LIVINGLIES: Lawyers, in rush to regain properties, can exploit judges’ workload

Lies a new tool in foreclosure
Lawyers, in rush to regain properties, can exploit judges’ workload

By Todd Ruger

Published: Sunday, May 10, 2009 at 1:00 a.m.
Foreclosure lawyers want to take back property as fast as possible, and sometimes they do not let the facts slow them down. In case after case, lawyers representing banks are giving false statements in court about who owns mortgages, or whether the homeowner is willing to negotiate, or whether they have completed all the legal steps to put a foreclosed house back on the market.

The errors and fabrications in the court files are seldom caught by judges with hundreds of foreclosure cases before them. The judges say they can only hope to catch a few of the offending lawyers in hopes of keeping the rest honest. The courts usually rely on defendants to point out problems in the cases against them. But in foreclosure court, many homeowners make no attempt to defend themselves. Judges cannot step into that role.

“Even the IRS can’t audit every return,” said 12th Circuit Chief Judge Lee Haworth. “We’re an impartial party. You don’t ask the referee at a baseball game to tell whether the people coming in the game are on drugs.”

Since the real estate market in Florida began to slide in 2006, the number of foreclosure cases has gone up 600 percent. In the first quarter of this year, 4,991 foreclosures were filed in the Sarasota-Bradenton-Venice market, which remains among the top 25 for
foreclosures in the nation. At the same time, judges handling the cases have seen their budgets fall 13 percent.

Most of the foreclosures are filed by out-of-town attorneys from a handful of firms who rarely appear in court in person. Minutes after a foreclosure attorney told her everything was in order in a recent case, Circuit Judge Donna Berlin was ready to sign off. Then she happened to glance at the file, and realized that the two properties were in Miami, a few hundred miles outside her jurisdiction.

“I didn’t have time to go through and read it,” Berlin told a group of attorneys at a meeting last weekend. “And it was not something that I normally look at.”

Foreclosure defense attorneys say that even homeowners who plan to walk away from a property should be checking the court file and making sure the lenders’ attorneys are sticking to the truth.

“It’s all across the country, it’s not just here,” said April Charney, a Jacksonville attorney who is a nationally recognized expert in foreclosure defense. “It’s whatever’s expedient.”
Troubling findings Nobody knows how common it is for foreclosure cases to be based on untrue statements or incomplete proof.
More than half of all foreclosure defendants simply walk away, and never show up in court to defend themselves. A Sarasota attorney, Richard Kessler, enlisted a few friends to go through 180 foreclosure cases in Sarasota County looking for errors. They found three out of four cases proceeded with incomplete or improper documentation.

For instance, the survey found that only one in 12 cases had the documents to prove the company foreclosing on the property was also the company holding the mortgage note. In half of the cases reviewed, the plaintiff said the mortgage note had been lost.

Kessler contacted Haworth and offered to have his business double check the paperwork for the courts, proposing that his fee could be charged to the company filing the case. Haworth declined, saying he cannot add such a filing fee, and the courts have no money to pay for the service. Instead, Haworth is recruiting volunteer law students to review all the cases for foreclosure judges this summer to verify documents. “We think having cops on the beat will help,” Haworth said.

‘Any old pleading’ Haworth changed court rules earlier this year to address some of the problems with the out-of-town firms that handle most of the foreclosures in Manatee and Sarasota counties. He required them to meet with homeowners and try to settle the case.

Lenders widely ignored the rule, and the number of foreclosures being resolved went from 400 a month to just over 100. Lenders also must file complete paperwork, including proof that they met or tried to meet with the homeowner. Otherwise, their hearings get canceled, costing them money.

But some foreclosure attorneys have simply filed paperwork saying the homeowners declined to have the meeting, whether that was true or not. Ronald and Sandra Smith requested the mediation meeting with their lender in January. Then they sent financial documents in preparation for the meeting.

A few weeks later, the attorney for the lender, HSBC Bank, filed court papers saying the Smiths had “no interest in the program or declined.” There is no way to know whether it was a mistake or deliberate, said the Smiths’ attorney, David Morrill of Legal Aid of Manasota. But he is asking for the case to be dismissed because of it.

“I don’t believe an attorney would deliberately do that,” Morrill said. “I just don’t know what happens to all this paperwork we send them.” Other false statements provided to the courts are more suspect, like the attorney for Deutsche Bank who, to avoid having to refile a case, claimed the international financial giant had changed its name to Aurora
Loan Services. [Editor’s Note: Aurora is a Lehman company not a Deutsch company]

A judge in Miami fined Wells Fargo bank $95,000 late last year because of sloppy paperwork filed by Florida Default Law Group, one of a handful of companies that handle the majority of foreclosures in the state.

Judge John K. Olson blasted Florida Default, saying the firm seemed to believe that “filing any old pleading without undertaking any investigation into its accuracy is perfectly acceptable practice.” Wells Fargo and the Florida Default Law Group told the judge that the mistakes were employee errors, and that staff at all levels were warned to be more careful.

Phone and e-mail messages left by a reporter for lender attorneys involved in those cases, including Florida Default Law Group vice-president Ronald Wolfe, were not returned.

The notorious Kellogg case The most notorious case in Sarasota County is that of Betty Kellogg, a 71-year-old disabled widow who twice had her villa put up for foreclosure sale, even though she worked out a settlement with her lender. Kellogg bought the villa in 2000 after her husband and other relatives died. To pay her medical bills and consolidate her debt, she took a $180,000 loan against her home.

The mortgage broker had inflated her income on the application — she makes $380 a month working part-time; the mortgage broker said she made $2,300 a month. Kellogg could not afford the loan payments.

“I asked them, ‘Why would you accept me, I don’t really have enough money to qualify for this. They said, ‘Just pay for a couple months and we’ll refinance again,'” Kellogg said. So when she fell behind and the foreclosure lawsuit was filed last year, she begged with the bank to help her.

“I am just lost. I don’t know what to do,” Kellogg wrote to the lender, Washington Mutual. “Please help me.” The bank told her it would not proceed with the foreclosure case while they negotiated. But at the same time, the bank’s lawyers were telling Judge Berlin that Kellogg was not defending herself, and were granted a default judgment.
They put Kellogg’s home up for sale.

Kellogg went to an attorney. Berlin cancelled the sale when she found out what happened. Less than a month later, the bank filed another motion, saying that the
first sale had been canceled because it was not advertised. Berlin signed the order, and the bank scheduled another sale. Kellogg, who got a lawyer through Legal Aid of Manasota, went back to the judge again, and the sale was canceled. Again. “I got so afraid, and I have no money to pay attorneys to fight for me,” Kellogg said. “It’s very confusing. I am not talking to anybody on the phone anymore.”

4 Responses

  1. L.Fitzgerald
    Good Rant,
    I email the Governor, Fl Senators, my Representatives, Florida Atorney General, on and on.
    It just goes into a black hole and comes back from them as a form letters. Here is one of my favorites, I send similar ones at least three times a week. This one is to Bill Young, my Represenative in the US House.

    Dear Bill,
    YOU SHOULD RESIGN, YOU AND ALL OF CONGRESS HAVE ALLOWED WALL STREET TO STEAL THE AMERICAN DREAM!

    MONEY IS POWER AND YOU HAVE ALLOWED THE POWER TO GO TO THE FEW THAT HAVE STOLEN OUR JOBS, OUR HOMES,
    AND OUR RETIREMENT.

    PLEASE DO WHAT IS RIGHT FOR THE COUNTRY AND RESIGN! YOU ARE NOT SERVING THE AMERICAN PEOPLE BUT ONLY THE WALL STREET STEALERS YOU SO ADMIRE!
    YOU HAVE OUTLIVED YOUR USEFULNESS. RESIGN!

  2. I have read so much of the ” corruption” , ” Fraud ” ,Greed,
    from Mortgage brokers, Banks, Investment Bankers , appraisals, Congress, Wall Street ..

    that it makes me really sick to my stomach …..Where’s the Justice ??

    While our kids are fighting over there …fighting terrorism !!!

    The home grown terrorism ..is in full force right here in America. .

    America has been transformed ..into a Tony Soprano ..Wise Guy mafia type banking and finance system .,

    It smells ugly, and is reeking of fraud, greed ,mistrust !..

    Where are the FBI ? , Federals Investigators..?
    Where the cops ???

    to arrest these criminals who are more effective in destroying America. than Osama… ??

    Where’s the Justice ??

    In what is the most world wide biggest worldwide Ponzi scam…

    fabricated with the help of Washington DC ,and their Wall

    Street buddies .. that has impoverished millions of its own citizens ….!

    A very Big chunk of the American Pie has been thrown out to the garbage can .. Millions and millions…. The backbone of America’s economy ..the middle class are being stripped of house & home …by corrupt lawyers and corrupt judges…..

    especially the judge they call the ” Rocket Docker “judge ….30 second hearing…..Bang ..the house is given free to the Fat Cats .
    Hey judge ..I read that you are overloaded with cases… and its the only way you can handle the work load..

    Why don’t you quit ….you are doing more damage to Florida ..

    than a terrorist attack !!!
    You are sending a lot of middle class white collar, and blue collar workers ..to a downgraded .. Poor Collar status in 30 seconds.

    The hard working middle class has been ripped off and raped…and their Constitutional Rights violated , and I can’t
    believe this America … downgraded to either living in a car, a tent, or moving back your parents home.

    and if you still have a job…maybe some good hearted landlord will offer you a small rented apartment even with your credit score close to zero..

    The American Dream of fairness and hard work has been damaged beyond repair .

    The evil winners are the corrupt lawyers,Judges,Politicians and all their scam partners ….
    involved in stealing the American Dream from us the once middle class people ..to a new poor collar class …

    Broke and betrayed by the Government they once trusted .

    But never again …in my life time..will I trust the evil banking finance system we have built ..for the new America.

    Maybe a revolt , a revolution, is brewing….and boiling ..building up pressure.

    The …War of Independence , the French and Russian Revolution ,comes to mind …..
    The Kings ,and Czar’s of the past …are in our time ..

    the Fat Cats, and Good Old Boys in Wall Street, and Washington D.C.

    When the abused and new homeless ..Poor Collar people..

    are completely broken, both spiritual and financially ……

    and we find that can not take it any more.

    We will all shout !!! and start to move on a mission to change things ….a real Change is needed …

    ” I am Mad as Hell ..and I am Not Taking it any More ”

    —————————————————-

    L.Fitzgerald

  3. I have read so much about ” Fraud, Greed ,and Corruption ” from Mortgage brokers, Banks, Appraisal agents, U.S.Congress, Fat Cats in Wall Street .. so on..and so on ….

    Make’s me want to drop out of this stinking system .

    America has been transformed from a magnificent fair and hard working country to a country reeking of fraud, and greed !..

    In what is the biggest worldwide Ponzi scam… fabricated with the help of Washington DC ,and their Wall Street buddies .. have impoverished millions of its citizens ….!

    A very Big chunk of the American Pie has been thrown out to the garbage can ..

    The hard working middle class has been ripped off and raped…and their Constutional Rights violated , and downgraded to become homeless or Renters.

    The American Dream of fairness and hard work has been damaged beyond repair . The evil winners are the corrupt lawyers,Judges,Politicians and all their scam partners …. involved in stealing the American Dream from us the once middle class people ..to now to the poor class … Broke and betrayed by Government they once trusted .
    But never again …never again will I trust the crooked system we have built ..as the new America. Maybe a revolt , a political revolution,
    is brewing….and boiling ..building up pressure.

    The French revolution comes to my mind …

    When the common people could not take it any more.

    ” I am Mad as Hell ..and I am Not Taking it any more ”
    —————————————————-

    R.Fitzgerald

  4. Here’s the order from the court, it was directed to judicial officers and it’s a TRO

    Ex Parte Federal National Mortgage Association, Petitioner.

    In Re Federal National Mortgage Association (“Fannie Mae”) Loans Subject to Foreclosure Sale.

    ORDER

    Petitioner asks this Court to issue an ex parte temporary injunction1 or restraining order “enjoining all judicial officials in South Carolina conducting foreclosure sales on May 4, 2009 (or the next judicial sales dated) from dismissing all eligible one- to four-unit owner occupied properties securing Fannie Mae portfolio mortgage loans and MBS pool mortgage loans guaranteed by Fannie Mae for which there is a foreclosure judgment.” It asserts that this injunction is necessary to avoid undue costs if these foreclosure actions are dismissed rather than stayed or postponed based on the fact that the underlying loans may be subject to modification under the Homeowner Affordability and Stability Plan, the Home Affordable Modification Program (HMP), and the United States Treasury Supplemental Directive 09-01. It also states that, “absent injunction, mortgagors eligible for relief under the HMP program could be denied their right to participate because their property was sold at the foreclosure sale. This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction.”

    While I am very troubled by the ex parte nature of this petition2, I grant a temporary restraining order (TRO) preventing the foreclosure sale of any property arising out of a loan owned or guaranteed by petitioner or Freddie Mac or held by a servicer who has signed an agreement to participate in the HMP3. If a sale has already taken place today prior to issuance of this order, this TRO shall stay the master-in-equity, circuit court judge or special referee from taking any further action to complete the sale including the issuance of a deed to the purchaser.

    By May 15, 2009, the plaintiff in every mortgage foreclosure action stayed by this order shall serve on all other parties to the action (including petitioner and/or Freddie Mac as appropriate) an affidavit setting forth its belief whether the loan is subject to modification under the HMP. If the affidavit indicates that the loan is subject to modification under the HMP, the foreclosure shall be stayed pending a determination if the loan will be modified. If the loan is modified, the foreclosure action shall be dismissed. If the loan is not modified, the foreclosure may proceed.

    If the affidavit indicates that the loan is not subject to modification under the HMP, the TRO will be lifted unless petitioner, Freddie Mac or another party serves and files a counter affidavit asserting that the loan is subject to modification under the HMP by May 22, 2009. If a counter affidavit is timely filed, the TRO will remain in effect until the master-in-equity or circuit court judge determines if the HMP is applicable to the loan. The lower court shall insure that these determinations are made in an expeditious manner.

    If the loan is determined not to be subject to modification under the HMP, the TRO shall be lifted and the foreclosure may continue. If the lower court determines that the loan is subject to modification and the loan is modified, the foreclosure action shall be dismissed. If the lower court determines that the loan is subject to modification but the loan is not subsequently modified, the TRO shall be lifted and the foreclosure may continue.

    IT IS SO ORDERED.
    s/Jean Hoefer Toal
    JEAN H. TOAL
    CHIEF JUSTICE

    Columbia, South Carolina
    May 4, 2009
    4:50 p.m.

    1 Under Rule 65(a), SCRCP, a temporary injunction cannot be issued without notice to the adverse party.

    2 Petitioner has known about the facts supporting its request for injunctive relief for almost a month before filing this petition, and could have provided notice to the opposing parties during that period. If it were not for the interest of mortgagors who may be entitled to a loan modification, I would deny the requested relief based on petitioner’s lack of diligence.

    3 While petitioner asks for this relief only as to Fannie Mae owned or guaranteed loans, this TRO applies to all loans that are subject to modification whether owned or guaranteed by Fannie Mae or Freedie Mac, or a servicer who has signed an agreement to participate in the HMP.

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