Tag Archives: lis pendence

Foreclosure in California

16 Mar

925-957-9797

ISSUE:

Many Californians in default on their mortgage and facing foreclosure have filed quiet title and wrongful foreclosure actions. What is a quiet title action against a lender, and are plaintiffs successful in California?

BRIEF ANSWER:                                                                                                         

            A quiet title action in California to determine the owner of property does not generally allow a mortgage borrower in default on their payments to claim title to the land free of liens. However, the action when combined with a wrongful foreclosure claim is often successful in extending the amount of time a defaulted borrower can remain in the house. While in essence, this is simply prolonging the inevitable, it can give a borrower a temporary feeling of control over their own destiny.

DISCUSSION:

Quiet Title Actions as a Defense to Foreclosure

A cause of action to quiet title seeks to determine adverse claims to real or personal property. (Cal. Code Civ. § 760.020.) The action is commonly commenced by homeowners when a lender wrongfully forecloses on their property. My research has not found a favorable California decision quieting title in a mortgage borrower challenging foreclosure. The filing of quiet title actions only prolongs the amount of time a borrower can remain in a house after defaulting.

Theory behind the current suits

The UCC governs negotiable instruments such as mortgages, and it defines a loan as a transferable, signed document that promises to pay the bearer a sum of money at a future date or on demand. Most mortgages are made by investment banks, who then package many similar loans into a mortgage backed security and sell the securities. To convert the mortgages into stocks, each mortgage note must be destroyed. A mortgage and a stock certificate cannot exist at the same time. This creates a gap in the chain of title, and theoretically making the loan invalid. As a result, homeowners can fight foreclosure through a quiet title action and receive clear title. The current trend to argue a break in chain of title is weak, because a “plaintiff may recover only upon the strength of his or her own title, however, and not upon the weakness of the defendant’s title.” (Ernie v. Trinity Lutheran Church (1959) 51 Cal.2d 702, 706.)

A promissory note is usually secured by a deed of trust in the real property. The trust names the security owner as the beneficiary and a loan servicer as the trustee. A trust is a form of ownership in which the legal title of a property is vested in a trustee, who has equitable duties to hold and manage it for the benefit of the beneficiaries. (Restatement of Trusts, Second, §2 (1959).) The trustee under a valid trust deed has exclusive control over the trust property. Usually, the lender records a deed of trust with the county to secure the loan to the debtor. The deeds identify the trustee, and most often identify Mortgage Electronic Registration Systems (MERS) as the nominal beneficiary.

Challenges to MERS

MERS is a company created by the banking industry to bypass recording statutes and filing fees. MERS records who currently owns the notes on a mortgage. A foreclosure may be brought in the name of MERS, and the trustee may act on behalf of MERS to effectuate a non-judicial foreclosure. MERS may also directly initiate a foreclosure proceeding, and California’s “statutory scheme (§§ 2924–2924k) does not provide for a preemptive suit challenging standing.” (Robinson v. Countrywide Home Loans, Inc., (2011) 199 Cal. App. 4th 42, 46.)

The MERS system of foreclosure has been upheld in California based upon two rationales. First, courts have held that MERS, acting as the agent of the beneficial owner, does not need to prove authorization by the beneficiary to foreclose. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 55-56.) Second, contract law legitimizes the system, because recent deeds of trust require that the borrower agree that MERS can proceed with foreclosure in the event of default. (Id. at 1157.)

Procedural Requirements for Plaintiffs

California mortgagors must file in the Superior Court, which has the authority to grant the equitable relief of quieting title in an individual. (Cal. Code Civ. §760.040.) Once a party has filed the action, they must file a notice of pendency with the office of the county recorder. (Id. §762.010(b).) This notice puts all other parties who are claiming the party on notice that the plaintiff is claiming the land as his, and stops any transfers of the property during the lawsuit.

To survive a demurer, A plaintiff must file a verified complaint that includes: (1) A legal description and street address of the subject real property; (2) The title of plaintiff as to which determination is sought and the basis of the title; (3) The adverse claims to the title of the plaintiff against which a determination is sought; (4) The date as of which the determination is sought; and (5) A prayer for the determination of the title of the plaintiff against the adverse claims. It is highly likely that a claim merely alleging that the plaintiff has an interest in the land will not make it past a demurer. (See Mangindin v. Washington Mut. Bank, 637 F. Supp. 2d 700, 712 (N.D. Cal. 2009) (Dismissing claim merely alleging plaintiff had an interest in land foreclosed upon by bank).)

Tender Rule

A plaintiff seeking to quiet title in the face of a foreclosure must allege tender, which is “an unconditional offeror an offer of performance of their obligations under the Note, made in good faith, with the ability and willingness to perform.” The “Tender Rule” is derived from several cases involving disputes between junior and senior lienholders. (See Arnolds Mgmt. Corp. v. Eishen (1984) 158 Cal. App. 3d 575, 580; FPCI RE-HAB 01 v. E & G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1022.)

The policy behind the rule is that it would be a useless act to set aside a foreclosure sale based upon a procedural defect when a mortgage borrower cannot redeem the property in absence of that defect. (Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 118.) Some courts interpret the Tender Rule to only require that the mortgage borrower tender delinquent pre-foreclosure payments prior to any claim of quiet title. (Id. at 117; Ghervescu v. Wells Fargo Home Mortg., Inc., 2005 WL 6559918.)

Recently, defendants have successfully demurred to plaintiff’s complaints for quiet title for failure to allege valid tender. (Vasquez v. OneWest Bank, FSB (Cal. Ct. App., Nov. 4, 2011, B225624) 2011 WL 5248294; Dupree v. Merrill Lynch Mortg. Lending, Inc. (Cal. Ct. App., Oct. 24, 2011, B225150) 2011 WL 5142051 (Affirming demurrer and denial of leave to amend complaint).)

Qusetions I am being asked about the Mass Joinder and Kaslow and Kramer and Mitchell Stien

25 Aug

Attorney’s Frequently Asked Questions

1 Who is Mitchell J. Stein

2 Who is Philip A. Kramer

3 Lead Attorney Phillip A Kramer Introduces The Lawsuit(s)

4 Can I get a local lawyer to sue my lender or do a lawsuit myself?

5 What are Attorney Phillip A Kramer’s qualifications?

6 How do I know if my loan is the type that can join the suit?

7 What are my possible outcomes if I become a Named Plaintiff

8 What is MERS and why is it illegal and fraudulent?

9 What is the difference between Loan Modification and this Litigation?

10 What documents do I need to provide?

11 What is the flow of communication between my attorney and myself?

12 Should I continue to make my mortgage payments if I am accepted as a plaintiff on this suit?

13 What if I’m dealing with a pending foreclosure?

14 What about those annoying calls from my lender(s)?

15 How long until I can expect resolution?

16 What is the motivation behind this law suit?

17 In a nutshell, what did the banks do wrong?

18 How did this whole mess happen?

19 What is Securitization?

20 Litigation Verses Modification In Table Format

Who Is Mitchell J Stein?
http://members.calbar.ca.gov/fal/Member/Detail/121750

Who Is Philip A Kramer?

http://members.calbar.ca.gov/search/member_detail.aspx?x=113969

Lead Attorney Phillip A Kramer Introduces The Lawsuit(s)

Can I get a local lawyer to sue my lender or do a lawsuit myself?

What are Attorney Phillip A Kramer’s qualifications?

How do I know if my loan is the type that can join the suit?

What are my possible outcomes if I become a Named Plaintiff

What is MERS and why is it illegal and fraudulent?

What is the difference between Loan Modification and this Litigation?

What documents do I need to provide?
What is the flow of communication between my attorney and myself?

Should I continue to make my mortgage payments
if I am accepted as a plaintiff on this suit?

What if I’m dealing with a pending foreclosure?

What about those annoying calls from my lender(s)?

How long until I can expect resolution?

What is the motivation behind this law suit?

In a nutshell, what did the banks do wrong?

How Did This Whole Mess Happen?

The Breakdown

To put this in perspective…the banks got greedy, really greedy. They were not satisfied with just making the 6% interest on your mortgage, they wanted more. So they chopped up their home loan portfolios and packaged them into “mortgage backed securities” (MBS) that could then be sold to Wall Street investors for even bigger profits. The only problem was, Wall Street had a huge appetite for these MBS’s and could not get enough of them. They kept demanding more of them from the banks so they did everything in their power to churn more out but unfortunately they took time to package and properly securitize. What happened next is where they went wrong. The banks decided to cut corners and avoid two critical steps in the securitization process so they could speed up the funding of these loans from the standard 45 – 60 days to as quick as 4 to 5 days. We all know time is money on Wall Street right? They committed this fraud knowingly and just kept doing it, over and over again 62 million times as shown on all of the documents being currently presented to the courts. The banks left their fingerprints on the gun, providing homeowners with the legal leverage needed to expose this fraud and use it to save their homes from imminent foreclosure.

The question is….will you choose to take action like so many have already done or will you sit back and wait to see what happens? The banks are counting on you doing nothing and going quietly? Become the “squeaky wheel” – show them you are serious about defending your home!

Securitization Explained

The Alphabet Problem – The Pooling and Servicing Agreement

The Pooling and Servicing Agreement (PSA) is the document that actually creates a residential mortgage backed securitized trust and establishes the obligations and authority of the Master Servicer and the Primary Servicer. The PSA also establishes that mandatory rules and procedures for the sales and transfers of the mortgages and mortgage notes from the originator’s to the Trust. It is this unbroken chain of assignments and negotiations that creates what we have called “The Alphabet Problem.”

In order to understand the “Alphabet Problem,” you must keep in mind that the primary purpose of securitization is to make sure the assets (e.g., mortgage notes) are both FDIC and Bankruptcy “remote” from the originator. As a result, the common structures seek to create at least two “true sales” between the originator and the Trust. You therefore have in the most basic securitized structure the originator, the sponsor, the depositor and the Trust. We refer to these parties as the A (originator), B (sponsor), C (depositor) and D (Trust) alphabet players. The other primary but non-designated player in my alphabet game is the Master Document Custodian for the Trust. The MDC is entrusted with the physical custody of all of the “original” notes and mortgages and the assignment, sales and purchase agreements. The MDC must also execute representations and attestations that all of the transfers really and truly occurred “on-time” and in the required “order” and that “true sales” occurred at each link in the chain. Section 2.01 of most PSAs includes the mandatory conveyancing rules for the Trust and the representations and warranties. The basic terms of this Section of the standard PSA is set-forth below:

The complete inability of the mortgage servicers and the Trusts to produce such unbroken chains of proof along with the original documents is the genesis for all of the recent court rulings. One would think that a simple request to the Master Document Custodian would solve these problems. However, a review of the cases reveals a massive volume of transfers and assignments executed long after the “closing date” for the Trust from the “originator” directly to the “trust.” We refer to these documents as “A to D” transfers and assignments. There are some serious problems with the A to D documents. First, at the time these documents are executed the A party has nothing to sell or transfer since the PSA provides such a sale and transfer occurred years ago. Second, the documents completely circumvent the primary objective of securitization by ignoring the “true sales” to the Sponsor (the B party) and the Depositor (the C party). In a true securitization, you would never have any direct transfers (A to D) from the originator to the trust. Third, these A to D transfers are totally inconsistent with the representations and warranties made in the PSA to the Securities and Exchange Commission and to the holders of the bonds (the “Certificate holders”) issued by the Trust. Fourth, in many cases the A to D documents are executed by parties who are not employed by the originator but who claim to have “signing authority” or some type of “agency authority” from the originator. Finally, in many of these A to D document cases the originator is legally defunct at the time the document is in fact signed or the document is signed with a current date but then states that it has an “effective date” that was one or two years earlier. Hence, this is what we call the Alphabet Problem. In the eyes of the courts and millions of homeowners nationwide, all of this spells out the word FRAUD, and there is no legal defense for the lender on this.

editors comment

THEY COULD HAVE A LEGITIMATE CAUSE OF ACTION.
THE BIG FIVE LENDERS SAT AROUND A TABLE SOMEWHERE AND PLANNED FOR THE INFUSION OF CAPITAL AND THE PUMPING OF THE REAL ESTATE MARKET IN AN UNPRECEDENTED AMOUNT. SEE THE DOCUMENTARY “INSIDE JOB” ACADEMY AWARD WINNER FOR A DOCUMENTARY. AT SOME TIME THEY KNEW THAT THEY WHERE GOING TO STOP THE MUSIC AND THERE WOULD BE NO CHAIRS TO SIT IN ONCE THE MUSIC STOPPED.
THE KRAMER LAWSUIT IS ABOUT THIS FRAUD PERPETRATED ON THE AMERICAN TAXPAYER. THE PROBLEM IS IT WAS SOLD AS A FORECLOSURE DEFENSE METHOD WHICH IT IS NOT. THE OTHER PROBLEM IS THAT AN ATTORNEY NEEDS TO HAVE A RELATIONSHIP WITH HIS CLIENT TO DIRECTLY REPRESENT THE CLIENTS INTEREST. WITH OVER 10,000 CLIENTS AND 55 MILLION IN FEES THIS WOULD BE IMPOSSIBLE TASK. I BELIEVE THIS IS WHERE THE FALSE ADVERTISING ISSUE PRESENTS ITSELF.

JP Morgan 18,000 affidavids per month

11 Jun

Posted 3 days ago by Neil Garfield on Livinglies’s Weblog

The bottom line is that none of these signors of affidavits have ANY personal knowledge regarding any document, event, or transaction relating to any of the loans they are “processing.” It’s all a lie.

In a 35 hour workweek, 18,000 affidavits per month computes as 74.23 affidavits per JPM signor per hour and 1.23 per minute. Try that. See if you can review a file, verify the accounting, execute the affidavit and get it notarized in one minute. It isn’t possible. It can only be done with a system that incorporates automation, fabrication and forgery.
Editor’s Note: Besides the entertaining writing, there is a message here. And then a hidden message. The deponent is quoted as saying she has personal knowledge of what her fellow workers have as personal knowledge. That means the witness is NOT competent in ANY court of law to give testimony that is allowed to be received as evidence. Here is the kicker: None of these loans were originated by JPM. Most of them were the subject of complex transactions. The bottom line is that none of these signors of affidavits have ANY personal knowledge regarding any document, event, or transaction relating to any of the loans they are “processing.” It’s all a lie.
In these transactions, even though the investors were the owners of the loan, the servicing and other rights were rights were transferred acquired from WAMU et al and then redistributed to still other entities. This was an exercise in obfuscation. By doing this, JPM was able to control the distribution of profits from third party payments on loan pools like insurance contracts, credit defaults swaps and other credit enhancements.
Having that control enabled JPM to avoid allocating such payments to the investors who put up the bad money and thus keep the good money for itself. You see, the Countrywide settlement with the FTC focuses on the pennies while billions of dollars are flying over head.

The simple refusal to allocate third party payments achieves the following:

* Denial of any hope of repayment to the investors
* Denial of any proper accounting for all receipts and disbursements that are allocable to each loan account
* 97% success rate in sustaining Claims of default that are fatally defective being both wrong and undocumented.
* 97% success rate on Claims for balances that don’t exist
* 97% success rate in getting a home in which JPM has no investment

(THE DEPONENT’S NAME IS COTRELL NOT CANTREL)

JPM: Cantrel deposiition reveals 18,000 affidavits signed per month
HEY, CHASE! YEAH, YOU… JPMORGAN CHASE! One of Your Customers Asked Me to Give You a Message…

Hi JPMorgan Chase People!

Thanks for taking a moment to read this… I promise to be brief, which is so unlike me… ask anyone.

My friend, Max Gardner, the famous bankruptcy attorney from North Carolina, sent me the excerpt from the deposition of one Beth Ann Cottrell, shown below. Don’t you just love the way he keeps up on stuff… always thinking of people like me who live to expose people like you? Apparently, she’s your team’s Operations Manager at Chase Home Finance, and she’s, obviously, quite a gal.

Just to make it interesting… and fun… I’m going to do my best to really paint a picture of the situation, so the reader can feel like he or she is there… in the picture at the time of the actual deposition of Ms. Cottrell… like it’s a John Grisham novel…

FADE IN:

SFX: Sound of creaking door opening, not to slowly… There’s a ceiling fan turning slowly…

It’s Monday morning, May 17th in this year of our Lord, two thousand and ten, and as we enter the courtroom, the plaintiff’s attorney, representing a Florida homeowner, is asking Beth Ann a few questions… We’re in the Circuit Court of the Fifteenth Judicial Circuit, Palm Beach County, Florida.

Deposition of Beth Ann Cottrell – Operations Manager of Chase Home Finance LLC

Q. So if you did not review any books or records or electronic records before signing this affidavit of payments default, how is it that you had personal knowledge of all of the matters stated in this sworn document?

A. Well, it is pretty simple, I have personal knowledge that my staff has personal knowledge of what is in the affidavit on personal knowledge. That is how our process works.

Q. So, when signing an affidavit, you stated you have personal knowledge of the matters contained therein of Chase’s business records yet you never looked at the data bases or anything else that would contain those records; is that correct?

A. That is correct. I rely on my staff to do that part.

Q. And can you tell me in a given week how many of these affidavits you might sing?

A. Amongst all the management on my team we sign about 18,000 a month.

Q. And how many folks are on what you call the management?

A. Let’s see, eight.

And… SCENE.

Isn’t that just irresistibly cute? The way she sees absolutely nothing wrong with the way she’s answering the questions? It’s really quite marvelous. Truth be told, although I hadn’t realized it prior to reading Beth Ann’s deposition transcript, I had never actually seen obtuse before.

In fact, if Beth’s response that follows with in a movie… well, this is the kind of stuff that wins Oscars for screenwriting. I may never forget it. She actually said:

“Well, it is pretty simple, I have personal knowledge that my staff has personal knowledge of what is in the affidavit on personal knowledge. That is how our process works.”

No you didn’t.

Isn’t she just fabulous? Does she live in a situation comedy on ABC or something?

ANYWAY… BACK TO WHY I ASKED YOU JPMORGAN CHASE PEOPLE OVER…

Well, I know a homeowner who lives in Scottsdale, Arizona… lovely couple… wouldn’t want to embarrass them by using their real names, so I’ll just refer to them as the Campbell’s.

So, just the other evening Mr. Campbell calls me to say hello, and to tell me that he and his wife decided to strategically default on their mortgage. Have you heard about this… this strategic default thing that’s become so hip this past year?

It’s when a homeowner who could probably pay the mortgage payment, decides that watching any further incompetence on the part of the government and the banks, along with more home equity, is just more than he or she can bear. They called you guys at Chase about a hundred times to talk to you about modifying their loan, but you know how you guys are, so nothing went anywhere.

Then one day someone sent Mr. Campbell a link to an article on my blog, and I happened to be going on about the topic of strategic default. So… funny story… they had been thinking about strategically defaulting anyway and wouldn’t you know it… after reading my column, they decided to go ahead and commence defaulting strategically.

So, after about 30 years as a homeowner, and making plenty of money to handle the mortgage payment, he and his wife stop making their mortgage payment… they toast the decision with champagne.

You see, they owe $865,000 on their home, which was just appraised at $310,000, and interestingly enough, also from reading my column, they came to understand the fact that they hadn’t done anything to cause this situation, nothing at all. It was the banks that caused this mess, and now they were expecting homeowners like he and his wife, to pick up the tab. So, they finally said… no, no thank you.

Luckily, she’s not on the loan, so she already went out and bought their new place, right across the street from the old one, as it turns out, and they figure they’ve got at least a year to move, since they plan to do everything possible to delay you guys from foreclosing. They’re my heroes…

Okay, so here’s the message I promised I’d pass on to as many JPMorgan Chase people as possible… so, Mr. Campbell calls me one evening, and tells me he’s sorry to bother… knows I’m busy… I tell him it’s no problem and ask how he’s been holding up…

He says just fine, and he sounds truly happy… strategic defaulters are always happy, in fact they’re the only happy people that ever call me… everyone else is about to pop cyanide pills, or pop a cap in Jamie Dimon’s ass… one or the other… okay, sorry… I’m getting to my message…

He tells me, “Martin, we just wanted to tell you that we stopped making our payments, and couldn’t be happier. Like a giant burden has been lifted.”

I said, “Glad to hear it, you sound great!”

And he said, “I just wanted to call you because Chase called me this evening, and I wanted to know if you could pass a message along to them on your blog.”

I said, “Sure thing, what would you like me to tell them?”

He said, “Well, like I was saying, we stopped making our payments as of April…”

“Right…” I said.

“So, Chase called me this evening after dinner.”

“Yes…” I replied.

He went on… “The woman said: Mr. Campbell, we haven’t received your last payment. So, I said… OH YES YOU HAVE!”

Hey, JPMorgan Chase People… LMAO. Keep up the great work over there.

non-judicial sale is NOT an available election for a securitized loan

2 Jun

Posted 6 days ago by Neil Garfield on Livinglies’s Weblog
NON-JUDICIAL STATES: THE DIFFERENCE BETWEEN FORECLOSURE AND SALE:

FORECLOSURE is a judicial process herein the “lender” files a lawsuit seeking to (a) enforce the note and get a judgment in the amount owed to them (b) asking the court to order the sale of the property to satisfy the Judgment. If the sale price is lower than the Judgment, then they will ask for a deficiency Judgment and the Judge will enter that Judgment. If the proceeds of sale is over the amount of the judgment, the borrower is entitled to the overage. Of course they usually tack on a number of fees and costs that may or may not be allowable. It is very rare that there is an overage. THE POINT IS that when they sue to foreclose they must make allegations which state a cause of action for enforcement of the note and for an order setting a date for sale. Those allegations include a description of the transaction with copies attached, and a claim of non-payment, together with allegations that the payments are owed to the Plaintiff BECAUSE they would suffer financial damage as a result of the non-payment. IN THE PROOF of the case the Plaintiff would be required to prove each and EVERY element of their claim which means proof that each allegation they made and each exhibit they rely upon is proven with live witnesses who are competent — i.e., they take an oath, they have PERSONAL KNOWLEDGE (not what someone else told them),personal recall and the ability to communicate what they know. This applies to documents they wish to use as well. That is called authentication and foundation.

SALE: Means what it says. In non-judicial sale they just want to sell your property without showing any court that they can credibly make the necessary allegations for a judicial foreclosure and without showing the court proof of the allegations they would be required to make if they filed a judicial foreclosure. In a non-judicial state what they want is to SELL and what they don’t want is to foreclose. Keep in mind that every state that allows non-judicial sale treats the sale as private and NOT a judicial event by definition. In Arizona and many other states there is no election for non-judicial sale of commercial property because of the usual complexity of commercial transactions. THE POINT is that a securitized loan presents as much or more complexity than commercial real property loan transactions. Thus your argument might be that the non-judicial sale is NOT an available election for a securitized loan.

When you bring a lawsuit challenging the non-judicial sale, it would probably be a good idea to allege that the other party has ELECTED NON-JUDICIAL sale when the required elements of such an election do not exist. Your prima facie case is simply to establish that the borrower objects the sale, denies that they pretender lender has any right to sell the property, denies the default and that the securitization documents show a complexity far beyond the complexity of even highly complex commercial real estate transactions which the legislature has mandated be resolved ONLY by judicial foreclosure.

THEREFORE in my opinion I think in your argument you do NOT want to concede that they wish to foreclose. What they want to do is execute on the power of sale in the deed of trust WITHOUT going through the judicial foreclosure process as provided in State statutes. You must understand and argue that the opposition is seeking to go around normal legal process which requires a foreclosure lawsuit.

THAT would require them to make allegations about the obligation, note and mortgage that they cannot make (we are the lender, the defendant owes us money, we are the holder of the note, the note is payable to us, he hasn’t paid, the unpaid balance of the note is xxx etc.) and they would have to prove those allegations before you had to say anything. In addition they would be subject to discovery in which you could test their assertions before an evidentiary hearing. That is how lawsuits work.

The power of sale given to the trustee is a hail Mary pass over the requirements of due process. But it allows for you to object. The question which nobody has asked and nobody has answered, is on the burden of proof, once you object to the sale, why shouldn’t the would-be forecloser be required to plead and prove its case? If the court takes the position that in non-judicial states the private power of sale is to be treated as a judicial event, then that is a denial of due process required by Federal and state constitutions. The only reason it is allowed, is because it is private and “non-judicial.” The quirk comes in because in practice the homeowner must file suit. Usually the party filing suit must allege facts and prove a prima facie case before the burden shifts to the other side. So the Judge is looking at you to do that when you file to prevent the sale.

Legally, though, your case should be limited to proving that they are trying to sell your property, that you object, that you deny what would be the allegations in a judicial foreclosure and that you have meritorious defenses. That SHOULD trigger the requirement of re-orienting the parties and making the would-be forecloser file a complaint (lawsuit) for foreclosure. Then the burden of proof would be properly aligned with the party seeking affirmative relief (i.e., the party who wants to enforce the deed of trust (mortgage), note and obligation) required to file the complaint with all the necessary elements of an action for foreclosure and attach the necessary exhibits. They don’t want to do that because they don’t have the exhibits and the note is not payable to them and they cannot actually prove standing (which is a jurisdictional question). The problem is that a statute passed for judicial economy is now being used to force the burden of proof onto the borrower in the foreclosure of their own home. This is not being addressed yet but it will be addressed soon.

MERS and civil code 2932.5 and Bankruptcy code 547 here is how it comes together

26 May

CA Civil Code 2932.5 – Assignment”Where a power to sell real property is
given to a mortgagee, or other encumbrancer, in an instrument intended
to secure the payment of money, the power is part of the security and
vests in any person who by assignment becomes entitled to payment of the
money secured by the instrument. The power of sale may be exercised by
the assignee if the assignment is duly acknowledged and recorded.”

Landmark vs Kesler – While this is a matter of first impression in
Kansas, other jurisdictions have issued opinions on similar and related
issues, and, while we do not consider those opinions binding in the
current litigation, we find them to be useful guideposts in our analysis
of the issues before us.”

“Black’s Law Dictionary defines a nominee as “[a] person designated to
act in place of another, usu. in a very limited way” and as “[a] party
who holds bare legal title for the benefit of others or who receives and
distributes funds for the benefit of others.” Black’s Law Dictionary
1076 (8th ed. 2004). This definition suggests that a nominee possesses
few or no legally enforceable rights beyond those of a principal whom
the nominee serves……..The legal status of a nominee, then, depends
on the context of the relationship of the nominee to its principal.
Various courts have interpreted the relationship of MERS and the lender
as an agency relationship.”

“LaSalle Bank Nat. Ass’n v. Lamy, 2006 WL 2251721, at *2 (N.Y. Sup.
2006) (unpublished opinion) (“A nominee of the owner of a note and
mortgage may not effectively assign the note and mortgage to another for
want of an ownership interest in said note and mortgage by the
nominee.”)”

The law generally understands that a mortgagee is not distinct from a
lender: a mortgagee is “[o]ne to whom property is mortgaged: the
mortgage creditor, or lender.” Black’s Law Dictionary 1034 (8th ed.
2004). By statute, assignment of the mortgage carries with it the
assignment of the debt. K.S.A. 58-2323. Although MERS asserts that,
under some situations, the mortgage document purports to give it the
same rights as the lender, the document consistently refers only to
rights of the lender, including rights to receive notice of litigation,
to collect payments, and to enforce the debt obligation. The document
consistently limits MERS to acting “solely” as the nominee of the
lender.

Indeed, in the event that a mortgage loan somehow separates interests of
the note and the deed of trust, with the deed of trust lying with some
independent entity, the mortgage may become unenforceable.

“The practical effect of splitting the deed of trust from the promissory
note is to make it impossible for the holder of the note to foreclose,
unless the holder of the deed of trust is the agent of the holder of the
note. [Citation omitted.] Without the agency relationship, the person
holding only the note lacks the power to foreclose in the event of
default. The person holding only the deed of trust will never experience
default because only the holder of the note is entitled to payment of
the underlying obligation. [Citation omitted.] The mortgage loan becomes
ineffectual when the note holder did not also hold the deed of trust.”
Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App.
2009).

“MERS never held the promissory note,thus its assignment of the deed of
trust to Ocwen separate from the note had no force.” 284 S.W.3d at 624;
see also In re Wilhelm, 407 B.R. 392 (Bankr. D. Idaho 2009) (standard
mortgage note language does not expressly or implicitly authorize MERS
to transfer the note); In re Vargas, 396 B.R. 511, 517 (Bankr. C.D. Cal.
2008) (“[I]f FHM has transferred the note, MERS is no longer an
authorized agent of the holder unless it has a separate agency contract
with the new undisclosed principal. MERS presents no evidence as to who
owns the note, or of any authorization to act on behalf of the present
owner.”); Saxon Mortgage Services, Inc. v. Hillery, 2008 WL 5170180
(N.D. Cal. 2008) (unpublished opinion) (“[F]or there to be a valid
assignment, there must be more than just assignment of the deed alone;
the note must also be assigned. . . . MERS purportedly assigned both the
deed of trust and the promissory note. . . . However, there is no
evidence of record that establishes that MERS either held the promissory
note or was given the authority . . . to assign the note.”).

What stake in the outcome of an independent action for foreclosure could
MERS have? It did not lend the money to Kesler or to anyone else
involved in this case. Neither Kesler nor anyone else involved in the
case was required by statute or contract to pay money to MERS on the
mortgage. See Sheridan, ___ B.R. at ___ (“MERS is not an economic
‘beneficiary’ under the Deed of Trust. It is owed and will collect no
money from Debtors under the Note, nor will it realize the value of the
Property through foreclosure of the Deed of Trust in the event the Note
is not paid.”). If MERS is only the mortgagee, without ownership of the
mortgage instrument, it does not have an enforceable right. See Vargas,
396 B.R. 517 (“[w]hile the note is ‘essential,’ the mortgage is only ‘an
incident’ to the note” [quoting Carpenter v. Longan, 16 Wall. 271, 83
U.S. 271, 275, 21 L. Ed 313 (1872)]).

* MERS had no Beneficial Interest in the Note,
* MERS and the limited agency authority it has under the dot does
not continue with the assignment of the mortgage or dot absent a
ratification or a separate agency agreement between mers and the
assignee.
* The Note and the Deed of Trust were separated at or shortly
after origination upon endorsement and negotiation of the note rendering
the dot a nullity
* MERS never has any power or legal authority to transfer the note
to any entity;
* mers never has a beneficial interest in the note and pays
nothing of value for the note.

Bankr. Code 547 provides, among other things, that an unsecured
creditor who had won a race to an interest in the debtor’s property
using the state remedies system within 90 days of the filing of the
bankruptcy petition may have to forfeit its winnings (without
compensation for any expenses it may have incurred in winning the race)
for the benefit of all unsecured creditors. The section therefore
prevents certain creditors from being preferred over others (hence,
section 547 of the Bankruptcy Code is titled “Preferences).” An
additional effect of the section (and one of its stated purposes) may be
to discourage some unsecured creditors from aggressively pursuing the
debtor under the state remedies system, thus affording the debtor more
breathing space outside bankruptcy, for fear that money spent using the
state remedies system will be wasted if the debtor files a bankruptcy
petition.

. Bankr. Code 547(c) provides several important exceptions to the
preference avoidance power.

Bankr. Code 547 permits avoidance of liens obtained within the 90 day
(or one year) period: the creation of a lien on property of the debtor,
whether voluntary, such as through a consensual lien, or involuntary,
such as through a judicial lien, would, absent avoidance, have the same
preferential impact as a transfer of money from a debtor to a creditor
in payment of a debt. If the security interest was created in the
creditor within the 90 day window, and if other requirements of section
547(b) are satisfied, the security interest can be avoided and the real
property sold by the trustee free of the security interest (subject to
homestead exemption). All unsecured creditors of the debtor, including
the creditor whose lien has been avoided, will share, pro rata, in the
distribution of assets of the debtor, including the proceeds of the sale
of the real estate

How to Use MERS on Deed of Trust or Mortgage

19 Dec

It is time to use the presence of MERS on the originating loan paperwork as an OFFENSIVE TACTIC. Most states have some version of the statute below. It is simply common sense. A creditor is not a creditor unless they are owed something. A beneficiary is not a beneficiary unless they are a creditor. In the case of a mortgage note, a beneficiary is not a creditor unless it is the obligee on the note (i.e., the one to whom the note directs payment). There is no escaping this logic.

The point is that designating MERS as beneficiary or mortgagee is the same as designating nobody at all. The range of options for the Judge include several possibilities. But the one I think we should concentrate on is that an ambiguity has been raised on the face of every Deed of Trust or Mortgage Deed naming MERS as the beneficiary or mortgagee. That being the case, it MUST BE JUDICIALLY DETERMINED by a trier of fact (Judge or Jury)in judicial foreclosure states.

In California there is legislation being proposed that would require mandatory mediation before a foreclosure can be initiated. The provisions the California Foreclosure prevention act of 2008 are just not working. Judges don’t uphold what the law says civil code 2023.6 and 2923.6 when the attorneys for the publicly funded Banks (our tax dollars 17.1 Trillion before it all over) oppose individual debtors and claim federal preemption. Our legal system is a rigged game favoring the capital of a capitalist system. In California a nonjudicial state a foreclosure can occur on the mere word of a lender without the original note or assignment of the original deed of trust. A then former homeowner can then be evicted by giving notice to vacate constructively (without notice) have a summons “Posted and Mailed” (again no actual notice) a default judgment taken (no trial) and a writ issued and the Sheriff’s instruction to evict issued and enforced.

In Non Judicial an action should be filed for declaratory relief that the foreclosure is invalid and void this is the problem in the non Judicial states. See state bar president article No Lawyer No Law Without having a beneficiary or mortgagee identified, there obviously can be no enforcement. The power off sale is contained in Civil 2932 and in California there must be a valid assignment civil code 2932.5 to have the power to foreclose.

So the strategy here would be to force the would-be forecloser (pretender lender) to file a lawsuit establishing the note and mortgage (or deed of trust) by identifying the beneficiary or mortgagee. It would also enable you, in the face of a reluctant judge, to press for expedited discovery for information that the would-be foreclosing trustee or attorney should have had before they started. And this leads to a request for an evidentiary hearing — the kiss of death for pretender lenders unless you don’t know your rules of evidence

California Mortgage and Deed of Trust Practice § 1.39 (3d ed Cal CEB 2008)

§ 1.39 (1) Must Be Obligee

The beneficiary must be an obligee of the secured obligation (usually the payee of a note), because otherwise the deed of trust in its favor is meaningless. Watkins v Bryant (1891) 91 C 492, 27 P 775; Nagle v Macy (1858) 9 C 426. See §§ 1.8-1.19 on the need for an obligation. The deed of trust is merely an incident of the obligation and has no existence apart from it. Goodfellow v Goodfellow (1933) 219 C 548, 27 P2d 898; Adler v Sargent (1895) 109 C 42, 41
P 799; Turner v Gosden (1932) 121 CA 20, 8 P2d 505. The holder of the note, however, can enforce the deed of trust
whether or not named as beneficiary or mortgagee. CC § 2936;

SB 94 and its interferance with the practice

5 Sep

CA SB 94 on Lawyers & Loan Modifications Passes Assembly… 62-10

The California Assembly has passed Senate Bill 94, a bill that seeks to protect homeowners from loan modification scammers, but could end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.

SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture. Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these services are not compensated until the contracted services have been performed.

SB 94 prevents companies, individuals… and even attorneys… from receiving fees or any other form of compensation until after the contracted services have been rendered. The bill will now go to the Democratic controlled Senate where it is expected to pass.

Supporters of the bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return. They say that by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no question that there have been some unscrupulous people that have taken advantage of homeowners in distress, the number of these scammers is unclear. Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.

In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up front fees for modifications, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are. Bank of America, for example, got the worst grade of any bank on the President’s report card listing, modifying only 4% of the eligible mortgages since the plan began. We’ve given B of A something like $200 billion and they still claim that they’re having a hard time answering the phones over there, so who’s scamming who?

To make matters worse, and in the spirit of Y2K, the media has fanned the flames of irrationality with stories of people losing their homes as a result of someone failing to get their loan modified. The stories go something like this:

We gave them 1,000. They told us to stop making our mortgage payment. They promised us a principal reduction. We didn’t hear from them for months. And then we lost our house.

I am so sure. Can that even happen? I own a house or two. Walk me through how that happened again, because I absolutely guarantee you… no way could those things happen to me and I end up losing my house over it. Not a chance in the world. I’m not saying I couldn’t lose a house, but it sure as heck would take a damn sight more than that to make it happen.

Depending on how you read the language in the bill, it may prevent licensed California attorneys from requiring a retainer in advance of services being rendered, and this could essentially eliminate a homeowner’s ability to hire a lawyer to help save their home.

Supporters, on the other hand, respond that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

But, assuming they’re talking about at the end of the transaction, there are key differences. Real estate agents and mortgage brokers are paid OUT OF ESCROW at the end of a transaction. They don’t send clients a bill for their services after the property is sold.

Homeowners at risk of foreclosure are having trouble paying their bills and for the most part, their credit ratings have suffered as a result. If an attorney were to represent a homeowner seeking a loan modification, and then bill for his or her services after the loan was modified, the attorney would be nothing more than an unsecured creditor of a homeowner who’s only marginally credit worthy at best. If the homeowner didn’t pay the bill, the attorney would have no recourse other than to sue the homeowner in Small Claims Court where they would likely receive small payments over time if lucky.

Extending unsecured credit to homeowners that are already struggling to pay their bills, and then having to sue them in order to collect simply isn’t a business model that attorneys, or anyone else for that matter, are likely to embrace. In fact, the more than 50 California attorneys involved in loan modifications that I contacted to ask about this issue all confirmed that they would not represent homeowners on that basis.

One attorney, who asked not to be identified, said: “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved.”

“I don’t think there’s any question that SB 94 will make it almost impossible for a homeowner to obtain legal representation related to loan modifications,” explained another attorney who also asked not to be identified. ”The banks have fought lawyers helping clients through the loan modification process every step of the way, so I’m not surprised they’ve pushed for this legislation to pass.”

Proponents of the legislation recite the all too familiar mantra about there being so many scammers out there that the state has no choice but to move to shut down any one offering to help homeowners secure loan modifications that charges a fee for the services. They point out that consumers can just call their banks directly, or that there are nonprofit organizations throughout the state that can help homeowners with loan modifications.

While the latter is certainly true, it’s only further evidence that there exists a group of people in positions of influence that are unfamiliar , or at the very least not adequately familiar with obtaining a loan modification through a nonprofit organization, and they’ve certainly never tried calling a bank directly.

The fact that there are nonprofit housing counselors available, and the degree to which they may or may not be able to assist a given homeowner, is irrelevant. Homeowners are well aware of the nonprofit options available. They are also aware that they can call their banks directly. From the President of the United States and and U.S. Attorney General to the community newspapers found in every small town in America, homeowners have heard the fairy tales about about these options, and they’ve tried them… over and over again, often times for many months. When they didn’t get the desired results, they hired a firm to help them.

Yet, even the State Bar of California is supporting SB 94, and even AB 764, a California Assembly variation on the theme, and one even more draconian because of its requirement that attorneys only be allowed to bill a client after a successful loan modification has been obtained. That means that an attorney would have to guarantee a homeowner that he or she would obtain a modification agreement from a lender or servicer or not get paid for trying. Absurd on so many levels. Frankly, if AB 764 passes, would the last one out of California please turn off the lights and bring the flag.

As of late July, the California State Bar said it was investigating 391 complaints against 141 attorneys, as opposed to nine investigations related to loan modifications in 2008. The Bar hasn’t read anywhere all of the complaints its received, but you don’t have to be a statistician to figure out that there’s more to the complaints that meets the eye. So far the State Bar has taken action against three attorneys and the Attorney General another four… so, let’s see… carry the 3… that’s 7 lawyers. Two or three more and they could have a softball team.

At the federal level they’re still reporting the same numbers they were last spring. Closed 11… sent 71 letters… blah, blah, blah… we’ve got a country of 300 million and at least 5 million are in trouble on their mortgage. The simple fact is, they’re going to have to come up with some serious numbers before I’m going to be scared of bumping into a scammer on every corner.

Looking Ahead…

California’s ALT-A and Option ARM mortgages are just beginning to re-set, causing payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result. Prime jumbo foreclosure rates are already up a mind blowing 634% as compared with January 2008 levels, according to LPS Applied Analytics.

Clearly, if SB 94 ends up reducing the number of legitimate firms available for homeowners to turn to, everyone involved in its passage is going to be retiring. While many sub-prime borrowers have suffered silently through this horror show of a housing crisis, the ALT-A and Option ARM borrowers are highly unlikely to slip quietly into the night.

There are a couple of things about the latest version of SB 94 that I found interesting:

1. It says that a lawyer can’t collect a fee or any other compensation before serivces have been delivered, but it doesn’t make clear whether attorneys can ask the client to deposit funds in the law firm’s trust account and then bill against thsoe funds as amounts are earned. Funds deposited in a law firm trust account remain the client’s funds, so they’re not a lawyer’s “fees or other compensation”. Those funds are there so that when the fees have been earned, the lawyer doesn’t have to hope his or her bill gets paid. Of course, it also says that an attorney can’t hold any security interest, but money in a trust account a client’s money, the attorney has no lien against it. All of this is a matter of interpretation, of course, so who knows.

2. While there used to be language in both the real estate and lawyer sections that prohibited breaking up services related to a loan modification, in the latest version all of the language related to breaking up services as applied to attorneys has been eliminated. It still applies to real estate licensed firms, but not to attorneys. This may be a good thing, as at least a lawyer could complete sections of the work involved as opposed to having to wait until the very end, which the way the banks have been handling things, could be nine months away.

3. The bill says nothing about the amounts that may be charged for services in connection with a loan modification. So, in the case of an attorney, that would seem to mean that… well, you can put one, two and three together from there.

4. Lawyers are not included in definition of foreclosure consultant. And there is a requirement that new language be inserted in contracts, along the lines of “You don’t have to pay anyone to get a loan modification… blah, blah, blah.” Like that will be news to any homeowner in America. I’ve spoken with hundreds and never ran across one who didn’t try it themselves before calling a lawyer. I realize the Attorney General doesn’t seem to know that, but look… he’s been busy.

Conclusion…

Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners, while foreclosures increase and our economy continues its deflationary free fall? Will the California State Bar ever finishing reading the complaints being received, and if they ever do, will they understand what they’ve read. Or is our destiny that the masses won’t understand what’s happening around them until it sucks them under as well.

I surely hope not. But for now, I’m just hoping people can still a hire an attorney next week to help save their homes, because if they can’t… the Bar is going to get a lot more letters from unhappy homeowners.

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

17 Jul

News Release
July 15, 2009
For Immediate Release
Contact: (916) 324-5500
Print Version
Attachments

Los Angeles – As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief.

Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

Brown filed five lawsuits as part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants, which he conducted with the Federal Trade Commission, the U.S. Attorney’s office and 22 other federal and state agencies. In total, 189 suits and orders to stop doing business were filed across the country.

Following the housing collapse, hundreds of loan modification and foreclosure-prevention companies have cropped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. Yet, loan modifications are rarely, if ever, obtained. Less than 1 percent of homeowners nationwide have received principal reductions of any kind.

Brown has been leading the fight against fraudulent loan modification companies. He has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

Brown’s office filed the following lawsuits in Orange County and U.S. District Court for the Central District (Los Angeles):

– U.S. Homeowners Assistance, based in Irvine;
– U.S. Foreclosure Relief Corp and its legal affiliate Adrian Pomery, based in the City of Orange;
– Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
– RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, City of Orange, Huntington Beach, Corona, and Fresno;
– and
– United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.

U.S. Homeowners Assistance
Brown on Monday sued U.S. Homeowners Assistance, and its executives — Hakimullah “Sean” Sarpas and Zulmai Nazarzai — for bilking dozens of homeowners out of thousands of dollars each.

U.S. Homeowners Assistance claimed to be a government agency with a 98 percent success rate in aiding homeowners. In reality, the company was not a government agency and was never certified as an approved housing counselor by the U.S. Department of Housing and Urban Development. None of U.S. Homeowners Assistance’s known victims received loan modifications despite paying upfront fees ranging from $1,200 to $3,500.

For example, in January 2008, one victim received a letter from her lender indicating that her monthly mortgage payment would increase from $2,300 to $3,500. Days later, she received an unsolicited phone call from U.S. Homeowners Assistance promising a 40 percent reduction in principal and a $2,000 reduction in her monthly payment. She paid $3500 upfront for U.S. Homeowners Assistance’s services.

At the end of April 2008, her lender informed her that her loan modification request had been denied and sent her the documents that U.S. Homeowners Assistance had filed on her behalf. After reviewing those documents, she discovered that U.S. Homeowners Assistance had forged her signature and falsified her financial information – including fabricating a lease agreement with a fictitious tenant.

When she confronted U.S. Homeowners Assistance, she was immediately disconnected and has not been able to reach the company.

Brown’s suit contends that U.S. Homeowners Assistance violated:
– California Business and Professions Code section 17500 by falsely stating they were a government agency and misleading homeowners by claiming a 98 percent success rate in obtaining loan modifications;

– California Business and Professions Code section 17200 by failing to perform services made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Civil Code section 2945.45 for failing to register with the California Attorney General’s Office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

US Homeowners Assistance also did business as Statewide Financial Group, Inc., We Beat All Rates, and US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown last week sued US Foreclosure Relief Corporation, H.E. Service Company, their executives — George Escalante and Cesar Lopez — as well as their legal affiliate Adrian Pomery for running a scam promising homeowners reductions in their principal and interest rates as low as 4 percent. Brown was joined in this suit by the Federal Trade Commission and the State of Missouri.

Using aggressive telemarketing tactics, the defendants solicited desperate homeowners and charged an upfront fee ranging from $1,800 to $2,800 for loan modification services. During one nine-month period alone, consumers paid defendants in excess of $4.4 million. Yet, in most instances, defendants failed to provide the mortgage-relief services. Once consumers paid the fee, the defendants avoided responding to consumers’ inquiries.

In response to a large number of consumer complaints, several government agencies directed the defendants to stop their illegal practices. Instead, they changed their business name and continued their operations – using six different business aliases in the past eight months alone.

Brown’s lawsuit alleges the companies and individuals violated:
– The National Do Not Call Registry, 16 C.F.R. section 310.4 and California Business and Professions Code section 17200 by telemarketing their services to persons on the registry;

– The National Do Not Call Registry, 16 C.F.R. section 310.8 and California Business and Professions Code section 17200 by telemarketing their services without paying the mandatory annual fee for access to telephone numbers within the area codes included in the registry;

– California Civil Code section 2945 et seq. and California Business and Professions Code section 17200 by demanding and collecting up-front fees prior to performing any services, failing to include statutory notices in their contracts, and failing to comply with other requirements imposed on mortgage foreclosure consultants;

– California Business and Professions Code sections 17200 and 17500 by representing that they would obtain home loan modifications for consumers but failing to do so in most instances; by representing that consumers must make further payments even though they had not performed any of the promised services; by representing that they have a high success rate and that they can obtain loan modification within no more than 60 days when in fact these representations were false; and by directing consumers to avoid contact with their lenders and to stop making loan payments causing some lenders to initiate foreclosure proceedings and causing damage to consumers’ credit records.

Victims of this scam include a father of four battling cancer, a small business owner, an elderly disabled couple, a sheriff whose income dropped due to city budget cuts and an Iraq-war veteran. None of these victims received the loan modification promised.

Brown is seeking unspecified civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

The defendants also did business under other names including Lighthouse Services and California Foreclosure Specialists.

Home Relief Services, LLC
Brown Monday sued Home Relief Services, LLC., its executives Terence Green Sr. and Stefano Marrero, the Diener Law Firm and its principal attorney Christopher L. Diener for bilking thousands of homeowners out of thousands of dollars each.

Home Relief Services charged homeowners over $4,000 in upfront fees, promised to lower interest rates to 4 percent, convert adjustable-rate mortgages to low fixed-rate loans and reduce principal up to 50 percent within 30 to 60 days. None of the known victims received a modification with the assistance of the defendants.

In some cases, these companies also sought to be the lenders’ agent in the short-sale of their clients’ homes. In doing so, the defendants attempted to use their customers’ personal financial information for their own benefit.

Home Relief Services and the Diener Law Firm directed homeowners to stop contacting their lender because the defendants would act as their sole agent and negotiator.

Brown’s lawsuit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 95 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $10 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Two other companies with the same management were also involved in the effort to deceive homeowners: Payment Relief Services, Inc. and Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown Monday sued RMR Group Loss Mitigation and its executives Michael Scott Armendariz of Huntington Beach, Ruben Curiel of Lancaster, and Ricardo Haag of Corona; Living Water Lending, Inc.; and attorney Arthur Steven Aldridge of Westlake Village as well as the law firm of Shippey & Associates and its principal attorney Karla C. Shippey of Yorba Linda – for bilking over 500 victims out of nearly $1 million.

The company solicited homeowners through telephone calls and in-person home visits. Employees claimed a 98 percent success rate and a money-back guarantee. None of the known victims received any refunds or modifications with the assistance of defendants.

For example, in July 2008, a 71-year old victim learned his monthly mortgage payments would increase from $2,470 to $3,295. He paid $2,995, yet received no loan modification and no refund.

Additionally, RMR insisted that homeowners refrain from contacting their lenders because the defendants would act as their agents.

Brown’s suit contends that the defendants violated:

– California Business and Professions Code section 17500 by claiming a 98 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

United First, Inc.
On July 6, 2009, Brown sued a foreclosure consultant and an attorney — Paul Noe Jr. and Mitchell Roth – who conned 2,000 desperate homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings.

These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home’s value.

Noe convinced more than 2,000 homeowners to sign “joint venture” agreements with his company, United First, and hire Roth to file suits claiming that the borrower’s loan was invalid because the mortgages had been sold so many times on Wall Street that the lender could not demonstrate who owned it. Similar suits in other states have never resulted in the elimination of the borrower’s mortgage debt.

After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth’s firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner’s debt, the homeowner would be required to pay the company 80 percent of the value of the home.

Brown’s lawsuit contends that Noe, Roth and United First:

– Violated California’s credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945

– Inserted unconscionable terms in contracts;

– Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating California Business and Professions Code 6150; and

– Violated 17500 of the California Business and Professions Code.

Brown’s office is seeking $2 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Tips for Homeowners
Brown’s office issued these tips for homeowners to avoid becoming a victim:

DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON’T transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.

DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or http://www.hud.gov.

If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.
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Ex-parte aplication for TRO and injunction

8 Jul

EX PARTE APPLICATION FOR OSC TRO