a usurious loan.

  • Civil usury involves loans of $500,000 or less with an interest rate greater than 18 percent and less than 25 percent. See § 687.03(1).

  • Criminal usury involves any loan amount with an interest rate greater than 25 percent. See § 687.071(2).

  • The penalties for civil usury include forfeiture of double the interest actually charged and collected. See § 687.04. The civil penalty for criminal usury is significantly greater: forfeiture of the right to collect the debt at all. See § 687.071(7).

  • Whether a transaction is either civilly or criminally usurious is determined at the inception of the loan. See Home Credit Co. v. Brown, 148 So. 2d 257, 259 (Fla. 1962); Oregrund Ltd. P'ship v. Sheive, 873 So. 2d 451, 458-59 (Fla. 5th DCA 2004).

  • If a borrower is required to pay a bonus or other consideration at the inception of the loan as an inducement to the lender to make the loan, such an inducement may be considered interest and can render an otherwise proper loan usurious. See Cooper v. Rothman, 57 So. 985, 988 (Fla. 1912); Jersey Palm-Gross, Inc. v. Paper, 639 So. 2d 664, 667 (Fla. 4th DCA 1994), aff'd, 658 So. 2d 531 (Fla. 1995).

  • Similarly, if a lender retains a substantial portion of the loan proceeds without allowing a corresponding abatement of interest on the amount retained, that retention effectively increases the interest charged on the amounts actually advanced to the borrower, which can render an otherwise proper loan usurious. See Mindlin v. Davis, 74 So. 2d 789, 793 (Fla. 1954).

  • Section 687.03(3) sets forth the methodology to be used to determine whether a loan is usurious when some of the loan proceeds have been retained by the lender at closing. The Florida Supreme Court applied this statutory methodology in St. Petersburg Bank & Trust Co. v. Hamm, 414 So. 2d 1071 (Fla. 1982), and specifically rejected any alternative means of calculating the effective interest rate of a loan.

***

  • [L]oan proceeds retained by the lender are considered additional interest, see Brown v. Home Credit Co., 137 So. 2d 887, 892 (Fla. 2d DCA 1962), and do not reduce the "stated amount of the loan" identified in section 687.03(3), see Hamm, 414 So. 2d at 1073.

***

  • Having determined that the note was criminally usurious at its inception, we must next consider what remedy is proper. Generally, a debt that is criminally usurious at its inception is not enforceable. See § 687.071(7) ("No extension of credit made in violation of any of the provisions of this section shall be an enforceable debt in the courts of this state."); Brown, 137 So. 2d at 892 ("[I]f the interest charged exceeds twenty-five percent per annum the lender shall forfeit the entire indebtedness, both principal and interest.").

  • However, Velletri claims she is entitled to more than that. She contends that she should be entitled to both cancellation of the note under section 687.071(7) and an award of double the interest paid under section 687.04—essentially a combination of the remedies for both civil and criminal usury. But such a remedy would be improper.

  • When a debt is criminally usurious, the remedy is cancellation of the debt itself and a return of any amounts paid. There is no authority for cumulating the penalties for both civil and criminal usury, and, in fact, the authority is to the contrary. See Rosenbloom v. Hart, 95 So. 2d 18, 19-20 (Fla. 1957) (noting that sections 687.04 and 687.071 recognize and define different degrees of usury and provide distinct and separate penalties which are not cumulative); Brown, 137 So. 2d at 893 (same); Gordon v. W. Fla. Enters. of Pensacola, Inc., 177 So. 2d 859, 862 (Fla. 1st DCA 1965) (same); Coral Gables First Nat'l Bank v. Constructors of Fla., Inc., 119 So. 2d 741, 748-49 (Fla. 3d DCA 1960) (same).

  • Contrary to Velletri's assertions, no court has held that the remedies provided in sections 687.04 and 687.071(7) are cumulative of each other. Therefore, we reject Velletri's suggestion that she is entitled to both cancellation of the debt and payment of double the interest she paid. Instead, on remand, the trial court should enter a judgment in favor of Velletri on the foreclosure action and award her a judgment in the amount the evidence establishes that she actually paid Dixon.

(2) The private lender in this case found itself holding an uncollectible, unenforceable loan, despite the fact that the stated rate of interest on the promissory note itself was otherwise within the maximun limits, as a result of a judicial recharacterization of the withheld loan proceeds as additional interest. Similarly, a foreclosure rescue operator (or anyone else, for that matter) can find itself in violation of the Florida usury statute as a result of a judicial recharacterization when peddling a sale leaseback arrangement that is combined with a repurchase right/option if such a transaction is ultimately recharacterized by a court as a secured loan/equitable mortgage, and where the "profit' on the deal (which would be recharacterized as "interest") violates the above-referenced Florida law. See, for example, Oregrund Ltd. P'ship v. Sheive, 873 So. 2d 451, 458-59 (Fla. 5th DCA 2004), which involved a usury claim in the context of a sale-buyback deal in a civil case. See also Equitable Mortgage & Usury In Sale Buyback Deals In Florida. (Note that, to the extent the sale leaseback transaction falls within the purview of Florida’s Foreclosure Rescue Fraud Prevention Act, F.S. 501.1377(6) thereof creates a rebuttable presumption that the deal is a loan transaction and the deed conveyance from the homeowner to the purchaser (ie. the foreclosure rescue operator, straw buyer, etc.) is an equitable mortgage under F.S. 697.01.)

Monday, September 13, 2010

Federal Court To Consider Consolidation Of Homeowner HAMP Suits Against BofA Alleging Illegal Jerk-Arounds As Similar Claims Continue To Proliferate

USA Today recently ran a story on the proliferation of lawsuits being brought by financially-strapped homeowners against loan servicers for jerking them around when seeking affordable modifications of their house payments, and points to a recent class action suit brought by Lake Stevens, Washington couple Anthony and April Soper, among others, as an example of these types of suits.
  • Whether the Lake Stevens, Wash., couple keep their home may hinge on the outcome of a legal strategy that aims to join struggling homeowners with similar experiences in the HAMP program in a class-action lawsuit against the nation's largest bank. On Sept. 30 in Nashville, a federal court hearing is scheduled to consider consolidating the Sopers' case with more than a dozen others against Bank of America.

  • Similar lawsuits, also seeking class-action status, are pending against other major servicers such as JPMorgan Chase and Wells Fargo. Taken together, the cases threaten to amplify a growing public frustration with mortgage servicers' treatment of HAMP borrowers and HAMP's modest results.

***

  • Most of the lawsuits allege that the three- or four-month trial payment plans are contracts, and that Bank of America and other servicers broke them by not giving permanent modifications to homeowners who made their trial payments on time and provided the necessary documentation.

  • Servicers have asked courts to dismiss some of the cases, saying the trial plans are not contracts. Bank of America, which says it plans to seek dismissal of the Soper case, argues in a court filing in a similar case that it must consider borrowers for a HAMP modification, but that it has discretion in granting permanent modifications.

***

  • "Borrowers have said we should be able to enforce the contract between Treasury and mortgage servicers, and many courts have rejected that. Our cases are the first filed that touch on a contract between servicers and borrowers," says Kevin Costello, a lawyer with Roddy Klein & Ryan in Boston, which represents homeowners in cases against Bank of America, JPMorgan Chase and Wells Fargo.

  • "This litigation is spreading all across the country. People have been relying on a promise all along, and then they get a denial. Then they find themselves in that much worse of a hole," he says.

***

  • Meanwhile, the number of homeowners claiming improper denials of HAMP modifications is climbing. One is Peter Salinas, 52, who struggled to pay his mortgage after the economy collapsed and his wife developed cancer. He appealed to his lender for help.

  • Salinas says he felt elated last year when he received a HAMP trial modification slashing $500 off his monthly payments. But later, he was told he made too much money to qualify for permanently reduced payments, he says. Wells Fargo threatened foreclosure if he didn't pay $9,000, the difference between his original mortgage and what he paid during the trial.

  • His servicer, Wells Fargo, declined to comment on his situation. Salinas is working with Gulfcoast Legal Services, a not-for-profit [Central Florida] civil legal aid office, that says it is preparing a lawsuit against the lender. "I was convinced I was doing everything right," says Salinas, a reporter for an automotive trade publication who lives near Bradenton, Fla. "I wasn't trying to walk away from this mortgage. It's just infuriating."

For the story, see Home mortgage modification snags spark lawsuits.

Suspicious Shorts Sales Continue To Attract Spotlight

The New York Times reports:
  • STRUGGLING homeowners have found some refuge in short sales, in which lenders allow borrowers to escape foreclosure by selling a home for less than what is owed on the mortgage. Government programs offering incentives to both parties will push the number of short sales to 400,000 this year from 100,000 in 2008, according to CoreLogic, a financial consulting firm.

  • But the jump in short sales has also given rise to a new form of fraud — which, as a recent study by CoreLogic suggests, could undermine the burgeoning practice.(1)

For more, see A Downside of Short Sales.

(1) The study can be downloaded by visiting www.corelogic.com/shortsalestudy.

NC Real Estate Operator Cops Guilty Plea To Foreclosure Bid Rigging Claims; Conduct Suppressed Sale Prices, Screwing Lienholders, Homeowners: Feds

From the U.S. Department of Justice:
  • A Raleigh, N.C., real estate speculator pleaded guilty to conspiring to rig bids for public real estate foreclosure auctions held in multiple counties in eastern North Carolina, the Department of Justice announced [].

  • Christopher J. Deans pleaded guilty [] in U.S. District Court in Greenville, N.C., for participating in a conspiracy to rig bids during the real estate foreclosure auction process in eastern North Carolina from at least as early as April 2003 until at least April 2005.

***

  • According to the charge, which was filed on July 29, 2010, Deans, an owner of Raleigh-based real estate investment companies, and co-conspirators agreed not to bid against each other during public real estate foreclosure auctions in eastern North Carolina. As part of the conspiracy, Deans and co-conspirators paid one another not to bid on foreclosed properties and received economic benefits from the rental and sale of real estate purchased through the rigged foreclosure auction process.

  • The conspiracy resulted in the suppression of competitive bidding on foreclosed properties which caused foreclosing lienholders and certain homeowners to receive a lower price for properties sold through foreclosure actions, the department said.

For the DOJ press release, see North Carolina Real Estate Speculator Pleads Guilty to Bid Rigging in Real Estate Foreclosure Auctions.

Go here for other posts & links on bid rigging at foreclosure and tax sale auctions.

(1) According to DOJ, the charge against Deans is the first to arise in an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in the Eastern District of North Carolina. DOJ states that the investigation is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI, and urges anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.

Sunday, September 12, 2010

Montana Man Gets 10 Years For Attempted Vacant Home Hijacking; R/E Agent Blows Whistle After Noticing Missing "For Sale" Sign From One Of His Listings

In Polson, Montana, the Great Falls Tribune reports:

  • A drifter convicted of trying to assume ownership of a Polson-area house in foreclosure has been sentenced to 10 years in prison. KERR-AM reports that District Judge Kim Christopher sentenced 53-year-old Brent Arthur Wilson to 20 years in prison with 10 suspended on Thursday.

  • Wilson was convicted of theft, deceptive practices, tampering with public records and a misdemeanor count of criminal mischief. The investigation into Wilson began when a real estate agent noticed “for sale” signs had been removed from a $380,000 house he was selling on behalf of a lender in August 2009. The locks had also been changed.

  • Wilson also filed strange paperwork with the Lake County clerk and recorder’s office claiming he had purchased the house from Yahweh.(1)

Source: Drifter gets 10 years for trying to steal houses.

(1) For earlier stories on Wilson, see:

WPB Man Convicted In Earlier Home Hijacking Incident Bagged Again; Accused Of Filing Four Adverse Possession Claims On Homes Soon After Jail Release

In West Palm Beach, Florida, The Palm Beach Post reports:
  • A year in jail wasn't enough to deter a 52-year-old West Palm Beach man bent on renting out homes he doesn't own. Claiming he is backed by an obscure Florida law pertaining to abandoned and vacant property, Carl Heflin again has attempted to take homes via adverse possession and rent them to unwitting tenants, according to Palm Beach County sheriff's investigators.

  • He was arrested the first time in relation to the practice in 2009. Following a July release from the Palm Beach County Jail,(1) Heflin filed adverse possession papers on four homes, renting one on Tallahassee Drive and accepting $2,500 from a tenant to begin a three-year lease.

  • Heflin was arrested again Tuesday afternoon on multiple charges of, among other things, burglary, organized scheme to defraud and contributing to the delinquency of a minor. On Wednesday, Palm Beach County Circuit Judge Krista Marx ordered Heflin held in lieu of $100,000 bail.

  • Heflin's 17-year-old daughter, Carli, also was charged with burglary because she allegedly broke windows to get into empty homes so her father could change the locks, the sheriff's report says.

For more, see West Palm Beach man arrested again for allegedly trying to rent out homes he doesn't own.

(1) Reportedly, Heflin's original charges related to adverse possession were pleaded down to misdemeanor trespassing because prosecutors said he had already spent 13 months in jail awaiting trial and the victims or owners of the properties were either unavailable or unwilling to appear for trial.

CT Probate Judge With Dubious History Faces Judicial Misconduct Charges In Suspected Land Grab Involving Now-Deceased 92 Year-Old's $1.5M+ Farm

In Southington, Connecticut, the Hartford Courant reports:
  • Rare is the chutzpa so shamefully displayed by Southington Probate Court Judge Bryan F. Meccariello. The judge who presided over a court process that expunged Sam Manzo, a humble farmhand, from Josephine Smoron's will, now wants to be the hero.(1)
  • Meccariello told the Council on Probate Judicial Conduct this week that it was but a small mistake that he ignored Smoron's will in May 2009 when he gave the OK to the creation of two trusts that allowed the Smoron Farm to be acquired by a local developer.
  • The judge said he was merely trying to bring Smoron home before she died in June 2009 at age 92. At the time, Smoron lay dying in a nursing home. Her wish was to give the family farm, worth at least $1.5 million, to Manzo, her long-time caretaker. Meccariello hadn't seen her in more than a year. The man he appointed as her conservator — local lawyer John Nugent — never bothered to meet her. ("I don't speak dementia,'' Nugent artfully explained to the council this week.)
***
  • Manzo, who mortgaged (and lost to foreclosure) his home to help pay for some of Josephine Smoron's bills and who was removed by Meccariello as her conservator in 2008, could only shake his head.
***
  • Meccariello is the man who allowed the entire mess to unfold, who never would have been caught were it not for Manzo's complaint about a railroad job unfolding in the Southington Probate Court. This is the judge who, as Smoron's sad fate unfolded before his court over her last year, never bothered to find out how she was doing in the hospital or nursing home.(2)
For more, see Southington Probate Court Judge Bryan Meccariello Faces Judicial Misconduct Charges (if link expires, TRY HERE).
See also:
(1) Stated another way, it sounds like Judge Meccariello may have effectively single-handedly disinheritred Mr. Manzo from Josephine Smoron's will.
(2) Reportedly, the same probate council admonished Meccariello in 2007 for a habit of mixing his roles as judge, land investor and lawyer for local developers because it had an appearance of impropriety. This time, Meccariello promised the council that there was no "conspiracy to divert or funnel land to a local developer," the story states. He reportedly said: "There is nothing sinister. There is nothing underhanded that went on. This was a mistake. It is being corrected."