Foreclosures browsing by tag


Foreclosures / Haunted Houses

Friday, October 28th, 2011

First there were bad mortgages, now it’s dud foreclosures.

HAVERHILL, MA–Francis Bevilacqua was a cash-for-trash real estate investor.

When he bought this duplex in 2006 the chain of title was, let’s say, not perfect.

The property in question, at Haverhill, Massachusetts

A prior owner was Pablo Rodriquez. In March 2005 Rodriquez gave a mortgage against the property to Mortgage Electronic Registration Systems (“MERS”), as nominee for the originating lender, Finance America. MERS, remember, is the privately owned database created by the mortgage banking industry to track mortgage loan ownership and servicing rights throughout the U.S. The mortgage bankers save lots of money on recording fees by registering with MERS instead of local county recording offices.

Rodriguez defaulted on his loan and in June 2006 the property was sold at a foreclosure sale. The foreclosing lender was U.S. Bank, as Trustee under a mortgage pooling and servicing agreement, and the successful bidder was also U.S. Bank. Weeks later, in July 2006, an assignment of the now-foreclosed mortgage from MERS, as nominee for Finance America, to U.S. Bank, was created (signed and dated). The assignment of mortgage was then recorded in the land records (Southern Essex Registry of Deeds).

Such were the circumstances when, in October 2006, Francis acquired the property by quitclaim deed from U.S. Bank.

MERS has headquarters in this building, at Reston, Virginia

By April 2010 Francis had converted the property into four condominiums and sold three units. At this point he had concerns about the title(s), so he filed suit to try title (akin to a quiet title action). He sought an order from the Massachusetts Land Court confirming his quitclaim deed, to rule out “the possibility of an adverse claim by Rodriquez.”

The Land Court ruled against Francis, even though Rodriguez could not be found and there was no opposition to the lawsuit. The court held Francis did not have standing to sue because the U.S. Bank foreclosure was void and his quitclaim deed was worthless. Francis appealed, and the Massachusetts Supreme Judicial Court agreed to decide the case.

The Supreme Court upheld the Land Court decision. The Court explained that at the time the foreclosure deed was created (June 29, 2006) its grantor (U.S. Bank, as Trustee) did not have an interest in the property according to “official” land records (the Southern Essex Registry of Deeds). Instead, U.S. Bank first appears in the chain of title by virtue of the assignment of mortgage (dated July 21, 2006). Since foreclosure can only be done by a mortgage holder, the foreclosure here was unauthorized, and void.

The Southern Essex Registry of Deeds, at Salem, Massachusetts

It follows the quitlclaim deed from U.S. Bank to Francis was ineffective to pass title.

Responding to Francis’ argument that he should be entitled to protected status of a bona fide purchaser, because he had no way of knowing all this, the Court disagreed saying the problem was apparent in the land records before Francis bought the property.

The Court concluded saying Francis may yet perfect his title if he can arrange a proper foreclosure to eliminate Rodriguez’s interest.

Moral: In recent years lenders and investors have relied heavily on MERS to evidence their mortgage rights. It’s been assumed an investor with superior rights can foreclose first and straighten out land records later. This decision upends such assumptions, at least in Massachusetts.

But what should such technicalities matter, when a borrower can’t afford property and abandons it?

According to the Supreme Court, it matters because the defaulting borrower continues to have a right to redeem the loan and reclaim the property, until the right of redemption is ended by foreclosure. It follows the borrower can still refinance or sell and, if he files bankruptcy, the property may be part of the debtor’s estate–tied up in bankruptcy proceedings.

Consequences of all this may seem illusory, but fear of clouded titles will cause some to avoid foreclosures entirely. And as for properties already foreclosed, and perhaps resold, no one knows how many could be in legal limbo.

State laws differ, so it’s unclear whether this view of faulty foreclosures will spread outside the Bay State.

The case is Bevilacqua v. Rodriguez, 995 N.E.2d 884 (Mass. 2011).

Foreclosure Rescue / Indictable Offenses

Saturday, November 6th, 2010

Suspicious dealings of a foreclosure rescue “expert.”

The first thing was to save her home.

It was 2008, and Karen Tappert was broke. Sometimes self-employed, but mainly unemployed, she couldn’t make the mortgage payment on her home in Bend, Oregon.

The Las Vegas property

Twice that year Tappert filed bankruptcy, but each case was dismissed when she failed to make court appearances and required payments.

In the meantime, Tappert studied debt elimination schemes being touted on the internet. She became convinced that debt, in particular mortgage debt, could legally be avoided using simple procedures and forms offered by the debt elimination “consultants.” The typical rationale behind these schemes was that the U.S. Federal Reserve system is unconstitutional, and loans funded with anything other than gold or silver can be avoided.

Soon Tappert began to offer her own services, and dubious legal forms, on the internet and by word of mouth. One blog boasted, “Karen has over 100 SUCCESSES around the country and WITHOUT having to use the courts!”

But last June the “Karen Tappert Method” came into question, when Tappert was indicted by a federal grand jury in Las Vegas and charged with multiple counts of mail and wire fraud. Here are some highlights from the criminal indictment.

The "rental" in Farmington, New Mexico

Count 3: The owner of property at 1601 Imperial Cup Dr., Las Vegas, NV, was behind in payments and faced foreclosure. Tappert offered to rescue the property for $1,800. The owner declined, but signed a quitclaim deed to an entity controlled by Tappert, known as “Amari Group.” Later, the property was foreclosed and acquired by Federal National Mortgage Association (a/k/a “Fannie Mae”). Tappert caused a fraudulent deed to be recorded, purportedly conveying the property from Fannie Mae to Amari Group. Tappert signed this deed on behalf of Fannie Mae.

Count 5: Property at 612 Diamond St., Farmington, NM, was foreclosed and acquired by Deutsche Bank National Trust Company, as trustee for investors in a mortgage-backed security that included the foreclosed mortgage. Tappert caused a fraudulent deed to be recorded, purportedly conveying the property from Deutsche Bank to an entity controlled by Tappert, known as “Saraland Investments.” Tappert notarized the bogus deed. Then Tappert rented out the property pocketing $4,050.

Corona, California: A million-dollar property "sold" for $490,000

Count 6: Property at 675 Gregory Circle, Corona, CA, was in the midst of non-judicial foreclosure. The foreclosure sale had been postponed, several times, when a fraudulent “Trustee’s Deed Upon Sale” was recorded. This trustee’s deed purportedly evidenced a foreclosure sale to an entity controlled by Tappert, known as “Northwest Properties Associates, Asset-Backed Certificates, Series 2006-FF1.” Days later, the property was sold by Northwest Property Associates for $490,000. The sale deed was signed by Tappert, on behalf of Northwest Property Associates.

Tappert has entered pleas of not guilty, and she awaits trial.

Moral: Karen Tappert is presumed innocent until proved otherwise. But if a defense to these charges will be that the Fed’s unconstitutional, and the money’s no good, she should know that others betting on this defense have gone to prison.

Postscript: In July 2011 Karen Tappert pleaded guilty to two counts of mail fraud and four counts of wire fraud. In January 2012 Tappert was sentenced to 97 months in prison, followed by three years supervised release, and ordered to pay restitution of $3,643,259.