WV High Court Disbars Attorney For $90K Ripoff Of Client Cash; Follows Suit After Lawyer Received Similar Boot From Maryland, Virginia, D.C Bars

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

• The state Supreme Court has followed suit with Maryland's high court to disbar an attorney for misappropriating over $90,000 in client funds. The Court on Sept. 16 voted to annul the license of Cumberland, Md. attorney Nathan H. Wasser. The decision came eight days after the Court heard arguments why they should impose a lesser punishment than the Maryland Court of Appeals for Wasser's misconduct.

• The Court of Appeals on Feb. 3, 2009, ordered Wasser's license annulled. The annulment came three months after his office manager, Sherry Yates, resigned, and filed a complaint with Maryland's Attorney Grievance Commission that Wasser was using client funds for personal use.(1)

***

• Despite reciprocal annulments in the District of Columbia and Virginia, where he was admitted to the Bar in 1969, and 1980, respectively, Wasser hoped the West Virginia Supreme Court would show him some mercy. [...] However, the Court found his argument unpersuasive. In an unsigned, unanimous opinion the Court said Wasser's repeated conversion of funds over a three-year period is grounds enough to disbar him.(2)

For the story, see WVSCA revokes Md. attorney's license.

For the court's ruling, see Lawyers Disciplinary Board v. Wasser.

(1) Reportedly, in the Maryland case, Wasser acknowledged his misconduct, expressed remorse for it, and forked over a check for $183,633.99 - the balance in his escrow account - to the Commission which was later forwarded to The Client Protection Fund of the Bar of Maryland.

(2) The West Virginia State Bar's Lawyers Fund for Client Protection was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys.

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

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

Florida Court System Begins Banning Public From Observing Foreclosure Proceedings? "You Don't Argue With Someone Carrying A Gun," Says One Attorney

Buried in a recent story in The Tampa Tribune on the three-ring circus that is the foreclosure process in Florida is this excerpt regarding public access to the legal proceedings taking place when booting delinquent homeowners from their homes:

• Another concern of defense attorneys: a closed-door policy for something that should be open to the public.

• "You get off the elevator now in Jacksonville and the doors leading to the foreclosure hearings are locked" [foreclosure defense attorney April] Charney said. "A bailiff won't let you in until your scheduled hearing is to begin."

• Randall Reder, a Tampa foreclosure defense attorney, said he has repeatedly seen homeowners and attorneys turned away from hearings. He said he now waits in the hallway until his case hearing because bailiffs won't let him in the hearing room to observe. "The laws are very clear that all judicial proceedings are open to the public," Reder said. "But my automatic reaction is, 'you don't argue with someone carrying a gun.'"

***

• The courts say it's not a matter of access but of space. "The rooms are small and we have emotional issues here," [Hillsborough County court administrator Mike] Bridenback said. "We only have one bailiff, and there is a need for security."

For the story, see Area judges handling hundreds of foreclosures a day.

Los Angeles Feds: Section 1031 Exchange Accomodator Illegally Dipped Into Investor Escrow Accounts, Pocketing $23M

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

• This week's indictment of Los Angeles real estate mogul Ezri Namvar on criminal fraud charges was welcome news to local investors who say the Iranian immigrant preyed on their shared ethnic ties and bilked them out of hundreds of millions of dollars.

• Namvar has agreed to surrender to federal authorities Monday to face charges that he stole $23 million from clients of his company, Namco Financial Exchange Corp., which safeguarded proceeds from commercial real estate transactions, said Thom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles. A federal grand jury indicted Namvar on Tuesday.

• The indictment alleged that Namvar misappropriated the money in 2008, using it to pay investors and creditors from a real estate investment company he ran, instead of holding it in escrow as promised. The charges carry a combined maximum sentence of 100 years in prison. Also charged in the indictment was Hamid Tabatabai, who served as controller and vice president of Namco Financial.

***

• Allegations in the indictment related only to Namco Financial, which helped investors avoid taxes by holding their commercial real estate profits in escrow until they could be reinvested.(1) Namvar promised to safeguard the money but instead dipped into it throughout 2008 to help run his struggling businesses, the indictment alleged.(2)

For more, see Investors cheer indictment of L.A. real estate mogul (A federal grand jury accuses Ezri Namvar of misappropriating $23 million held in escrow by one of his companies. 'I am happy because he deserves it,' said one man who lost $700,000).

For the U.S. Attorney press release, see Prominent L.A. Businessman Indicted On Fraud Charges That Allege He Bilked Five Victims Out $23 Million (Ezri Namvar Allegedly Stole Money Given to His Company for Safekeeping).

Go here for other posts on Section 1031 exchange escrow ripoffs.

(1) This outfit acted as a Qualified Intermediary (Exchange Accommodator) in Internal Revenue Code Section 1031 Exchanges, a legal maneuver that enables real estate investors reinvest proceeds from sales of profitable real estate investments into new real estate deals while indefinitely deferring the payment of income taxes on the profits.

(2) If it wasn't bad enough that the investors lost all this loot, the U.S. tax laws state that if the escrowed cash isn't reinvested in new real estate within certain time parameters, the investors will have to immediately pay their income tax liability. Thus, they now face a big tax bill on the un-reinvested profits from the sales, and no longer have those profits from which to pay the IRS bill (See Alleged 1031 Exchange Scam Leaves Real Estate Investors With Big Tax Bill & No Money To Pay It With).

However, the victims may be entitled to offset their taxable investment profits by taking an itemized deduction on their income tax returns for some, if not all, of their losses. See IRS Revenue Ruling 2009-9 for tax information that may provide some guidance:

• (1) A loss from criminal fraud or embezzlement in a transaction entered into for profit is a theft loss, not a capital loss, under §165.
  
  (2) A theft loss in a transaction entered into for profit is deductible under §165(c)(2), not §165(c)(3), as an itemized deduction that is not subject to the personal loss limits in §165(h), or the limits on itemized deductions in §§67 and 68.
  
  (3) A theft loss in a transaction entered into for profit is deductible in the year the loss is discovered, provided that the loss is not covered by a claim for reimbursement or recovery with respect to which there is a reasonable prospect of recovery. (Editor's Note: If you are one of the investors in the reported story, how the hell do you determine if "there is a reasonable prospect of recovery" when the criminal prosecution has only just started and you don't know how much, if any, of the loot the Feds will recover - and how much will ultimately end up in your pocket???)

Now-Disbarred Title Lawyer Cops Plea To Ripping Off $2.7M In Real Estate Closing Proceeds Due To Existing Mortgage Holders, Clients From Trust Account

From the Office of the U.S. Attorney (Fort Lauderdale, Florida):

• [A]ttorney James B. Hayes, 57, of Boca Raton, Florida, pled guilty [] to a criminal information charging him in two counts of making false statements on a HUD-1 Settlement Form, a matter within the jurisdiction of the U.S. Department of Housing and Urban Development (HUD) in violation of Title 18, United States Code, Section 1001.

***

• According to the criminal information and statements made in court during [this week's] plea hearing, Hayes practiced law during 2007 through December 2009 at James B. Hayes P.A. in Boca Raton, Florida, handling real estate closings for clients and mortgage lenders.

• According to statements made in court, during that time, Hayes misappropriated more than $2,706,346.91 that were to be used to payoff prior loans and clients funds from his law firms trust account. Instead of using the money as directed on several closings, Hayes prepared and sent false HUD-1 Real Estate Settlement Forms on closings, falsely reflecting the old loans had been paid off.

• As part of the plea agreement announced in court today, Hayes agreed to make mandatory restitution of the $2,706,346.91 to the title insurance companies and to the client victims.(1)

• Hayes was permanently disbarred by the Florida Supreme Court on August 24, 2010 and in his plea agreement agreed to never reapply or seek admission as an attorney in any state.

For the U.S. Attorney press release, see Title Lawyer Pleads Guilty To Stealing More Than $2,706,000 In Trust Funds.

(1) The Florida Bar's Clients' Security Fund, which was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys, may also end up holding the bag in this ripoff as well.

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

• Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

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

South Florida Feds: Recently Disbarred Lawyer Looted $2.4M In Client Cash From Trust Account

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

• A disbarred Fort Lauderdale attorney faces a mail fraud charge with federal authorities suspecting him of embezzling more than $2.4 million from clients.

• Joseph Sindaco, 62, lost his law license last month after admitting during Florida Bar proceedings he misappropriated about $445,000 from two clients. He had practiced law in South Florida for three decades, specializing in estate and trust cases and real estate closings, court records show.

• Federal court documents indicate that from April 2006 to December, he used clients' trust money for his own personal expenses. Prosecutors filed the mail fraud charge against him last week, accusing him of failing to distribute $318,000 to the family of a retired tool and die maker who died in 2008.(1)

For more, see Disbarred Fort Lauderdale attorney suspected of embezzling $2.4 million of clients' money (Joseph Sindaco has been charged with mail fraud).

(1) At the risk of solidifying my status as persona non grata among some of my "friends and colleagues" in the legal profession, I repeat the following (now-nauseating for some) reminder:

The victims in this story may be able to turn to the The Florida Bar's Clients' Security Fund (which was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys) to recover some, if not all, of the swindled money.

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

• Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

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

Metropolitan Money Store Foreclosure Rescue Civil Litgation Continues Kicking Around

The class action plaintiffs/homeowners who were victims of the Metropolitan Money Store sale leaseback, foreclosure rescue scam were hit with something of an unfavorable ruling in a U.S. Bankruptcy Court in Maryland recently in a matter involving the Chapter 7 bankruptcy proceeding of Sussex Title, LLC, a title and closing agent involved in many of the deals resulting in the draining of any equity the financially strapped plaintiffs had in their homes.

The court overruled an objection by the class action homeowners to an application by Special Counsel for the Chapter 7 Trustee seeking an allowance of $178,868.48 for the period January 4, 2008, through March 31, 2010. The homeowners unsuccessfully claimed that the amount of the attorney fees being charged by the attorney for the Chapter 7 trustee was excessive. As a result, less money is available for the homeowners to recover by way of damages resulting from the screwing over that they took.

For the ruling, see In Re Sussex Title, LLC, Case No. 07-22878PM (Bankr. D. Md., September 22, 2010).

CT Probate Judge Dodges Major Trouble, Gets Hand-Slap In Suspected Land Grab Case Involving Now-Deceased, Dementia-Stricken 92-Year Old's $1.5M+ Farm

In Southington, Connecticut, The New Britain Herald reports:

• Local Probate Judge Bryan Meccariello has been publicly censured by the Council of Probate Judicial Conduct for his conduct in the Josephine Smoron estate issue. The council found that Meccariello “engaged in judicial misconduct” and “failed to perform the duties of his office and his conduct was prejudicial to the impartial and effective administration of justice.”

***

• The council opened a hearing in June after receiving a complaint from Samuel Manzo. Josephine Smoron, his longtime employer and friend, had willed the 100-acre farm to him but, instead. the land went to three churches, two in New Britain and one in Southington. [...] The report said the council found “clear and convincing evidence” that Smoron had willed her estate to Manzo, whom she had known since 1985.

***

• This is not the first time Meccariello has faced the Council on Probate Judicial Conduct. In 2007, the council found that Meccariello “probably violated judicial ethics rules” but that his actions did not rise to the level of judicial misconduct.

For more, see Conduct council censures probate judge.

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

NYC To Use Pro Bono Engineers, Architects In Program To Estimate Rehab Costs, Ward Away Would-Be Flippers, Of Over-Leveraged Apartment Buildings

In New York City, The Wall Street Journal reports:

• The City Council plans to announce [...] a new program to detail distressed living-conditions in the city's so-called over-leveraged buildings,(1) aiming to raise awareness about the money required to make the buildings more habitable.

• The program will rely on engineers and architects offering to examine and report on these buildings on a pro-bono basis, according to Council Speaker Christine Quinn. The model for the program is a study done by Baer Architecture Group on a portfolio of 10 Bronx buildings owned by private-equity firm Milbank Real Estate. The buildings went into foreclosure last year when Milbank defaulted on $35 million in debt.(2)

• The Baer report is also expected to be made public on Thursday. It will say that the 10 buildings, which have been short of cash since the default and seen their living conditions worsen, require between $20 million and $25 million in repairs, a higher estimate than previously thought, an official in Ms. Quinn's office said.

***

• Ms. Quinn says she hopes the estimates of repair costs will be an eye-opener for other investment firms that may be considering buying the debt of over-leveraged buildings but don't realize the actual costs involved with maintaining the properties. "Some investors hope to flip these buildings and make money," she said. "If it becomes clear how much money is needed, lenders make think twice" before lending money to firms pursuing this strategy.

For the story, see Quinn Warns About Buildings' Excess Debt (City Council Program to Focus on Actual Property Costs; 'Flipping' Strategy Could Backfire on Private-Equity Investors).

(1) Reportedly, the Department of Housing Preservation and Development estimates that 110,000 New York City apartment units are in buildings where the debt exceeds what the property's income can support.

(2) In a related story on this portfolio of 10 Bronx buildings, see Crains' New York Business: New owner cleared for troubled Bronx buildings (Unknown buyer expected to take control next week; residents and officials concerned that badly deteriorated properties are being saddled with too much debt):

• Concern is high among elected officials, tenants and housing activists who worry that the properties—which are saddled with 3,261 code violations—will likely deteriorate further because the new owner is paying too much for the portfolio and won't be able to make needed repairs. [...] Leaks, mold, rats, roaches, collapsed ceilings, missing floorboards and fire damage have made the 548 units virtually uninhabitable, tenants say.

Deed Service Ripoff Operation Uses Mail Solicitations Simulating Government Collection Notices To Clip Homeowners Out Of Unecessary Fees

In Colorado Springs, Colorado, KKTV-TV Channel 11 reports:

• A company is targeting homeowners, asking for $87 to send you a copy of your property deed. The company uses a mailing that looks a lot like a bill from a government agency, but don't be fooled.

For the story, see No Need to Pay More for Deed (go here for the video news report).

Well-Known Monopoly Icon Gets Boot From Expensive Park Place/Boardwalk Hotel Digs; Forced To Shack Up In Modest Baltic Avenue Abode

In AnyCity, USA, Spooftimes.com reports:

• Echoing the difficult economic times being faced by so many people, a well-known Monopoly player recently had two valuable properties foreclosed-- including five hotels on Park Place and Boardwalk. The bank gave him just two weeks to vacate the expensive properties -- forcing the owner to move into a much thriftier small green house on Baltic Avenue.

For more, see Park Place and Boardwalk Properties Facing Foreclosure.

Ally/GMAC Told Freddie Of Dubious Documents Weeks Before Slamming Brakes On Its Own Foreclosures

Bloomberg News reports:

• Ally Financial Inc.’s GMAC Mortgage unit told Freddie Mac that foreclosures by the auto and home lender might have been faulty weeks before halting its own evictions, according to two people briefed on the matter.

• Ally informed Freddie Mac on Aug. 25 that affidavits for court proceedings might not be valid, according to a person with direct knowledge of the matter. By Sept. 1, Freddie Mac had notified its network of lawyers and stopped related foreclosures and evictions, said the person, who declined to be identified because the matter hasn’t been formally disclosed. GMAC told agents to halt evictions in 23 states on Sept. 17.

For more, see Ally Said to Tell Freddie Mac of Faulty Foreclosures Weeks Ago.

Texas, Iowa AGs Open Probe Into Ally/GMAC Foreclosure Practices

Bloomberg News reports:

• Attorneys general in Texas and Iowa, following Florida, have started their own investigations into foreclosure practices at Ally Financial Inc.’s GMAC mortgage unit.

• “The integrity of the foreclosure process is of utmost importance and we are very concerned by the issues that have been raised regarding Ally Financial’s treatment of affidavits,” Iowa Assistant Attorney General Patrick Madigan said yesterday. Iowa leads an 11-state working group of attorneys general and bank examiners exploring ways to prevent foreclosures.

• Texas Attorney General Greg Abbott opened an investigation “early this month,” said Tom Kelley, a spokesman for the office.(1) Iowa and Texas follow an announcement by Florida Attorney General William McCollum, who last month said he was investigating three Florida law firms handling foreclosures.

For more, see Texas, Iowa Attorneys General Probe Foreclosure Actions by Ally's GMAC.

(1) Texas is a non-judicial foreclosure state, and is not one of the 23 states originally included by Ally/GMAC in their list of states affected by their foreclosure "suspension/moratorium."

Dubious Docs Begin Surfacing In Ally/GMAC's 27 Non-Foreclosure Moratorium States, Leaving Homeowners Across Country Scrambling To Challenge F'closures

The Washington Post reports:

• Flawed foreclosure documents like those that led mortgage lender Ally Financial [the outfit formerly known as GMAC] to halt evictions in 23 states this week are showing up in parts of the country previously thought to be unaffected, including the Washington area, according to attorneys and consumer advocates.

• Ally Financial has not called off evictions in the other 27 states or the District of Columbia, none of which require a court order to initiate a foreclosure. And yet in those places, distressed borrowers, on the brink of losing their homes, are finding flawed and forged documents in their files and scrambling to challenge foreclosure proceedings.

***

• In Maryland, Virginia, the District and 25 other states in which lenders do not need a court order, homeowners challenging foreclosure proceedings face an uphill battle. In those places, a bank needs only to file papers with a local court official after giving a borrower sufficient notice. It's up to the homeowner to sue the lender to stop the process.

***

• Generally speaking, delinquent borrowers have a better chance of keeping their homes in judicial foreclosure states because of the involvement of judges who appear to have wide discretion over how to handle shoddy or forged foreclosure papers. The system in the other states creates "enormous barriers for homeowners who want to assert legal claims and raise a defense," a report from the National Consumer Law Center concluded.(1)

For more, see Ally's mortgage documentation problems could extend beyond 23 states.

(1) See Foreclosing A Dream: State Laws Deprive Homeowners of Basic Protections (page 4).

Florida Appeals Court Says No Way To Rubber-Stamping Trial Judge "Nabbed" Improperly Striking Homeowner's Pleadings In Foreclosure Action

A Florida appeals court recently reversed another rubber-stamped summary judgment in a foreclosure action. This time, the state's 3rd District Court of Appeal reversed a ruling by Miami-Dade County Circuit Court Judge Mark King Leban who, on his own motion ("sua sponte"), improperly struck all of the pleadings filed by a homeowner/defendant, and then granted summary judgment for the foreclosing lender.(1)

Bringing this appeal on behalf of the homeowner were attorneys John H. Ruiz and Hector A. Peña (go here for website in Spanish), Miami, Florida.

For the ruling, see Sanchez v. LaSalle Bank National Association, No. 3D09-2095 (Fla. App. 3rd DCA, September 22, 2010).

(1) In reaching its conclusion, the court simply stated the following ("Fla. R. Civ. P." is a reference to the Florida Rules of Civil Procedure; bold text is my emphasis, not in the original text):

• Generally, the striking of pleadings is not favored. See, e.g., Menke v. Southland Specialties Corp., 637 So. 2d 285 (Fla. 2d DCA 1994); Costa Bell Dev. Corp. v. Costa Dev. Corp., 445 So. 2d 1090 (Fla. 3d DCA 1984).

• Florida Rules of Civil Procedure authorize a trial court sua sponte to strike a pleading which is "redundant, immaterial, impertinent or scandalous," and, upon a party's motion, a pleading which is sham. Fla. R. Civ. P. 1.140(f), 1.150.

• A trial court, however, should not strike a pleading sua sponte on the ground that it is legally insufficient, or because the party subsequently may not be able to prove his or her allegations. Bay Colony Office Bldg. Joint Venture v. Wachovia Mortgage Co., 342 So. 2d 1005 (Fla. 4th DCA 1977).

• Here, the trial court, on its own motion, struck Sanchez' affirmative defenses without finding them redundant, immaterial, impertinent, scandalous or a sham. Apparently, the trial court deemed the defenses to be lacking in specificity and support. Neither of these grounds warrants the sua sponte dismissal of Sanchez' affirmative defenses. Accordingly, we reverse the final summary judgment, and remand the cause for further proceedings.

Volunteer Lawyers' Efforts Help Shine Light On Shoddy Mortage Servicing Practices In Foreclosure Actions

In Portland, Maine, The Portland Press Herald reports:

• Two Maine lawyers who help homeowners fight foreclosures may have contributed to a decision this week by one of the nation's largest mortgage-servicing companies to stop foreclosing on homes in 23 states, including Maine.

• Thomas Cox(1) of South Portland and Geoffrey Lewis of Fryeburg said Wednesday that the shoddy legal practices that led to the temporary halt appear to be common in an industry that is swamped by troubled loans. [...] Cox and Lewis volunteer with a legal defense group called Maine Attorneys Saving Homes. About 6,000 foreclosures a year have been filed recently in Maine, and the advocacy group estimates that only one in 10 homeowners is represented by a lawyer.

For more, see Maine lawyers help uncover mishandled foreclosures (Now they're trying to get a summary judgment in a GMAC case nullified to keep a Denmark woman in her home).

(1) For more on Thomas Cox, see Retired Maine Attorney Joins Fight Against Foreclosures; Volunteers Services With Local Legal Aid Program.

Other Multiple Corporate Hat Wearing Vice Presidents Begin To Share The Spotlight

The Washington Post reports:

• The nation's overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower's files, according to court documents and interviews with attorneys, housing advocates and company officials. The problems, which are so widespread that some judges approving the foreclosures ignore them, are coming to light after Ally Financial, the country's fourth-biggest mortgage lender, halted home evictions in 23 states this week.

***

• Beth Ann Cottrell said in a sworn deposition in May(1) that she signed off on thousands of foreclosures a month for JPMorgan Chase even though she did not verify the accuracy of the information. In one instance in Palm Beach, Fla., Cottrell signed off on two documents that stated conflicting amounts of mortgage, the court testimony states. Cottrell claimed that both were signed by the borrower at closing. But the homeowner recognized that her signature had been forged, her attorney Christopher Immel said. The attorney added that such forgeries are common among the cases he's seen. JPMorgan Chase declined to comment.

• In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America, Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits.

• In many cases, her signature appeared to be forged by different employees.(2) Green worked for a foreclosure document company owned by Lender Processing Services. The company is being investigated by a U.S. attorney in Florida for allegedly using improper documentation to speed foreclosures. Lenders have already started to withdraw foreclosures that had Green's name on them.

• Green also submitted to courts documents that listed "Bogus Assignee" as the owner of a mortgage instead of the real name. In another case, she signed as the vice president of "Bad Bene," a made-up company.(3)

For the story, see Under piles of paperwork, a foreclosure system in chaos.

(1) See May 17, 2010 deposition of Beth Ann Cottrell (available online courtesy of Mother Jones).

(2) Go here for examples of Linda Green's changing signature.

(3) Green has also been known to have signed at least one assignment of mortgage with an effective date of 9/9/9999 (see 4closurefraud.org - document titled - "DOCX Assignment of Mortgage 3 Effective 09-09-9999").

"Robo-Signers" Masquerading As Multiple Corporate-Hat-Wearing Vice Presidents Just "Affidavit Slaves" With Modest Incomes, Mountainous Workloads

A recent story in The Washington Post describes the multiple corporate-hat wearing vice presidents employed by foreclosing lenders, servicers, foreclosure mills, etc. around the country in this excerpt:

• Many large mortgage lenders have come to rely on a relative handful of so-called robo-signers [...] to attest to the accuracy of thousands of home foreclosure documents across the country. These workers are not the Wall Street masterminds who created ever more complex mortgage-backed securities and fueled the subprime mortgage boom, but rather "affidavit slaves" with modest incomes and mountainous workloads.

• Their actions are leading lawyers representing foreclosed homeowners to claim that lenders have no legal standing if the filings weren't reviewed and verified, and to argue that the cases should be thrown out.

For the story, see 'Robo-signer' played quiet role in huge number of foreclosures.

Use Of Robo-Signers In Foreclosure Actions Not New For GMAC/Ally; Earlier Case Required Servicer To Cough Up $8K In Fees To Homeowner's Attorney

Bloomberg News reports:

• Ally Financial Inc.’s GMAC Mortgage unit, which suspended evictions in 23 states last week after finding employees didn’t verify foreclosure documents, was sanctioned in 2006 for similar practices, court records show.

• GMAC gave “false testimony” when it justified foreclosures by submitting sworn affidavits signed by a mortgage executive who later said in a deposition she didn’t actually review the loan documents or sign in the presence of a notary, according to a 2006 court order filed in Duval County, Florida.

***

• The 2006 case stems from a GMAC Mortgage foreclosure that began in August 2004 on a home owned by Robert and Lillian Jackson. The filing included an affidavit signed by a GMAC officer laying out the amount owed on the loan.

• Florida Circuit Court Judge Bernard Nachman sanctioned GMAC in May 2006, saying that the company “submitted false testimony to the court in the form of affidavits of indebtedness.” The company was ordered to submit an explanation and confirmation that the policies were changed, and told to pay defendants’ legal costs of $8,135.55.(1)

***

• “They’re acting like this is a new problem,” said O. Max Gardner III, a bankruptcy attorney at Gardner & Gardner PLLC in Shelby, North Carolina, who isn’t directly involved in either GMAC case. “It’s the exact same thing,” Gardner said. “This is not just a GMAC problem. This is an industry-wide problem.”

For more, see GMAC Drew 'False Testimony' Sanction Years Before Eviction Halt.

(1) I suspect that Florida foreclosure defense attorneys are getting their motions ready for attorneys fees requests when courts begin dismissing foreclosures based on these bogus documents. In Florida, where an agreement allows for an attorney fee award to one of the contracting parties, state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Not only might the lender and servicer be court-ordered to cough up fees to the homeowners' attorneys, it's possible that the foreclosure mill law firms representing the lenders/servicers (at least in Florida) may also be ordered to foot part of the tab as well by reason of section 57.105(1), Florida Statutes:

• Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:
  
  (a) Was not supported by the material facts necessary to establish the claim or defense; or
  (b) Would not be supported by the application of then-existing law to those material facts.

(For an old (July/August,2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.), see Pleading Requirements for a Claim for Attorneys' Fees.)

Federal Commission: Florida Played Starring Role In Mortgage Fraud Problem That Led To Untold Trillion$ In Crappy Loans

In Miami, Florida, The Miami Herald reports:

• Mortgage fraud is responsible for untold trillions of dollars in bad loans currently defaulting across the country, and Florida has played a starring role in the tragedy, a federal commission said during a hearing in Miami on Tuesday.

• A panel of national and local experts sat before the federal Financial Crisis Inquiry Commission during a hearing focused on liar's loans, predatory mortgage practices and shady home appraisals. They concluded that the financial impact of the fraud was more severe than most have estimated, and prosecuting those responsible will be nearly impossible.

For more, see Florida led nation in mortgage fraud, federal commission says (Experts discussed Florida's multibillion-dollar mortgage fraud problem during a hearing hosted by the federal Financial Crisis Inquiry Commission).

Four Pinched On Grand Theft, Forgery Charges; Used Stolen I.Ds To Obtain Homes, Mtgs: Cops; Victims Discover Scam When Stiffed Banks Sought Repayment

From the Office of the San Bernardino, California District Attorney:

• On Monday, September 13, 2010, Ray Gross, 46, of Victorville, was arrested at his residence by San Bernardino County Sheriff’s deputies for real estate fraud charges. Gross was arrested for numerous felony counts including grand theft, forgery, and filing forged documents with the County Recorder’s Office. The San Bernardino County District Attorney’s Real Estate Fraud Unit conducted the investigation.

• Within the last few weeks, other co-conspirators were arrested on similar charges. Those arrested were: Freddie Gross, 52, of Fontana, Lyall Alexander, 42, of Victorville, and Barbara Kimberling, 46, of Riverside.

• In 2007, the suspects conspired to obtain real estate loans by fraudulently using the identity of three victims. The loans encumbered properties located in Victorville, Riverside, and Ridgecrest. The victims’ signatures were forged on Grant Deeds and Deeds of Trust. The fraudulent loans totaled over $600,000.

• The victims had no knowledge of these loans until months later when they were contacted by lending institutions for lack of payment. The suspects have been booked into the San Bernardino County Sheriff’s jail facilities. Bail for Gross is set at $1,700,000.

Source: Victorville Man Arrested on Real Estate Fraud Charges.

Forced Placed Insurance Drives Central Florida Homeowner Into F'closure; Loan Servicer Backpeddles On Initial Demands After Inquiries From Local Media

In Port Richey, Florida, WFTS-TV Channel 28 reports:

• A Port Richey homeowner nearly lost his house not once but twice to foreclosure. Mark Poulsen said it had nothing to do with his payment history, but rather a new insurance policy.

***

• About the same time when Mark lost his job, he says, CITI bank attached a $5,000 wind policy to his home. "My normal payment was $749 a month and the next statement shows $1,886 a month,” he said. Poulsen fell behind, and within months the bank served the family with foreclosure papers. “It was devastating I could not sleep at night.”

• Mark's story then took a cruel twist. He says CITI worked out a deal with him. He paid them $3500 they were suppose to bring his account current and drop the foreclosure. Months later, this homeowner claims CITI called and backed out of that deal. "It was a nightmare, a total nightmare.”

• After listening to Mark's story, [ABC Action News consumer advocate] Jackie Callaway emailed CITI bank's corporate office and asked them to review the account. A spokesperson responded in an email saying, "If the property owner does not maintain this and other required forms of insurance ... we will obtain lender-placed gap insurance on the homeowner's behalf. Failure to reimburse us for coverage can result in delinquencies on the account.”

• Weeks later, CITI bank put another offer in writing. They excused Marks' delinquent fees and made his account current. He now has his own affordable wind policy on the house that meets CITI’s requirements.

For the story, see A man nearly loses his house in a mortgage insurance mess.

Foreclosure Mills Begin Filing Motions To Withdraw Previously Filed Court Documents Signed By Loan Servicers' "Affidavit Slaves"

Mother Jones reports:

• Christopher Immel, an attorney for Ice Legal, a Florida foreclosure defense firm, said each and every foreclosure that relied on an affidavit signed by GMAC's [Jeffrey] Stephan is shrouded in doubt.(1) "People who lost their homes to evidence like that did have their homes taken wrongly," he says. Indeed, Immel tells Mother Jones that one major Florida foreclosure law firm, Florida Default Law Group, has already begun withdrawing affidavits signed by Stephan knowing that they're faulty and ripe for challenging.

• Immel adds that the effects of GMAC's decision to revisit foreclosures involving tainted legal documents could ripple throughout the housing industry. For instance, in May, another Ice Legal attorney took the deposition of Chase's [Beth] Cottrell, whose firm is a subsidiary of JPMorgan Chase. In that deposition, Cottrell similarly conceded that she didn't have the "personal knowledge" required to sign the foreclosure documents that crossed her desk.(2)

***

• [O]ne judge in central Florida told Mother Jones that, in the past week, she's seen attorneys representing several other big banks file what she called "mysterious" motions to proactively withdraw foreclosure affidavits. The firms say the affidavits "may not have been properly verified"—the same problem with the documents at the heart of GMAC's headaches.

• Having never seen a spate of withdrawals like this before, the judge, Pasco County's Lynn Tepper, questioned whether other banks might be hoping to avoid the kind of public scrutiny now on GMAC by quietly clearing up conflicts with robo-signed documents. Tepper called the motions "unbelievable," and said she might seek to vacate foreclosures—instead of merely delaying them—where banks try to swap out bogus documents for new ones.

For the story, see A Crack In Wall Street's Foreclosure Pipeline?

(1) Reportedly, in a June deposition, Stephan said his outfit handled 6,000 to 8,000 of these documents each month. Yet under questioning, Stephan all but admitted, under oath, that he didn't really read those crucial documents or know what they precisely said [...].

(2) For more on Cottrell, see Financial Times: Staff says bank foreclosures went unchecked:

• In one case signed off on by Ms Cottrell, two separate promissory notes were presented as originals, even though they contained different clauses and monthly payments. “They are clearly two different notes,” said Chris Immel, one of the lawyers. “That is not what I’d considered a technicality.”

Loan Modification Operator Denies Taking Upfront Fees; Says Money Taken Was For "Attorney Fees"

In Kansas City, Missouri, The Kansas City Star reports on Livonia, Michigan's Expert Financial Services, a loan modification outfit, led by its chief - Rick White, that has been accused of ripping off some local homeowners out of thousands in upfront fees. The following excerpt describes his responses to allegations when contacted by the media:

• White didn’t return my call to his office or answer an e-mail I sent him. But a former employee who said she was owed back pay gave me his cell phone number, and we talked for a while the other day. He refused to discuss Diane’s situation or discuss his business practices in general, other than to say that upfront fees he charges are for “attorney’s fees” and not for the mortgage modification process.

***

• Well, you might be interested to know that the Michigan attorney general’s office has received at least 10 complaints about the same company, which has been in business for less than a year.(1) Those complaints are “under review,” an official said. Meanwhile, the Better Business Bureau gives Expert Financial Services an “F” rating. On the Internet, you’ll find scads of bad reviews from former customers.

For the story, see Foreclosure rescue schemes a costly trap for homeowners.

(1) Inasmuch as the Michigan Attorney General's office has shown no reluctance in bringing criminal charges against alleged loan modification scams, it may simply be a matter of time before it gets around to slamming this outfit. See:

• Michigan AG Files 19 Criminal Complaints Setting Forth 69 Charges Against Individuals, Firms Running Alleged Advanced-Fee Loan Modification Operations,
• Michigan AG Files Criminal Charges In Separate Cases Alleging Loan Modification Firms Clipped Homeowners For Upfront Fees, Then Failing To Help (involving three criminal complaints containing a total of ten charges).

Fannie Agrees To Rescind Foreclosure For Virginia Family After Recent "Post" Article; Says Chase Botched Loan Modification Application Process

In Prince William County, Virginia, The Washington Post reports:

• Chase -- the bank that foreclosed on the home of a Prince William County couple caring for their gravely ill child -- has reversed the foreclosure and offered to modify the family's mortgage, the bank said Friday.

***

• Chase, which was administering the loan for mortgage finance giant Fannie Mae, mishandled the application for assistance under the federal mortgage relief program, a spokeswoman for Fannie Mae said Friday.

• Early this month, just days before the house was to be sold in foreclosure, Chase told the Waleses that they had been approved for a modification under the federal Making Home Affordable Program. But the promised documents never arrived, and on Sept. 8, the house was sold back to Fannie Mae.

• In fact, the family might not have qualified under the program's income limits. But under Fannie Mae protocols, Chase should have offered modification options before weighing more drastic options, such as a short sale and foreclosure.

• After the family's plight was described in an article Friday in The Washington Post, Chase and Fannie Mae began investigating and concluded that the case had been botched. "Fannie is frustrated when we learn of individual cases where servicers do not properly process modification applications, and families . . . pay the price," Fannie Mae spokeswoman Amy Bonitatibus said. "In this instance, the situation was not handled properly," Bonitatibus said.

For the story, see Bank reverses foreclosure for Va. family with very ill child.

GMAC's Use Of "Affidavit Slave" May Affect Hundreds Of F'closing Lenders Using Firm To Service Mortgages, Opening Door For Challenges Across Country

The Washington Post reports:

• Some of the nation's largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork - an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

• The legal predicament compelled Ally Financial, the nation's fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now Ally officials say hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

• As head of Ally's foreclosure document processing team, 41-year-old Jeffrey Stephan was legally required to review cases to make sure the proceedings were justified and the information was accurate. He was also required to sign in the presence of a notary. In a sworn deposition, he testified that he did neither.

***

• Stephan's job at Ally was arguably one of the least enviable in the mortgage business: formally signing off on foreclosure papers that his company would submit to the courts to get approval to evict delinquent homeowners and resell their homes.

• From his office in suburban Philadelphia, Stephan oversaw a team of 13 employees that brought documents to him for his signature at a rapid clip. Stephan did not respond to messages left at his work and home. His official title was team leader of the document execution unit of Ally's foreclosure department, but consumer advocates call him the company's "super robot signor" or "affidavit slave."

• In sworn depositions taken in December and June for two separate court cases involving families trying to keep their homes, Stephan revealed his shortcuts when reviewing the files. He said he would glance at the borrower's names, the debt owed and a few other numbers but would not read through all the documents as legally required. He would then sign them. The files were packed up in bulk and sent off for notarization several days later. Stephan testified he did not know how the "summary judgment" affidavits he signed were used in judicial foreclosure cases.

***

• Christopher Immel, an attorney in Florida who deposed Stephan for a case in Palm Beach County, said he thinks Stephan was not a rogue employee but one that was performing his job responsibilities as the company told him to do. "GMAC has a business model to do this, and Stephan was just one small part of it," Immel said. "He was under the impression it was okay to do this."

For more, see Ally Financial legal issue with foreclosures may affect other mortgage companies.

In a related story, see Mother Jones: A Crack In Wall Street's Foreclosure Pipeline?

Use Of Special Addendums & Bank-Designated Title Agents When Dumping REOs Mark Wave To Unload Defectively-Titled F'closed Homes Onto Unwitting Buyers?

Naked Capitalism reports:

• Another ticking time bomb in the realm of real estate bad behavior is bound to go off sooner rather than later, and it is likely to impede normalization of values of residential property.(1)

For more, see Latest Real Estate Time Bomb: Title of Foreclosed Properties Clouded; Wells Fargo Dumping Risk on Hapless Buyers.

(1) The story revolves around the use of a certain type of contract addendum (go here for Standard Form REO Addendum) sprung on prospective buyers at the "11th hour" by lenders selling recently-foreclosed homes, coupled with the use of title insurance policies containing a special clause that renders the policy worthless (providing no protection to the buyer) if the foreclosure action is subsequently found to be void (because of legal defects, irregularities, fraud, etc.) in order to shift all the risk of buying these "pink elephants" onto the unwitting buyer (unwitting, but not necessarily unsophisticated - the level of sophistication needed to spot this scam is probably beyond the scope of most lawyers who aren't real estate specialists).

Florida Congressman Asks State Chief Justice To Slam Brakes On Potentially Lawless Foreclosure Mill Seizures

The Florida Independent reports:

• Citing the reporting of Mother Jones and the New York Times, Congressman Alan Grayson has sent a letter calling on the Chief Justice of the Florida Supreme Court to “abate” foreclosure cases involving three law firms currently under scrutiny from the Office of Attorney General Bill McCollum until the investigation is complete.

• “If the reports I am hearing are true, the illegal foreclosures taking place represent the largest seizure of private property ever attempted by banks and government entities,” Grayson wrote. “This is lawlessness.”

See Grayson calls on Florida Chief Justice to halt “foreclosure mill” cases for more, including the full text of Congressman Grayson's letter to Florida Chief Justice Charles T. Canady.

GMAC Calls Off Foreclosure Actions, Suspends Pending REO Sales In 23 States, Letting Buyers Back Out Of Deals; Cites Need To Take "Corrective Action"

Bloomberg News reports:

• Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York.(1)(2)

• GMAC Mortgage may “need to take corrective action in connection with some foreclosures” in the affected states, according to a two-page memo dated Sept. 17 and obtained by Bloomberg News.

• Ally Financial spokesman James Olecki confirmed the contents of the memo. Brokers were told to stop evictions, cash-for-key transactions and lockouts, regardless of occupant type, with immediate effect, according to the document, addressed to GMAC preferred agents.

• The company will also suspend sales of properties on which it has already foreclosed. The letter tells brokers to notify buyers that the company will extend the closing date on all sales by 30 days. Buyers will be able to cancel their agreement to purchase and get their deposit back, according to the letter.

***

• Lawyers defending mortgage borrowers have accused GMAC and other lenders of foreclosing on homeowners without verifying that they own the loans. In foreclosure cases, companies commonly file affidavits to start court proceedings. “All the banks are the same, GMAC is the only one who’s gotten caught,” said Patricia Parker, an attorney at Jacksonville, Florida-based law firm, Parker & DuFresne. “This could be huge.”

For the stories, see

• Ally's GMAC Mortgage Halts Home Evictions in 23 States,
• Ally Says GMAC Mortgage Mishandled Affidavits on Foreclosures.

For story update, see: GMAC Denies Halting Foreclosures in 23 States:

• There has been a number of reports from other media outlets that the suspensions may relate to how GMAC documented ownership of the mortgage note in foreclosure claims in some states. The Associated Press reports that Jeffrey Stephan, a GMAC employee, testified in December that he routinely signed 10,000 such affidavits or claims a month without verifying who actually owned the mortgage.

• An examination of the states listed in the Bloomberg report by the Naked Capitalism blog found that 22 of the 23 are judicial foreclosure states, which require such affidavits in order to bypass lengthy judicial hearings. In addition, the Bloomberg list covers all but one of the nation’s judicial foreclosure states. Regardless of whatever procedure GMAC is alluding to in its statement, the question of proving ownership of a mortgage in foreclosure cases has been a growing issue.

***

• The Florida attorney general is presently investigating three law firms for providing fraudulent affidavits of mortgage ownership, two of which have represented GMAC in foreclosure proceedings. U.S. Rep. Alan Grayson (D-Fla. 8th), cited the cases in a letter [] asking the Florida Supreme Court Chief Justice Charles Canady to suspend all mortgages until the investigation is completed.

(1) The affected states are: Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, Wisconsin.

(2) According to a recent New York Times story (see GMAC Halts Foreclosures in 23 States for Review):

• Since the real estate collapse began, lawyers for homeowners have sparred with lenders in those states. The lawyers say that in many cases, the lenders are not in possession of the original promissory note, which is necessary for a foreclosure. GMAC, which has been the recipient of billions of dollars of government aid, declined to provide any details or answer questions, but its actions suggest that it is concerned about potential liability in evicting families and selling houses to which it does not have clear title.

• The lender said it was also reviewing completed foreclosures where the same unnamed procedure might have been used. Matthew Weidner, a real estate lawyer in St. Petersburg, Fla., said he interpreted the lender’s actions as saying, “We have real liability here.” Mr. Weidner said he recently received notices from the opposing counsel in two GMAC foreclosure cases that it was withdrawing an affidavit. In both cases, the document was signed by a GMAC executive who said in a deposition last year that he had routinely signed thousands of affidavits without verifying the mortgage holder. “The Florida rules of civil procedure are explicit,” Mr. Weidner said. “If you enter an affidavit, it must be based on personal knowledge.” The law firm seeking to withdraw the affidavits is Florida Default Law Group, which is based in Tampa.

Technology Advances Continue In Effort To Help Lenders Identify Potential Short Sale Scams, Tracking Properties Even After Sale Is Completed

Housing Wire reports:

• DataVerify announced today changes made to its fraud management platform, Data Risk Intelligent Verification Engine (DRIVE), that help mortgage lenders identify potential short sale and property fraud losses. The program has updated tools for predicting risks such as employment disclosure, local conditions for flipping and individual history in the housing industry.

***

• [Property data provider] CoreLogic reported fraud occurs once in every 53 short sale transactions and has, since reporting this data, launched its own technology platform to monitor the estimated 400,000 short sales taking place in 2010. The program keeps track of properties even after the sale is completed.

For more, see DataVerify enhances short sale fraud detection based on customer track record.

In related stories, see:

• CoreLogic Launches Short Sale Fraud Watchdog Technology,
• Short Sales Cost Lenders $310m More Than Necessary, CoreLogic Study Finds,
• Short Sale Fraud Fears Grow as HAFA Gets Set to Pop (“Many homeowners are attempting to purchase their own properties at the market value. They will request a family member purchase their property with a different last name,” Housing Assist America's Ari Afshar said.)

Ohio AG's Servicer Lawsuit Gets Go-Ahead As Court Denies Dismissal Motion; Conduct In Giving Loan Mods Subject To State Consumer Sales Practices Act

From the Office of the Ohio Attorney General:

• Ohio Attorney General Richard Cordray’s lawsuit against Barclays Capital Real Estate dba HomEq Servicing, headquartered in New York City, just took a legal step forward with a recent decision by a state court. [Last] week, Montgomery County Common Pleas Judge Timothy N. O’Connell overruled the defendant’s motion to dismiss, clearing the way for Cordray’s case to move forward.

• “This ruling takes us one step closer in our overall strategy to hold loan servicers accountable for unfair loan modifications in foreclosure cases,” said Cordray. “For too long, servicers have stood idly by, talking the talk but failing to provide any real solutions to the foreclosure crisis. Ohioans are losing their homes and servicers have aggravated the situation with noncompliance and out-right incompetence.”

• Cordray sued HomeEq last December for multiple violations of Ohio’s Consumer Sales Practices Act (CSPA), including unfair and deceptive business practices. The lawsuit marked the third filed by Cordray against a loan servicer operating in Ohio. Cordray was the first state attorney general to file a lawsuit against a loan servicer for CSPA violations in the wake of the foreclosure crisis.

• [Last] week’s ruling is the first state court decision to hold that mortgage servicers are accountable under the CSPA, serving to create a precedent in this first-of-its-kind legal strategy.

For the Ohio AG press release, see Court Affirms Cordray's Case Against Loan Servicer.

To view the court decision and lawsuit, see State of Ohio v. Barclay's Capital Real Estate Inc. dba HomEq Servicing.

Company Execs Quick To Shift Blame, Invoke "Flawed Business Model" Defense To Explain Collapse Of Alleged Loan Modification Ripoff Racket

In St. Louis, Missouri, a recent column in the St. Louis Post Dispatch describes the aftermath left by the now-defunct Home Safe Financial Assistance. The company's principals attempt to give reasons for their firm's problems in the following excerpt:

• Derek Doherty, Home Safe's president and owner, and Elijah Norton, the company's former chief executive, said their company really did help customers save money and stay in their homes.

• The men boasted that they successfully modified the mortgages of 50, maybe 70 customers. The problem, however, is the company had between 300 and 400 paying clients. At least 200 of them paid for Home Safe for work it didn't perform.

• Norton, who now lives in Kansas City, blames the company's collapse on a flawed business model. He said too much of what consumers paid ended up with so-called affiliate marketers hired by Home Safe to drum up business.

• One of the biggest, St. Peters-based Capital Debt Management, is owned by John Jacob Ehlinger. He previously owned CarSafe, a St. Charles company that sold extended auto-service contracts.

• Doherty, the Home Safe owner, said Capital Debt Management lied to customers about how mortgage-modification process worked, improperly promised specific reductions and instructed consumers to stop making house payments. "When we heard this was going on, we issued them a formal warning," Doherty said in an e-mail. "They seemed to clean up but their production dropped drastically."

• Ehlinger said that his company did nothing wrong, and that Doherty is passing the buck. "If he had such a problem in the ways the contracts were sold, he should have cancelled them," Ehlinger said. "He shouldn't have taken their money."

For the story, see Customers of mortgage-modification firm often got nothing for their money.

Wave Of Lawsuits Targeting Foreclosing Lenders, Contractors For Illegal "Trash-Outs" Seen On The Horizon?

The Palm Beach Post reports:

• The home repo business is booming as lenders break records this year to take back properties from delinquent borrowers. But some homeowners and attorneys complain the banks, and the property preservation companies hired to change door locks and clean homes, are overzealous in their work.

• In a handful of recent lawsuits statewide, homeowners say their locks were changed before a foreclosure had even been filed, that personal property and financial papers were rifled through or taken, and that charges are being levied for lawn maintenance and trash removal when HOAs already take care of those services.

• Often, homeowners say they can't even figure out who has been in their home as banks contract with nationwide property preservation groups that subcontract to local companies, which are not state regulated or required to receive special licensing.

• In one suit, a man with a criminal record of drug and burglary charges who is working for a property preservation company is alleged to have taken a laptop computer, several bottles of wine and a cordless drill from a Punta Gorda home while there to change the locks. He also helped himself to a cold beer from the refrigerator, leaving it, along with his fingerprints, on a counter top, the suit says.

• "They are emboldened because they are getting away with it," said St. Petersburg attorney Matt Weidner, who is representing the Punta Gorda homeowner.(1)(2)

For more, see Critics: Home repo agents too 'gung-ho,' change locks before foreclosures are filed.

(1) Reportedly, the lawsuit names Sarasota-based First Property Preservation Inc., which is doing business as Good Choice Preservation, and claims that not only were things stolen, but that the employee with the criminal record returned a second time and threatened the renters saying he was going to take all of their belongings. The home was in foreclosure, but occupied by renters, the story states.

(2) For earlier posts on a couple of high profile illegal trash-out cases, see:

• Countrywide Financial: Nevada High Court OKs $1M+ Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure (for the court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008).),

• Wells Fargo: Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure (for the court ruling, see Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010)).

BofA Bagged Again On Wrongful Foreclosure Attempt; Says It's Sorry For Action Against Couple With Paid-Off Loan After Local Media Steps In

In Willcox, Arizona, KVOA-TV Channel 4 reports:

• A southern Arizona family is in fear of losing their house to what they call an unjust foreclosure, and they're now fighting back against one of the biggest banks in the country. The Willcox-area family says that house was paid for more than a year ago. The loan company went under, and Bank of America stepped in and said it wasn't paid.

***

• So the Newman's hired an attorney that has dealt with this kind of thing before, and then they contacted News 4. After working with the Newman's for two days, reporter Greg Dingrando got through to Bank of America who agreed to talk to them. A few hours later, they received the following statement:
  
  We sincerely apologize to the Newman's for this mistake. We have cancelled the foreclosure sale and hope to resolve this with the Newman's. Due to the pending litigation, we cannot comment further on this case.

• This came as a huge relief to the Newman's, but their attorney says it's not over. "You can't just walk away and let these large big box banks get away with that," said Carlin Phillips, the Newman's attorney. "We want to bring them to task before a jury in Arizona, and see what they have to say about this kind of conduct." The Newman's attorney says this type of thing happens all too often, and it's not just Bank of America. He says it happens everywhere.(1)

For the story, see Bank admits mistake on Willcox home foreclosure.

For the lawsuit, see Newman v. Bank of America, N.A. (go here for the attached Exhibits).

See also, Arizona Couple Sues Bank of America Alleging Unlawful Foreclosure.

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

(1) For earlier posts on a couple of high profile bank foreclosure screw-up cases, see

• Countrywide Financial: Nevada High Court OKs $1M+ Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure (for the court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008).),

• Wells Fargo: Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure (for the court ruling, see Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010)).

Arizona AG Scores $1.7M In USDOJ Cash To Escalate Efforts In Prosecuting Mortgage-Related Scams

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard [] announced he has been awarded a $1.7 million grant from the U.S. Office of Justice Programs to fight mortgage fraud in Arizona. The grant will be utilized to create a new six-person unit devoted exclusively to investigating and prosecuting mortgage-related crimes. This new unit will operate as part of the Criminal Division of the Attorney General’s Office and will be operational within the next 90 days.

• The Office of Justice Programs is a part of the U.S. Department of Justice. Goddard said the unit will enable his Office to go after more mortgage “rescue” businesses that exploit consumers struggling to keep their homes. Over the past three years, the AG’s Office has undertaken several dozen criminal and civil investigations of mortgage fraud, leading to 13 indictments and 19 lawsuits and settlements.(1)

For the Arizona AG press release, see Terry Goddard Wins $1.7 Million to Fight Mortgage Scams.

(1) Goddard also said that in the past two weeks he has stepped up efforts to prevent mortgage scams by sending more than 600 letters to loan modification companies and licensed mortgage brokers, advising them about the new state laws that went into effect this summer. The letters affirm his commitment to vigorously enforce the laws and take action over any violations of the Arizona Consumer Fraud Act.

Sale Leaseback Peddler Aquitted Of Charges Accusing Him Of Tricking Couple Facing Foreclosure Into Signing Over Deed To Home

In Farmington, Utah, the Standard Examiner reports:

• A judge rendered a not guilty verdict on two felony counts against a Morgan man accused of swindling a former West Point couple out of their home. Judge David M. Connors issued the not guilty verdicts Thursday in 2nd District Court following almost two days of testimony in a bench trial for Jeffery Q. Wangsgard, 57.

• The state Attorney General’s Office had charged Wangsgard in January of 2008 with two second-degree felonies: one count of communication fraud and one count of exploitation of a vulnerable adult.

• The charges accused Wangsgard of tricking Emery and June Mitton, when they were facing foreclosure in 2006, into signing documents that transferred their property deed over to the company where Wangsgard worked.

• Assistant Attorney General Charlene Barlow said she plans to go forward with remaining counts against Wangsgard. Those counts involve two other families who said they were tricked out of their homes by Wangsgard. Connors set Feb. 2 and Feb. 3 for one case and Feb. 9 and 10 for another case. Wangsgard is charged with second-degree felony communication fraud in both cases.

For more, see Not guilty verdict in swindling case.

Lender Sells Same Foreclosed House To Two Separate Buyers; Blames Escrow Agent For Closing One Deal In Error

In San Clemente, California, KABC-TV Channel 7 reports:

• The real estate market may be suffering, but that didn't stop one Orange County home from selling - twice. Doug Garhartt and his partner Brandon Lively bought the foreclosed townhouse in San Clemente last March. They moved in and started renovations but a week later, Garhartt said, the nightmare started.

• "I came home from work and found an eviction notice on my door that said you have three days to move out of your home," he said. Through a series of mistakes, the townhouse they had purchased at auction for $365,000 had also been sold to an investment group, which had paid more than $345,000 in cash.

• "We're kind of in no man's land," said Garhartt. "We bought a property but we don't have the property or the money, so we don't know what's going on at this point."

• Both of the buyers have the deed to the property. One West Bank handled both deals and Point Break Escrow closed them. [...] Garhartt alleged the bank was at fault. "They just simply forgot to cancel the foreclosure. It was a mistake. The right hand didn't know what the left hand was doing."

• According to court documents the bank said the escrow company closed the sale by mistake. The bank said it did not receive a required form before closing. The escrow company denied this and said it had property delivered all documents to the bank.

For the story, see House accidentally sold to two buyers in OC.

DC AG's Lawsuit Against Foreclosure Rescue Operator Alleges More Of The Same Use Of Sale Leasebacks To Rip Off Property Owners' Home Equity

A recent lawsuit filed by the Office of the District of Columbia Attorney General against local foreclosure rescue operator Vincent Abell alleges more of the same conduct that has earned him notoriety for allegedly ripping off homeowners in foreclosure through use of sale leaseback arrangements purportedly designed to help them keep their homes.(1)(2)

In addition, in a separate charge, Abell is accused of taking a rental apartment building that he purchased, converting it into condominiums, and peddling the units to buyers that contained wiring, gas lines, and electrical outlets that were improperly installed, not to mention water damage to drywall and roof leaks.

For the DC AG's lawsuit, see District of Columbia v. Abell.

Thanks to DC attorney Mike McKeown of Neighborhood Legal Services Program for the assist in obtaining the lawsuit.

For earlier posts and links to other stories on Abell, see:

• F'closure Rescue Operator At It Again As DC AG Slams Sale Leaseback Peddler w/ Suit Seeking To Void Title Transfers Violating Consumer Protection Law,
• DC High Court Affirms Punitive Damages Award Slamming Sale Leaseback Peddlers For $3.3M In Equity Stripping Foreclosure Rescue Ripoff.

(1) For the DC AG's press release announcing the commencement of this action, see Attorney General’s Office Files Action Against Foreclosure Rescue Scam.

(2) DC authorities once brought a successful criminal prosecution years ago against a sale leaseback peddler who operated in much the same way as Abell does. See Browner v. Dist. of Columbia, 549 A.2d 1107 (D.C. 1988), in which the DC Court of Appeals affirmed a criminal conviction of a foreclosure rescue operator where the trial judge found "that the depiction of each of these transactions as a sale and lease back was a transparent sham which masked an unlawful loan."

Inasmuch as Abell has reportedly "done time in federal prison for property schemes" according to a 2004 CBS News' story (see Loan Scam Targets Seniors' Homes (Washington Con Artists Preyed On Elderly People In Financial Trouble) (go here to watch related CBS News' video)), continuing to bring civil suits against him (that lack a threat of jail time) will probably not do much to stop him.

If local law enforcement is unwilling to go after him criminally for making these usurious loans to homeowners that masquerade as sale leasebacks (the [relatively toothless] DC usury statute [§28-3301 et seq], provides for fines of not more than $1,000 or imprisonment for not more than 1 year, or both under §28-3313 for willful violations), it may take a sharp, aggressive FBI agent to "prove up" federal criminal charges against him (ie. mail and/or wire fraud, conspiracy, RICO) in an attempt to permanently put Abell and his associates out of business.

New Jersey Appeals Court Voids Mortgage Made In Violation Of Affordable Housing Deed Restriction, Leaving Lender With Unsecured Loan

The following facts have been adapted from a recent ruling of the Superior Court of New Jersey, Appellate Division (New Jersey's intermediate appeals court):

• On January 14, 2004, one, Hough, purchased a condominium unit for $68,142.86. To fund part of the purchase price, Hough borrowed $61,329 from Wells Fargo Home Mortgage, Inc., and secured the loan by executing a mortgage in favor of Wells Fargo.

• Because the condominium formed a part of the Township's affordable housing obligation under New Jersey state law, the deed contained a restriction limiting the use, sale and resale of this property, which, among other things, limited the amount of a loan that could be secured by the property.

• On March 25, 2005, Hough refinanced the condominium unit by borrowing $108,000 from Mortgage Lenders Network, USA, Inc.

• At the time of the mortgage transaction, the maximum allowable resale price of the condominium unit, pursuant to N.J.A.C. 5:80-26.6, was approximately $68,735.41. The loan, therefore, was limited to 95% of the units' maximum allowable resale price.

• Hough used the mortgage proceeds to satisfy the Wells Fargo purchase money mortgage then in the amount of $62,795.10, and for other personal unsecured debts, and real property tax liens. Hough netted $20,080.45 from the mortgage refinance.

• On February 1, 2007, Hough defaulted on the mortgage. The lender subsequently sued for foreclosure, afterwhich Hough challenged the legality of the mortgage, which the lower court overruled, and which gave rise to an appeal.

• In reversing the lower court, the New Jersey appeals court noted that the deed restriction limiting the use, sale and resale of the property placed lenders on constructive notice that the condominium unit was part of the Township's Mount Laurel affordable housing obligation subject to the applicable state regulations.

• Because the amount of the refinanced loan exceeded the maximum amount allowable under the Township's affordable housing obligation, the court found the mortgage to be void, but left the amount of debt itself, now unsecured, to remain in tact, and noted that lender may file a separate action seeking to collect upon the unsecured underlying debt.

For the ruling, see U.S. Bank, N.A. v. Hough, Docket No. A-5623-08T3 (N.J. Super. App Div. September 14, 2010) (when link expires, TRY HERE).