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Archive for July, 2011

Foreclosure Fraud in Florida – How High Does it Go?

Read this post, courtesy of our friends at www.4closurefraud.org, and you be the judge.

Is New Director of Bondi’s Economic Crimes Division, Richard “DICK” Lawson, Defending Lender Processing Services & the Foreclosure Mills?

Lawson told the News Service on Wednesday that he did indeed ask about those two companies, after their lawyers expressed concerns about the way Edwards and Clarkson were handling the cases – and, in particular about a public presentation the two gave in a public forum that gave their “impressions and theories” about the Lender Processing Services, and characterized certain companies as foreclosure mills.

So, it sounds like LPS didn’t like these ladies poking around and the poor wittle foreclosure mills were offended by their characterizations…

Guess that didn’t sit well with ‘DICK’ for some reason. Wonder what that reason was?

He was hired by Pam Bondi shortly after she came into office btw… Hmmm…

Just so you all know, the presentation that “DICK” is referring to, as Barry Ritholtz puts it, as yeoman’s work, is the UNFAIR, DECEPTIVE AND UNCONSCIONABLE ACTS IN FORECLOSURE CASES report that was created, presented and praised under the previous administration.

I even got word that June and Theresa actually got an award for their groundbreaking work that was presented to the “public” at the December conference of the Florida Association of Court Clerks and Comptrollers by the attorney general’s economic crimes division.

The certain “companies” that they categorized as “Foreclosure Mills” that “DICK” is referring to are The “Law Offices” of David J. Stern, Shapiro $ Fishman, Marshall C. Watson, The Florida Default Law Group, Ben-Ezra Katz, Kahane, Consuegra, Albertelli, etc…

Oh my, slanderous… /sarcasm.

Okay folks, their true colors are starting to show here.

This is why you never react with emotion, because when you do, you fail…

Quotes from the New Director of Bondi’s Economic Crimes Division Richard “DICK” Lawson on Fraudclosuregate…

But first, the latest comment from Blondi…

“The decision that supervisors made to end the employment of these two employees, like every decision made in my office, was made based on sound policy and responsible management,” she wrote. “Any suggestion otherwise is both unfounded and offensive.”

Yea, sound policy and responsible management, right…

Now the latest from DICK Lawson…

Richard Lawson, the director of Bondi’s Economic Crimes Office, said that he had met with the women three times in their South Florida office to discuss his problems with their work. However, there is no documentation of these meetings, and their annual performance reviews for the past few years were complimentary. Edwards’ direct supervisor, Bob Julian, said in an interim evaluation in April that “I cannot overstate the degree to which I respect Ms. Edwards and her work with this unit.”

Lawson said Wednesday that his first meeting with the two women was shortly after he’d started his job last spring, so he did not believe the meeting warranted formal paperwork. He also said that he was unsure why Julian did not also see problems with their work.

Okay, two things here…

One, this guy comes aboard not knowing a thing about foreclosuregate, (we met with him for about an hour in March after he claims of this meeting with June & Theresa and he still had no clue) and criticizes something he knows nothing about shortly after he started? Really?

Try harder there DICK. No pun intended…

Two, I think we should all be concerned for Clarkson’s and Edward’s previous supervisor Bill Julian with the way DICK is trying to discredit his opinion of these ladies…

He also said that he was unsure why Julian did not also see problems with their work.

I hope Bob’s job is now not in jeopardy.

To continue…

Lawson also denied that the office was easing up on Lender Processing Services, a Jacksonville firm that recently hired Joe Jacquot, a lawyer from Bondi’s office who was a holdover from former Attorney General Bill McCollum‘s office. Edwards and Clarkson had said publicly that Lawson had questioned them extensively about the firm.

Lawson said he and several assistant attorneys general from other states had met with LPS about their practices a day before the first story on Edwards and Clarkson broke and that he was “frustrated” by accusations that the office was easing up on its investigations.

So, this guy, Joe Jacquot, was hired by LPS the same week that June and Theresa were fired. His new position, Senior Vice President of Government Affairs for Lender Processing Services, Inc.

WOW, talk about a coincidence. Go from an office that is investigating LPS for fraud to its Senior Vice President of Government Affairs for Lender Processing Services, Inc. What a lucky guy!

From LPS’ web site. (You can’t make this stuff up folks!)

As Senior Vice President, Government Affairs, for Lender Processing Services (LPS), Joe Jacquot provides leadership and strategic oversight of LPS’ legislative, political, advocacy and other public affairs activities.  Joe is responsible for analyzing and responding to pending legislation and regulation affecting LPS; identifying legal, policy and operational issues for LPS; and building effective relationships with internal and external partners, including government officials and industry professional associations.

But wait, it gets better…

DICK doesn’t know when to stop…

Edwards and Clarkson said publicly in newspaper stories that their boss, Richard Lawson, who heads up the economic crimes division in Bondi’s office, questioned them extensively about two mortgage processors that are under investigation by the office, Jacksonville-based Lender Processing Services and Tampa-based ProVest.

Lawson told the News Service on Wednesday that he did indeed ask about those two companies, after their lawyers expressed concerns about the way Edwards and Clarkson were handling the cases – and, in particular about a public presentation the two gave in a public forum that gave their “impressions and theories” about the Lender Processing Services, and characterized certain companies as foreclosure mills.

Poor wittle LPS, Provest and the foreclosure mills…

I don’t know what else can be further presented to characterize these “impressions and theories” as criminal intent and felonies…

And, the “certain companies” ARE Foreclosure Mills. How else would you define them?

Fraud is fraud and it is rampant. How can you deny it?

If any one of the homeowners did anything remotely close to what these fraudsters have done they would be in jail. Do not pass go, do not collect $200, directly to jail.

Anyway, we will close this one out with Bondi’s final quote of the day…

Bondi, who was one of several politicians who got “small” campaign donations from Lender Processing Services last year, also released a lengthy statement on the growing controversy on Wednesday.

“The most important directives I have given to the Division of Economic Crimes have been to increase its efforts to pursue foreclosure law firm investigations and to protect consumers,” Bondi said in the statement. “I am proud that based on my direction, we are more aggressively pursuing foreclosure law firm investigations and have substantially increased the amount of time and more than doubled the number of employees working on these investigations. From 2009 to 2010, 1,300 hours were spent on these investigations. From April to July 2011, more than 1,500 hours have been spent on these investigations….

“The two employees who were given the option of resigning or being terminated were failing to meet expectations, and they were held accountable for those shortcomings,” Bondi wrote.

Well if that’s the case, we should be seeing some fines levied, some criminal prosecutions initiated and some bar licenses lost.

Right Pam? Because if two investigators were able to accomplish the amount of work that they did in a year, or about 1300 hours, the new “investigators” should have something out this week if they spent more time and efforts than June and Theresa did over the last 3 months or 1,500 hours than J&T spent over the last year…

If not, we will speculate why…

Is it not true that you think homeowners are a “moral hazard” that can simply take advantage of their lender? Must, protect, the banks…

“Some homeowners may simply default on their loan and use the States’ agreement to obtain a principal reduction — whether or not they actually made an effort to maintain their mortgage,” wrote Bondi, who serves on the negotiating group’s executive board.

She called it a potential “moral hazard” that “rewards those who simply choose not to pay their mortgage — because they can simply take advantage of lenders‘ obligation to honor virtually automatic principal write-downs.”

Oh, yea. I almost forgot…

If you want to contact DICK Lawson and tell him how supportive you are of him and his new fraudclosure team, you can contact him through the methods below…

Richard “Dick” Lawson
Director Economic Crimes Division
Office of the Attorney General
State of Florida
PL-01, The Capitol
Tallahassee, Florida 32399-1050
Ph: (850) 414-3300
Fax: (850) 488-1249
Richard.Lawson@myfloridalegal.com

But don’t don’t be disappointed if you do not get a response. We have sent numerous requests to his new fraudclosure “investigators” on who is monitoring and enforcing the Marshall C. Watson “settlement agreement,” in which it appears to have ongoing violations and have received no responses at the time of this posting…

Mark Stopa

www.stayinmyhome.com

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Title Problems, Take Two

Nearly a year ago, I was doing everything I could to alert the public about the impending title problems resulting from foreclosures being processed too quickly.  The New York Times and USA Today wrote stories about it, here, and several Florida reporters did so as well, contemporaneous with my blogs, here, here, here, and here.  But basically the issue went away quietly. 

Now, it’s re-emerged, finally and appropriately, in two key ways. 

First, MERS announced it changed its procedures to require that an assignment of mortgage be filed prior to the start of any foreclosure suit.  To me, this is a tacit yet glaring admission of the huge title problems that have existed in a huge percentage of foreclosure cases.  This isn’t a complicated issue, either – it’s just one that everyone has ignored. 

Take your standard MERS mortgage – a mortgage recorded in the public records with MERS as nominee for XYZ Corp.  Invariably, when the foreclosure lawsuit is filed, it’s not filed in the name of XYZ Corp., it’s filed in the name of Bank of America, JP Morgan Chase or some securitized trust – an entity with no relationship to XYZ Corp. 

In most foreclosure cases, banks’ lawyers argue the plaintiff has standing if it is the “holder” of the Note, i.e. if it possesses the original note with a special indorsement or indorsement in blank.  Many judges accept this position, no questions asked.  In other words, an assignment of mortgage is often viewed as irrelevant/superfluous. 

But I’ve often asked “what about title?”  Remember, the ultimate purpose of a foreclosure lawsuit isn’t merely to foreclose, it’s to convey title to someone.  Has that been happening?  Unfortunately, no.  Even if Bank of America, JP Morgan Chase, or the securitized trust has standing (a huge if, but that’s a whole other blog), without an Assignment of Mortgage in the public record, XYZ Corp. is still the mortgage holder of record.  This means that even if Bank of America, JP Morgan, or whoever prevails in the foreclosure is the high bidder at the auction, acquires title, and sells the property to a third party, XYZ Corp. is still the mortgage holder of record.  What does that mean?  Essentially, the entire foreclosure case was like a wild deed – it took place, but XYZ Corp. can still institute a foreclosure lawsuit in its own name, as it would have priority over the bona-fide purchaser who acquired title from the bank. 

That sounds crazy, I know.  But think about it.  If XYZ Corp. is the mortgage holder of record, and it’s not named as a party in the mortgage foreclosure suit, and there is no Assignment of Mortgage, then the mortgage in favor of XYZ Corp. still exists, even after the foreclosure, even after the auction, and even after the sale to the third party.  Yes, the foreclosure happened, but as far as XYZ Corp. is concerned, the foreclosure is irrelevant – it still has the mortgage. 

There are only two ways to prevent this – join XYZ Corp. as a defendant in the lawsuit (meaning the final judgment of foreclosure would be res judicata as to any subsequent claim on the mortgage), or record an Assignment of Mortgage in the public records. 

In my view, MERS finally caught on to this problem, hence the change in its procedures.  But what about the hundreds of thousands of foreclosure cases that were completed or remain pending (prior to this change)? 

It’s up to all of us to educate judges about this problem.  “Yes, judge, the plaintiff may have standing.  But even if it does, XYZ Corp. is an indispensible party, and you cannot enter a final judgment of foreclosure without it.”  When the judge acts confused, explain that since XYZ Corp. is the mortgage holder of record, it can prosecute a foreclosure lawsuit even after the plaintiff acquires title and sells the property to a third party.  And since that defeats the purpose of a foreclosure, subjects homeowners to two lawsuits on the same debt, and will cause indescribable title problems (for innocent third parties), we cannot allow that.  Apparently, MERS now realizes as much, hence the change in procedures. 

Old Republic is starting to feel the impact of title problems, announcing it may have to stop issuing title policies.  Is the timing of this announcement a coincidence, coming right on the heels of MERS changing its policies?  Maybe, but I doubt it.  Apparently … hopefully … the title insurance industry is finally catching on to the huge, widespread title problems that are emerging as a result of foreclosure cases being pushed through in a sloppy, haphazard manner.

Mark Stopa

www.stayinmyhome.com

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The Biggest Transfer of Wealth in the History of Mankind; Does Anyone Care?

Florida truly is the epicenter of the foreclosure crisis. Want more proof? While sitting in my hotel room in NYC, I happened upon a New York Times article about foreclosure sales in Miami-Dade County. The point of the article (the author’s “angle,” if you will) was to show that the real estate market is not as bas as some people think because wealthy investors are buying houses and condos in Florida in all-cash transactions. Hence, David Streitfeld titled the article “Affluent Buyers Reviving Market for Miami Homes.”

We can debate the veracity of that viewpoint, i.e. the real estate market is improving in Florida all day long – personally, I don’t think it is. The point, though, is that the article glosses over the bigger picture … In fact, everyone is glossing over the bigger picture.

Even if you accept (which I don’t) the concept that the real estate market is improving, clearly, the market isn’t improving for everyone. As the article shows, the “deals” in this “buyer’s market” are almost always “cash” transactions. I don’t know about you, but I don’t have hundreds of thousands of dollars, cash, to buy an investment home. Do you? Do you know ANYONE who does? Clearly, it’s only the ultra-rich, the mega-wealthy, the socio-economically elite, who have the means to take advantage of this “buyer’s market.” Remember, banks aren’t lending, so you have to be independently wealthy to buy any of these investments.

So what does this mean? The mega-rich have the means to get “in” on these bargains while middle-class Americans stand helplessly on the sidelines and watch, knowing the deals are available but unable to do anything about it. Worse yet, these homes were taken from the middle-class, so it’s basically a double-whammy – the middle-class lost their homes, and they have to watch while the uber-rich buy their homes as investments at bargain-basement prices.

Am I the only one disgusted here? Where is the outrage? Why isn’t anyone in our government screaming:

THIS IS THE BIGGEST TRANSFER OF WEALTH IN THE HISTORY OF MANKIND … AND IT MUST STOP!!

It’s sadly ironic, actually. When he was running for President, Obama was accused by some of being a Socialist – of wanting to divide wealth equally among everyone. In fact, the typical Democratic viewpoint (I realize I’m simplifying) is to take from the rich and give to the poor. Yet during his Presidency, exactly the opposite has transpired – the mega-rich are getting richer while everyone else is getting poorer.

Unless something changes, this problem is only going to get worse over the next several years. Homeowners will keep getting foreclosed. Banks will keep unloading REO from their inventory, and they’ll keep doing so to the only people who can afford to pay cash – the mega-rich. Meanwhile, middle-class America will sit idly by, watching their collective wealth be transferred to those who are already wealthy.

Many Americans already believe the US government is run by the rich, for the rich. After all, if this is what’s happening on Obama’s watch, what will happen if/when a staunch Republican takes office? My point isn’t to initiate a political debate. Rather, it seems clear that nobody in our government is willing to stand up to the banking industry or the mega-elite because nobody in politics wants to bite the hands that feed them. And that’s the perpetual problem – the politicans are all rich (or depend on the rich for their re-election campaigns), so regardless of party lines, they all cater to the whims of the rich and powerful. If you disagree, you tell me – what is Obama, or anyone else in government, doing to stop/slow the unprecedented transfer of wealth from middle-class America to the uber-wealthy?

My solution? Adide from not allowing foreclosures to be processed (at breakneck speed, if at all), I see a few options. First, let’s tax the hell out of all the banks that took bailout money and aren’t lending. I suppose I agree we can’t “make” banks lend, but we can punish them for refusing to do so. Make the punishment steep enough and they’ll start lending again. That way, at least some middle-class Americans will have a chance to take advantage of the low real estate prices, if they so choose.

Second, there has to be a way to get typical, middle-class Americans into our government. Our government is supposed to be run “by the people, for the people.” The system can’t work when virtually everyone in politics is rich … All that happens is there is no voice for the majority of Americans.

I’m sure there are many other posible solutions. In my view, though, it all starts with acknowledging the problem. The current system isn’t working. It’s not fair that the rich are getting richer at the expense of mainstream America, and it’s appalling that nobody in a position of authority is saying so.

Mark Stopa

www.stayinmyhome.com

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Florida Lawyer Facing Suspension for Mortgage Modification Scam

Nearly every client or prospective client who has consulted with Stopa Law Firm over the years has expressed a desire to obtain a loan modification.  As much as I’d love to tell these homeowners what they want to hear, the sad reality is that mortgage modifications are few and far between, especially those with principal reductions

Unfortunately, not everyone in the industry shares the necessary candor with homeowners.  The story below, for instance, shows how one Florida lawyer duped thousands of homeowners into paying him an up-front fee based on promises of a loan modification … promises which he obviously can’t deliver. 

If you’re a homeowner facing foreclosure, let this be a gentle reminder of a a few basic things. 

1.  Loan modifications are rare, especially with principal reductions.  I know that’s frustrating, believe me – but don’t shoot the messenger.  

2.  If anyone is promising you a loan modification with principal reduction, predicated on you paying an up-front fee, be very wary – it’s probably a scam.  The number of scam operations has gone down in recent years, but as you can see, they’re still out there.

3.  Even if you’re trying to get a loan modification, you must defend your foreclosure lawsuit in the interim.  Otherwise, you may think you’re negotiating for a mortgage modification, but those negotiations will end quickly once the foreclosure lawsuit ends with a Final Judgment of Foreclosure. 

Of course, if you’ve been a victim of William O’Toole or Summit Legal Group, feel free to contact Stopa Law Firm for a consultation – we’ll be happy to see if it’s not too late to help you.   

Here is the article, courtesy of the Daily Business Review. 

The Florida Bar has called for an emergency suspension of Boca Raton lawyer William O’Toole, declaring the foreclosure defense lawyer presents “great public harm.”

In its petition for suspension, which the Florida Supreme Court is expected to rule on today, the Bar alleges that O’Toole has partnered with non-lawyers to create Summit Legal Group and collect up-front fees from clients for mortgage modifications.

State law prohibits non-lawyers from collecting up-front fees in exchange for promises of obtaining mortgage modifications. Attorneys general throughout the country have warned consumers that mortgage modification centers are a relatively new phenomenon that produce few or no results for distressed homeowners. The Bar has warned lawyers not to partner with non-lawyers on such endeavors.

According to the Bar’s petition, O’Toole is the subject of 20 complaints and has been under investigation by the Bar since March 2010. He partnered with non-lawyer Randy Baker, who is under investigation by the Florida attorney general, the petition states, to send him “leads” and then split fees with Baker in violation of Bar rules.

O’Toole currently has between 2,500 and 3,000 clients “and admits that he has so many files he does not know the status of the client’s files,” according to the Bar petition.

O’Toole did not return phone calls by deadline.

The Daily Business Review recently reported that another lawyer, Rashmi Airan-Pace, was suspended by The Bar for allegedly operating a similar mortgage modification service with a non-lawyer company. The Bar alleged Airan-Pace took up-front fees and promised to obtain mortgage modifications for underwater homeowners without results.

Mark Stopa

www.stayinmyhome.com

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The Debt Ceiling

I don’t typically post about political issues, but I can’t help but share my view about the debt ceiling.  Basically, I’m aggravated because both sides are arguing, yet both sides are right, and both fail to see the big picture. 

Would it be bad for the United States to default right now, further damaging an already fragile economy?  Yes. 

Would it be bad for the United States to keep raising the debt ceiling and keep incurring vast debts that we will have to pay in the future?  Yes. 

So what’s really going on here? 

Imagine a typical, middle-class family facing foreclosure.  One spouse is unemployed/underemployed, the family is struggling financially, and they’re running up credit card debts to try to stay afloat. 

Everyone knows, when you put it in these terms, that the family can’t keep using their credit cards forever.  Eventually, something will have to change.  If the family’s income doesn’t increase, then, at some point, the family’s creditors will insist that the debts be paid and, unable to do so, the family will be foreclosed, bankrupt, or both. 

Everyone realizes this, right?  Then why is the analysis any different for America?

Our country is in the same boat.  We can keep using our credit cards (running up the debt ceiling), but eventually, our creditors are going to push for payment and, unable to pay, we’re going to go bankrupt.  Alternatively, at best, future generations are going to pay out the wazoo for the debts we’re incurring now. 

As I see it, America has incurred enough debt in recent years.  If we’re going to raise the debt ceiling, fine, but do so as part of a plan to cut spending and pay that debt back.  Otherwise, America is no different than a family running up credit card bills with no realistic ability to pay them back.  In other words, it’s not fair to future generations to incur these debts simply because Americans don’t want to deal with its problems now.

Mark Stopa

www.stayinmyhome.com

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“Judge with Interest in Bank Shouldn’t Hear Foreclosure Cases”

I’ve made my views clear about Judge Cook presiding over foreclosure cases; Shannon Behnken of the Tampa Tribune gave her version here

I’m disappointed to see Judge Cook’s take on the story.  Respectfully, the issue isn’t whether she thinks she’s biased; it’s whether homeowners could reasonably think she’s biased.  As Henry Trawick appropriately notes, that is the standard for disqualification in Florida. 

Here’s the article. …

TAMPA —

A Hillsborough County judge seeking to tame a backlog of thousands of foreclosure lawsuits is raising questions from critics who wonder whether she should be hearing foreclosure cases at all.

Judge Martha J. Cook has an ownership interest in Community Bank, where her husband, William H. Sedgeman Jr., serves as chairman and chief executive, public documents show.

The bank, known formally as Community Bank of Manatee, has 17 locations throughout the Tampa Bay area. The bank has been hard-hit by the foreclosure crisis and has struggled to shed troubled assets.

Like most banks, Community Bank often finds itself as a plaintiff against homeowners in foreclosure cases.

“It’s reasonable that a homeowner would fear they aren’t going to get a fair hearing before her,” said Mark Stopa, a foreclosure defense attorney. “There’s no way I could go into court before her without thinking about this.”

But Cook said she is not prejudiced.

“I don’t have bias,” Cook said. “I listed my connection, as required by the law. Beyond that, my personal life is my personal life.”

The state’s Judicial Qualifications commission’s code of conduct does not expressly prohibit judges from owning stock in companies they may see in the courtroom, but it does require disclosure.

The financial disclosures must be filed yearly with the Florida Commission on Ethics. On forms filed for 2007 and 2008, Cook checked a box indicating she had more than 5 percent interest in the bank. In 2009 and 2010, Cook indicated she still had an interest but that it was less than 5 percent.

Cook told the Tribune she disclosed this because of her husband’s interest in the bank. She said she doesn’t hear cases involving his bank and doesn’t feel she has a conflict of interest by overseeing foreclosures by other banks.

The 13th Judicial Circuit, which includes Hillsborough County, has nearly 30,000 foreclosure cases at some stage in the court system. Cook is one of 10 judges assigned those cases. This time last year, the state implemented a program to shed the backlog. Retired senior judges were brought back to hear foreclosure cases.

But the program was controversial, and judges were accused of rubber-stamping foreclosures and not checking documents. This came to a boil late last year when some banks admitted that employees fabricated documents and forged signatures. The legislature discontinued Florida’s foreclosure program, and starting this month, it’s now up to elected judges, such as Cook, to hear cases.

Mike Bridenback, court administrator for Hillsborough County, said Cook was the first to add foreclosure cases to her July calendar. Working through the backlog is important to the circuit, he said, but judges still want to give homeowners who chose to fight their foreclosure a chance to be heard.

Bridenback said he wasn’t aware of Cook’s relationship with the local bank. He said each judge has to decide whether they have a conflict of interest and that he’s not aware of any problems with her cases.

“Judges have lives beyond the bench,” Bridenback said.

Henry P. Trawick Jr., a Sarasota lawyer and author of Florida’s Practice and Procedure, a textbook used by lawyers, said it’s good that Cook disqualifies herself from hearing cases that involved her husband’s bank. But he said she should go a step further.

“I think she shouldn’t hear foreclosure cases,” Trawick said. “That’s what I would do if I had that close of a connection, but perhaps my ethical standards are higher.”

The problem, Trawick said, is whether or not Cook shows favor to the banks; those representing homeowners may feel like she might.

Hillsborough’s other nine judges have not owned bank stock over at least the past four years, according to state disclosure documents.

Stopa, the foreclosure defense attorney, said Cook once told him in court that she thought the “only way to improve the economy is to push through foreclosures as soon as possible.”

Cook said she was misquoted, but she declined to correct the statement.

Mike Wasylik, a foreclosure defense attorney, said he’s had few cases before Cook but is uncomfortable with her connection to a local bank.

“A judge has the duty to avoid even the appearance of bias,” Wasylik said. “She may have personal opinions about the need to push foreclosures through quickly.”

Phyllis Kotey, a professor at FIU School of Law, said the connections show an “appearance of personal and financial interest.”

“At the very least, parties before her should be put on notice and have the opportunity to object to her hearing their cases.”

Mark Stopa

www.stayinmyhome.com

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Thank You

Stopa Law Firm was flooded today with emails and phone calls thanking me for writing this letter to a local judge (asking her to remove herself from all foreclosure cases given her ties to the banking industry). 

I’m thankful and humbled at the support.  From the bottom of my heart, I really appreciate it.  Sticking my neck out there isn’t always easy, but it sure helps having so much support from so many good people.

Mark Stopa

www.stayinmyhome.com

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Florida Turns its Back on Foreclosure Fraud – Again

This morning, I was chatting with fellow foreclosure defense lawyer Matt Weidner, and we agreed that being a foreclosure defense attorney is like pushing a boulder up a mountain.  Often, it seems like everyone and everything is against you, and if you take a breath for a moment, the boulder will crush you.  Ideally, we could take a break while someone else pushes the boulder or holds it in place, but that’s the problem – there are far too people willing to help in the fight. 

Don’t understand what I mean?  Check out this article, below. 

You see, two employees of the Florida Attorney General’s Office were actively and aggressively investigating fraud by banks in foreclosure cases.  They had repeatedly earned glowing reviews from their employer and helped shine a huge spotlight on foreclosure fraud, even on a national level.  Their work even impacted a court ruling in a New York case.

That all sounds good, right?  It was – until they were forced out of their jobs, without explanation, without notice, and without being replaced.  Just like that, POOF – their investigation was over. 

That begs the question … why?  Why were they forced to leave?  Why did their investigation stop?  For me, there is only one answer.  Florida’s Attorney General, Pam Bondi, whose job it is to investigate and prosecute fraud, has turned her back on the fraudulent practices by banks and Wall Street, succombing to the power of the industry, just like too many others in our country.  Does that sound harsh?  Speculative?  Maybe.  But what other conclusion can we draw (particularly when she won’t explain why these employees, who earned positive reviews, were ousted without notice, without explanation, and without being replaced)?

I’ll keep pushing the boulder.  I just wish there were more people, especially those in positions of authority, willing to help. 

Here’s the article, courtesy of the Orlando Sentinel …

A few months ago, two of Florida’s assistant attorneys general were blowing the lid off foreclosure fraud in this state.  They were turning up evidence of bogus paperwork, exposing the law firms and lenders at fault — and making them pay.

If the world of investigatory accounting had rock stars, Theresa Edwards and June Clarkson were Beyonce and Lady Gaga.  Right up until they were ousted, anyway.

At the height of their popularity, when Edwards and Clarkson were generating national headlines — and making profiteers nervous — Attorney General Pam Bondi‘s office asked them to leave.

So said Edwards, who recalled: “Our director called us in at 3:30 one Friday afternoon and said: ‘You can either resign today, or you’re going to be fired.'”

The news came on the heels of a performance review filled with praise.

“Obviously we did our job too well,” Edwards said. “We were making too much noise.”

Bondi’s office won’t say why the two were ousted — or even confirm that they were. Instead, the office stresses that the two attorneys “resigned.”

Spokeswoman Jennifer Meale said her office is as committed as ever to rooting out financial fraud. “The resignations of these two individuals will not impede these investigations,” Meale said. “In fact, we are more aggressively pursuing these investigations.”

Edwards found that claim interesting — since neither she nor Clarkson were even allowed to brief anyone else in the office on the year’s worth of work. “I couldn’t even write a memo,” she recalled.

This duo attracted acclaim for exposing “foreclosure mills,” which are involved in ousting massive numbers of families from their homes, sometimes without following all the rules.

They discovered fraudulent signatures and bogus names. (Literally: “Bogus” was the first name in the blanks of some documents.)  Some documents contained dates that were off by a few years. One was off by 8,000.  In other instances, financial powerhouses claimed to have “lost” paperwork.

“Fraudulent Practices come in all shapes and sizes,” the women concluded in their report. “Robo-signers. Fake witnesses. Fake notaries. Fake documents. False affidavits.”

And keep in mind: All of this had to do with companies attempting to foreclose upon people’s homes.

The duo’s work attracted widespread attention — from the Los Angeles Times to the Washington Post. “60 Minutes” was particularly intrigued with their disclosure that “Linda Green” had signed thousands of mortgage documents and supposedly served as a vice president of more than 20 banks.

The firms began feeling the pressure. One agreed to pay $2 million in a settlement.  Edwards’ and Clarkson’s work was largely responsible. And their bosses knew it.

In a performance evaluation obtained by the Palm Beach Post, Edwards’ supervisors praised her work, calling it “instrumental in triggering a nationwide review of such practices.”

One month later, Edwards was gone.

On one level, it’s hard to believe Bondi’s office would oust its best-known crusaders just to silence them — if only because it would be so politically stupid.

But the fact that Bondi and her staff won’t offer any explanations is troubling. (And excuses about the private nature of personnel decisions seem pretty thin when the personnel involved have pretty clearly waived any expectation of privacy. Plus, truth is most always a good defense.)

As far as doling out justice goes, Bondi’s long-term actions will speak loudest.

The head of her office’s economic-crimes division vowed Tuesday that his office is working more aggressively than ever — though he wasn’t sure what, if any, punishment other firms or fraud perpetrators might face.

So, one of two things will happen:

Either Bondi’s office will aggressively stand up for consumers, making the bad guys pay — no matter whose feathers it ruffles.

Or it will resort to the pulled-punches approach to watchdogging that many Floridians have come to expect from attorneys general, present and past — the kind where inflammatory press releases bashing other politicians make more headlines than crusades against the powerful on behalf of the meek.

Edwards, who has since started a new law firm with Clarkson, fears it will be the latter, saying others in the attorney general’s office saw what happened to her.

“We just couldn’t understand how we were the bad guys here,” she said. “We thought our job was to protect the consumer from unfair and deceptive trade practices. And that’s all we tried to do.”

Mark Stopa

www.stayinmyhome.com

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No Punishment = Continued Misconduct

In Maine, a group of drug dealers was caught distributing drugs to local middle schoolers.  They confessed, yet the District Attorney declined to press charges, so the drug dealers returned to the school and passed out more drugs. 

In Kansas, police apprehender a serial killer, yet, despite his confession, decided to let him go free.  Upon his release, he murdered 12 more women. 

In Florida, a man confessed to the arson of 14 homes.  After law enforcement declined to take any action, the arsonist burned down another 16 houses. 

If these stories sound impossible to believe, they are – I made them up.  But this one is perhaps just as disturbing, and it’s true … Banks Continue Robo-Signing.

How can this be, you ask?  Well, it’s simple (sickening, but simple).  Banks admitted to robo-signing foreclosure documents on a widespread, systematic basis.  But after they were never punished for that wrongdoing, they, like the drug dealer, murderer, or arsonist in my examples above, saw no reason to stop the fraudulent misconduct. 

Here’s the article. …

NEW YORK/IMMOKALEE (Scot J. Paltrow) – America’s leading mortgage lenders vowed in March to end the dubious foreclosure practices that caused a bruising scandal last year.

But a Reuters investigation finds that many are still taking the same shortcuts they promised to shun, from sketchy paperwork to the use of “robo-signers.”

In its effort to seize the two-bedroom ranch house of 87-year-old Margery Gunter in this down-on-its-luck Florida town, OneWest Bank recently filed a court document that appears riddled with discrepancies. Mrs. Gunter, who has lived in the house for 40 years and gets around with the aid of a walker, stopped paying her loan back in 2009, her lawyer concedes. To foreclose, the bank submitted to the Collier County clerk’s office on March 3 a “mortgage assignment,” a document essential to proving who owns a mortgage once the original lender sells it off.

But OneWest’s paperwork is problematic. Among the snags: state law permits lenders to file to foreclose only if they already legally own a mortgage. Yet the key document establishing ownership wasn’t signed and officially recorded until months after OneWest filed to foreclose on Mrs. Gunter. OneWest declined to comment on the case.

Reuters has found that some of the biggest U.S. banks and other “loan servicers” continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures.

In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts.

Reuters also identified at least six “robo-signers,” individuals who in recent months have each signed thousands of mortgage assignments — legal documents which pinpoint ownership of a property. These same individuals have been identified — in depositions, court testimony or court rulings — as previously having signed vast numbers of foreclosure documents that they never read or checked.

Among them: Christina Carter, an employee of Ocwen Loan Servicing of West Palm Beach, Florida, a “sub-servicer” which handles routine mortgage tasks for banks. Her signature — just two “C”s — has appeared on thousands of mortgage assignments and other documents this year.

In a case involving a foreclosure by HSBC Bank USA, a New York state court judge this month called Carter a “known robo-signer” and said he’d found multiple variations of her two-letter signature on documents, raising questions about whether others were using her name. That and other red flags prompted the judge to take the extraordinary step of threatening to sanction HSBC’s chief executive officer.

In a phone interview, Carter acknowledged signing large numbers of mortgage assignments this year, but said they all were legally done. To her knowledge, she added, no one else used her name.

‘CUTTING CORNERS’

One of the industry’s top representatives admits that the federal settlements haven’t put a stop to questionable practices.

Some loan servicers “continue to cut corners,” said David Stevens, president of the Mortgage Bankers Association. Nearly all borrowers facing foreclosure are delinquent, he said, but “the real question is whether the servicer complied with all legal requirements.” The loss of a home is “the most critical time in a family’s life,” and if foreclosure paperwork is faulty homeowners should contest it. “Families should be using every opportunity they can to protect their rights.”

Federal bank regulators signed settlements in March with 14 loan servicers — banks and other companies that perform tasks for mortgage investors such as collecting payments from homeowners and when necessary, filing to foreclose. The 14 firms promised further internal investigations, remediation for some who were harmed and a halt to the filing of false documents. All such behavior had stopped by the end of 2010, they said.

Of these companies, Reuters has found at least five that in recent months have filed foreclosure documents of questionable validity: OneWest, Bank of America, HSBC Bank USA, Wells Fargo and GMAC Mortgage.

So have half a dozen large servicers that weren’t party to the agreements, including Ocwen Financial Corp and units of Credit Suisse Group AG.

Spokesmen for the banks and servicers named in this article said that they halted any wrongdoing after disclosures last autumn of robo-signing led them to revise their practices, and they denied filing false documents since then.

In general, they said their foreclosure cases were legitimate, but for a small number of exceptions, and that criticism by defense lawyers and judges of some types of documentation is based on misinterpretation of the law.

The persistence of the paperwork mess poses a dilemma for American policymakers and society at large.

The vast majority of homeowners in foreclosure are in fact delinquent on their mortgage payments. Many bankers and judges view the issue as a technicality. Regardless of legal niceties, they say, people should pay up or lose the collateral on the loans — their houses and condos.

Increasingly, though, courts are holding that the trusts suing to foreclose don’t actually own the mortgages. Judges have ruled that foreclosing based on flawed or missing evidence violates longstanding laws meant to protect all Americans’ property rights.

In a landmark decision in January, the Massachusetts Supreme Judicial Court overturned a foreclosure because of a lack of proper documentation.

“The holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order,” wrote Justice Robert Cordry in a concurring opinion. “Although there was no apparent actual unfairness here to the (homeowners), that is not the point. Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it.”

(U.S. Bank National Association, trustee, vs. Antonio Ibanez, 458 Mass. 637.)

A THOUSAND QUESTIONS

Reuters reviewed records of individual county clerk offices in five states — Florida, Massachusetts, New York, and North and South Carolina — with searchable online databases. Reuters also examined hundreds of documents from court case files, some obtained online and others provided by attorneys.

The searches found more than 1,000 mortgage assignments that for multiple reasons appear questionable: promissory notes missing required endorsements or bearing faulty ones; and “complaints” (the legal documents that launch foreclosure suits) that appear to contain multiple incorrect facts.

These are practices that the 14 banks and other loan servicers said had occurred only on a small scale and were halted more than six months ago.

The settlements included the four largest banks in the United States — Bank of America Corp, Wells Fargo, JP Morgan Chase & Co, and Citigroup Inc. The other parties were lending units of Ally Financial Inc, HSBC Holdings PLC, MetLife Inc, PNC Financial Services Group Inc, SunTrust Banks Inc, U.S. Bancorp, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank.

The pacts were struck with the Office of the Comptroller of the Currency, the main regulator of national banks, as well as with the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.

Some state and federal officials have called the settlements weak. Authorities are still working out financial penalties to be imposed on the 14 firms. The banks didn’t admit or deny wrongdoing, and many of the practices banned were previously illegal anyway, such as filing false affidavits and making false notarizations. And regulators left it to the banks to oversee their own internal investigations.

The OCC confirmed it has received complaints that questionable practices continue. But spokesman Bryan Hubbard said the settlements “are intended to address many of the root causes of improper foreclosure actions,” thus preventing future harm.

WAVE OF FORECLOSURES

The collapse of the housing boom in late 2006 led to a wave of foreclosures. Federal Reserve data show that some 4.5 percent of U.S. mortgages are in foreclosure. In 2010, 2.5 million foreclosures were initiated, with a similar number expected this year.

In the housing boom, lenders created millions of new mortgages, packaged them into pools, and securitized them rapidly for sale to investors in so-called mortgage-securities trusts.

The agreements setting up the trusts, called “pooling and servicing agreements,” require that key documents, properly executed and endorsed, be turned over immediately for each mortgage when a trust is established. The two most important ones are a promissory note and mortgage assignment.

A mortgage really has two parts. One is the actual mortgage (in some states called a “deed of trust”). Its purpose is to pledge the home as collateral for the loan. To transfer ownership of this collateral pledge, the seller must issue a document called a mortgage assignment. The other is the promissory note, which is the loan agreement itself. The homeowner signs it, promising to pay principal and interest.

The Reuters examination turned up thousands of instances –more than 2,000 in Florida alone — involving recently filed mortgage assignments which ostensibly transferred mortgages to these trusts years after they were formed.

The problem, according to Georgetown University law professor Adam Levitin, an expert on securitization: About 80 percent of all trust agreements provide that New York State law applies, and under New York law, any mortgage assignments made later than specified in the agreements would be void.

Reuters has also uncovered problems with the other key document used in foreclosure cases, the promissory note.

To foreclose, a trust, bank or mortgage finance giant such as Fannie Mae or Freddie Mac must possess the original “blue ink” signed promissory note. The crucial parts of the note are at the bottom — the endorsements, somewhat like those on the back of a check. The agreements establishing trusts require a proper chain of endorsements showing legal transfers of a note from the original lender, through any intermediary owners, and finally to the trust itself.

Attorneys defending homeowners contend that improper endorsements are rife. Reuters obtained from public court records and defense attorneys more than 100 examples of notes that for various reasons appear to be improper.

MYSTERY OF MARY ARTHUR

One example: The attempt by Credit Suisse unit DLJ Mortgage Capital to foreclose on Mary Arthur of Dobbs Ferry, New York. Mrs. Arthur, 63 and legally blind, works part time as an assistant in a doctor’s office. Originally from Trinidad, Mrs. Arthur became delinquent on her $427,500 loan after her parents and sister died and she ran up debts traveling home for the funerals, according to her attorney, Linda Tirelli.

The loan servicers, Select Portfolio Servicing of Salt Lake City, threatened to foreclose on DLJ’s behalf. Mrs. Arthur arranged with Select Portfolio a trial mortgage modification to see if she could keep up with the reduced payments. She made the payments but, Tirelli said, Select Portfolio filed to foreclose.

DLJ filed in two separate court cases what it said were authentic copies of Mrs. Arthur’s promissory note. Because they were supposed to be copies of the same document, the endorsements filed with both courts should be identical.

But a look at the documents shows that the version filed in state court and the one filed in bankruptcy court had completely different endorsements on them — naming different owner banks and signed by different people. Tirelli said she has brought this to the attention of the bankruptcy judge and is awaiting a ruling.

Credit Suisse, which owns both DLJ Mortgage Capital and Select Portfolio Servicing, declined to comment, as did Casey Howard, the lawyer representing DLJ in the bankruptcy case.

Bank of America, meanwhile, is coming under fire from a New York federal bankruptcy judge.

Last Tuesday, Judge Robert Drain ordered an investigation involving a foreclosure case brought by the bank. Two earlier copies of a promissory note filed in court had lacked any endorsement, but then one appeared on the note when bank lawyers produced the original.

The judge said the sudden appearance of an endorsement, and his own close look at it, raised questions about whether it had been added illegally to make the note look legitimate.

It “raises a sufficiently serious issue as to when and more importantly by whom this note was endorsed,” the judge said.

A Bank of America spokesman said the bank will produce evidence that “will demonstrate to the court’s satisfaction that the endorsement is proper.”

MISSING SIGNATURES

These banks aren’t alone in filing doubtful documents. Reuters found cases in which Wells Fargo didn’t obtain mortgage assignments — and hence the right to foreclose — until well after it had filed foreclosure cases.

Wells Fargo, as a trustee, has moved to foreclose on homeowners who have mortgages from now-defunct Option One Mortgage Corp. In June, a bankruptcy appellate panel of the federal Ninth Circuit Court of Appeals overturned a decision to allow Wells Fargo to foreclose on an Option One mortgage. It said that there was no evidence that the note and mortgage had ever been turned over to Wells Fargo as trustee.

In court files of Florida foreclosure cases by Wells Fargo on Option One mortgages, none of the promissory notes filed as exhibits in 10 cases found by Reuters had any endorsements on them.

A Wells Fargo spokeswoman said it is possible that proper endorsements exist but were omitted from the copies of the promissory notes filed in court.

In other cases reviewed by Reuters, Wells Fargo and GMAC Mortgage, a unit of Ally Financial, this year assigned mortgages from defunct lender New Century Mortgage Corp., which went under in 2007. Securitization lawyers say it is technically impossible for a defunct company to directly assign a mortgage over to another owner.

Mark Stopa

www.stayinmyhome.com

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An Appeal to the Trial Court Judges

Below is an email I just wrote to the Honorable Thomas McGrady, Chief Judge of Florida’s Sixth Judicial Circuit.  My point in writing him was to show him the Florida Supreme Court’s recent ruling regarding lack of prosecution, i.e. Rule 1.420(e), and see if he’d be willing to discuss the issue with the powers that be, i.e. the Florida Supreme Court. 

After I hit “send,” I realized that this appeal needs to be made to all Florida judges and all Florida homeowners.   

If you’re a judge, and you agree with me that our courts desperately need a mechanism to adjudicate/dispose of foreclosure cases that have been languishing for years with little/no activity, then tell the Florida Supreme Court it should amend Rule 1.420(e) to give it some “teeth.”

If you’re a homeowner, and you agree with me that giving Rule 1.420(e) some “teeth” is a better solution than the procedures currently being employed in Florida courts, then tell someone about it. 

The Florida Supreme Court’s recent ruling on this issue is, in my view, terribly impractical.  With the tremendous backlog of cases before our courts, the Court should be making it easier, not harder, to dismiss cases for lack of prosecution. 

Respectfully, I cannot help but think that if the Court realized what was going on – if it saw what we see on the front lines of the foreclosure crisis, that it would agree that Rule 1.420(e) should be amended to make it easier, not harder, to dismiss cases that have been languishing. 

Here is my email …
Your Honor,
I know this seems like it’s out of the blue, but if you haven’t seen it already, I wanted to discuss with you the Florida Supreme Court’s recent opinion,
here, which clarified just how high the standard is to dismiss cases for lack of prosecution. 
 
Respectfully, I find this ruling bitterly disappointing, and I suspect you do as well, particularly as it pertains to the foreclosure crisis. 
I mean, this case gave the FL SUP CT an opportunity to help judges such as yourself deal with the enormous backlog of cases by making Rule 1.420(e) have some “teeth.” 
I’m not suggesting it go overboard, but at least make it more like the Rule was prior to its amendment in 2006. 
 
If that had happened, judges such as yourself would have a legitimate way to adjudicate/dispose of foreclosure cases that have been languishing with little/no activity for years. 
I think anyone on the front lines of the foreclosure crisis would acknowledge the need for such a mechanism. 
 
Instead, the way the Court ruled, it is basically impossible to dismiss for lack of prosecution. 
The plaintiff can file any piece of paper in a year and the case remains active. 
 
I understand the Court’s rationale, it just seems to me to be terribly impractical in today’s climate. 
 
I’d point you to the last paragraph of Justice Pariente’s concurring opinion, where she notes:
Unfortunately, the significantly diminished resources available to the trial courts, including lost case managers and the flood of mortgage foreclosure cases, have taxed our trial courts to the limit, making active case management more difficult in all cases.  Regardless, the bottom line is that these problems cannot be solved by using Rule 1.420(e) to dismiss cases where the litigants intend to continue to prosecute the case to a conclusion.
She recognizes the problem but declines to apply the rule in a way that would help cases be dismissed. 
My question is … why? 
 
Why not employ the rule as it previously existed, at least with respect to the 60-day period after the Notice of Intent to Dismiss? 
 
I know that judges throughout Florida are looking for ways to get through the backlog of cases. 
Why not have a Rule 1.420(e) that allows courts to legitimately do that? 
I’d argue that is much better than some of the procedures going on throughout the state. 
 
In my view, a rule like that would help courts legitimately deal with the backlog AND help the budgetary constraints. 
After all, every time a case is dismissed for lack of prosecution, it is dismissed without prejudice, so the case is re-filed, and a new filing fee ensues. 
 
My point here is this …
I believe you have the power, if you were so inclined, to bring this issue to the attention of the appropriate people. 
I respectfully request/encourage you to do so, as I think it will help you and other judges/courts throughout the state. 
 
I am willing to help however, I can, but my “power” is quite limited (though I will note that I interned for Justice Quince several years ago, and she wrote the dissenting opinion).
 
If this email is out of line, then I apologize. 
I just can’t help but think that you will agree with me on this issue and that if this Rule were given more thought, that the Court could be convinced that its recent ruling is not the best way to deal with the current climate of foreclosure cases. 
 
If you prefer to talk to me about this, feel free to do so at 727-XXX-XXXX. 
 
Thank you for your attention to this matter.
Mark

Mark Stopa

www.stayinmyhome.com

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