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Bankruptcy judges get tough on debtors who don’t surrender property

When Lisa Metzler declared bankruptcy in 2012, she was so delinquent on her mortgage that she agreed to surrender her Gibsonton townhouse so the bank could proceed with foreclosure.

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By agreeing to give up the home, Metzler was allowed to keep $5,000 worth of personal property.

That was in federal court, which handles bankruptcy cases. Yet in state court, Metzler hired a lawyer and continued to fight the foreclosure. She still has her house. So do some other debtors who promised to surrender their homes but kept battling the bank.

That’s not fair, lenders are starting to argue. When people say they are going to surrender property, they should do so or face a penalty. It’s an argument that’s finding a receptive ear among a small but growing number of bankruptcy judges.

Last year, Judge Michael G. Williamson in Tampa threw out Metzler’s bankruptcy case because she kept trying to block foreclosure.

“At a minimum,” he wrote in a recent opinion, “ ’surrender’ means a debtor cannot take an overt act that impedes a secured creditor from foreclosing its interest in secured property.”

In a similar South Florida case, Judge Erik Kimball put the issue more bluntly: “When a debtor says, ‘(I) surrender,’ that means you need to throw up your hands and not fight anymore.”

Some debtors fight to keep houses they don’t even live in.

Former Clearwater Beach real estate agent Michael Andolino agreed in bankruptcy court to surrender a waterfront home he bought as a rental property.

But after his bankruptcy case was closed, Andolino resumed battling the bank in state court. He hasn’t made a mortgage payment in five years, yet he continues to collect rent each month.

• • •

People in bankruptcy, called debtors, have two basic options for dealing with a homestead or other real estate secured by a mortgage.

They can “reaffirm” the mortgage debt and continue making payments. Or, more typically, they surrender the property so the bank can resume foreclosing or a bankruptcy trustee can sell it if there is any equity.

Debtors are allowed to keep, or “exempt,” $1,000 worth of furniture, jewelry and other personal property except when a homestead is being surrendered. In that case, the debtor can keep $5,000 in personal property, a substantial amount given that personal items are valued for bankruptcy purposes at yard sale prices.

Cheryl Troutt of Stuart claimed the full $5,000 exemption — the so-called “wild card exemption” — when she agreed to surrender her home two years ago. She got a discharge, meaning most of her debts were forgiven, and her bankruptcy case was closed.

But Troutt didn’t surrender the house, which had been in foreclosure since 2009. Instead, she continued fighting U.S. Bank in state court even though she had admitted in bankruptcy court that she owed the lender $205,000.

Last June, the bank moved to reopen the case, saying Troutt should be required to honor her surrender agreement. Judge Kimball granted the motion.

Although Troutt had “admitted the validity of the debt and the mortgage,” Kimball said, “she used the wildcard exemption … while having no intention of actually giving up the real property.”

Repeatedly warned to “play by the rules,” Troutt finally agreed to stop her state court case against the bank. However, the bank is seeking sanctions against her and she faces possible revocation of her discharge — “a horrible remedy,” the judge told her, because “creditors can literally pursue you forever.”

In another South Florida case, a Boca Raton couple kept $10,000 in personal property — $5,000 each — after they, too, agreed to surrender their home. But they continued fighting the lender in state court even though they hadn’t made a payment on their $500,000 mortgage since 2009.

A judge ordered them to turn over the property; they are appealing the decision and remain in the house.

In their orders, both South Florida judges built on earlier rulings by Williamson in Tampa. He has faced several recalcitrant debtors, including Lisa Metzler.

Three years ago, Wells Fargo began foreclosing on Metzler’s Gibonston townhouse. She declared bankruptcy and agreed to surrender the house under terms of a Chapter 13 plan to repay other creditors.

Williamson confirmed her plan, and Wells Fargo went back to court to finish foreclosing. But Metzler continued to fight even though the bank said she had not made a mortgage payment since 2010.

Metzler’s action “disavowed her representations to this (bankruptcy) court and show that her confirmation was procured by fraud,” an attorney for Wells Fargo alleged in a motion asking the judge to revoke confirmation of the Chapter 13 plan.

Williamson granted the motion and dismissed the case. But he reopened it last month so he could issue an opinion to “provide guidance” to other people in bankruptcy.

Referring to Metzler and a Tampa debtor who also failed to surrender property, Williamson found that both “plainly took overt acts” to prevent lenders from foreclosing. Although bankruptcy law does not define “surrender,” Williams agreed with two appeals court rulings that “surrender … requires a debtor to relinquish secured property and make it available” to the bank or other secured creditor.

Metzler did not return calls for comment.

Hywel Leonard, a Tampa lawyer who has represented numerous lenders, thinks Williamson’s opinion could lead to more cases being dismissed for failure to surrender property.

There’s no way of knowing the total number of pending cases in which surrender is an issue because court clerks don’t track those.

But, “I sense that you’re going to see a number of other creditors beginning to pick up on this as a line of attack rather than be mired in state court where things move extremely slowly,” Leonard said. “This has the benefit of asking the bankruptcy court to revisit the issue of whether (debtors) are entitled to discharge of their debts if they haven’t lived up to representations they made to the court.”

• • •

One debtor who said he would surrender property but did not has avoided any penalty. At the peak of the real estate boom in 2005, Michael Andolino paid $875,000 for a waterfront house near his own home in Clearwater’s upscale Island Estates.

By the time Andolino declared bankruptcy two years ago, the house, an investment property, was in foreclosure with at least $600,000 owed on it. Andolino agreed to surrender the house as part of his proposed Chapter 13 repayment plan.

However, Andolino was unable to carry out the plan, so his case was converted to a Chapter 7 liquidation. At that point, according to the bankruptcy code, he should have declared his intention to either make mortgage payments or surrender the house.

He did neither. Instead, he hired a lawyer and continued fighting the foreclosure.

In an email to the Tampa Bay Times, Andolino said “the bank delayed taking surrender of the property” because it wanted to renegotiate his loan.

“The documentation for the surrender … is already with the bank, and I have been advised that the bank has elected to file my surrender,” he said.

Andolino, 44, did not respond to calls and emails asking for clarification. Records show that he continues to fight the case, with a trial set for June 19.

In the meantime, Andolino has been renting the 2,600-square-foot pool home to a family from Texas. A woman who answered the door recently said that she found it on Craiglist and that Andolino had told her it was in foreclosure. She would not say what the rent is, but on his 2013 bankruptcy filing, Andolino reported $19,2000 in rental income for the first seven months of that year.

Andolino, who now has a used car business in New Port Richey, was asked by email why he collected thousands of dollars in rent yet hadn’t made a payment on his loan in five years.

He did not respond.

Contact Susan Taylor Martin at or (727) 893-8642. Follow @susanskate.

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Land bank announces completion of first ‘zombie’ house renovation in …

The handsome, yellow brick ranch at Abbott and Fisher roads in Lackawanna’s Second Ward had seen better days. After seven years of vacancy and neglect, it was no longer livable.

But the house was reclaimed by the Buffalo Erie-Niagara Land Improvement Corp., which Friday announced the completion of a $45,000 renovation. It is a first-of-its-kind revitalization effort that seeks to spare uninhabited and unattended properties from wrecker’s ball so they can be placed back on the real estate market – for more than double the investment.

“It was one of the properties that you often hear about, the ‘zombie’ properties that do not have anyone living in them, that are so distressed that they can’t be sold and are truly a drain on the local market,” said Erie County Executive Mark C. Poloncarz at a news conference inside the newly renovated house.

“It was allowed to rot and decay and become such an eyesore that it could not be sold. It shouldn’t have been demolished, because there were good bones in this building,” Poloncarz added.

The land bank is the mechanism by which the county was able to reclaim the two-bedroom house. Back in 2012, Gov. Andrew M. Cuomo signed a law that removed barriers for counties across the state in their quest to take control of foreclosed, vacant properties and get them back on the tax rolls. That same year, State Attorney General Eric T. Schneiderman initiated a $33 million funding mechanism that arose out of a multibillion-dollar settlement with mortgage companies in the aftermath of the foreclosure crisis that burdened communities across the state with blighted and abandoned properties.

In the first round of funding, which took place in October 2013, $13 million was disbursed to eight land banks, one of which was the Buffalo Erie-Niagara Land Improvement Corp., which Friday announced that the Abbott Road property is the first of its bank of reclaimed houses to be renovated and made ready to be sold to a qualified moderate-income buyer.

“This story represents what our land bank is supposed to be about – eliminating blight and improving neighborhoods one house at a time,” said Deputy County Executive Maria Whyte, who also chairs the board of the land bank.

“The impacts will be significant and long-lasting,” Whyte added.

As a result of the land bank’s efforts, Poloncarz said the former zombie property at 1745 Abbott will see new life, and so will the surrounding community.

“A family will shop at the local restaurants, whether it’s Pat’s Submarines or the Nite Cap. A family will eventually send their children to Lackawanna Junior and Senior High School right behind us,” he said.

Jocelyn Gordon, executive director of the land bank, said there are plans to renovate eight more reclaimed properties across the county this year, with the expectation that those efforts will be doubled in 2016.

“Our mission includes returning property we acquire to productive use and leaving property in better shape than we found it,” Gordon said.

Lackawanna Mayor Geoffrey Szymanski also attended Friday’s event.

“It means a lot to me that the city is moving forward and that the county has a new avenue to stop blight in its tracks and help out both the homeowners … and the people interested in collecting taxes,” he said.


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Dustin Diamond Guilty: ‘Saved By The Bell’ Star Convicted Of Bar Stabbing, But …

Dustin Diamond was convicted Friday of two misdemeanor charges related to a barroom stabbing, but the Saved By The Bell actor avoided a third charge that could have landed him in prison for a decade.

Diamond had been accused of stabbing a man on a fight on Christmas Day, but pleaded not guilty to charges of carrying a concealed weapon, disorderly conduct, and a felony count of recklessly endangering public safety.

The 38-year-old actor was convicted of the two misdemeanor charges after a trial in which he testified that other patrons were harassing him and his fiance, Amanda Schutz.

“I felt like we were being set up for antagonistic purposes,” he said.

After Schutz pushed a woman and grabbed another, she was then punched in the face herself. Diamond said he then pulled out a pocket knife to stop the group from hurting his fiance any more. He ended up stabbing 25-year-old Casey Smet.

Though Diamond appeared serious throughout the trial — and even broke out in hives during an initial court appearance — on the stand he smiled when a defense attorney asked if he liked when people brought up his iconic character, Screech.

“That means they love you,” Diamond said. “That means you’re doing your job.”

The trial comes amid a difficult stretch for the former child actor. Since appearing on Saved By The Bell and a string of spin-off series, Diamond has struggled with finances, and in 2006 pleaded with fans to help pay a mortgage to avoid losing his home to foreclosure.

In an interview with Howard Stern, Diamond admitted that he had fallen on hard times.

“I’m doing great with my comedy, but this is definitely a low point,” he said. “Real life comes in and affects you.”

Diamond also wrote a tell-all book about his time on Saved By The Bell, detailing drug use and hook-ups among his fellow actors. He also had a controversial appearance on VH1’s Celebrity Fit Club and tried his hand at celebrity boxing.

In the years since he moved out of acting, Diamond has made a name for himself on the stand-up comedy circuit, and often goes on tours.

After his arrest, Diamond said he was content with his new path in show business.

“Here’s the way I look at it. I walk a very honest and humble path, and I know what kind of person I am. I’m very comfortable where I fit in life,” he said. “I want to have a family. I want to have kids and I want to raise them right. I’m playing comedy clubs. I’m not rich, but I make a living. I’ve tripped and fallen many times in my life. If you don’t, how do you learn?”

Dustin Diamond could have faced up to 10 years in prison had he been convicted of the felony charge.

[Image via Getty Images/Dustin Phelps]

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Kupchick works to help struggling homeowners

State Rep. Brenda Kupchick (R-132, Fairfield) supported an extension of a program which helps consumers facing possible foreclosure as well as lenders who benefit from the settlements by retaining a performing loan rather than acquiring unwanted properties.

The legislation, HB-6752, An Act Extending the Foreclosure Mediation Program extends the program to July 19, 2019 and additional makes other improvements to the program.

The bill will now expand the scope of the program by making eligible an owner-occupant who is not a borrower on the mortgage but who is an owner as a result of certain events, such as divorce, legal separation, property settlement, or the borrower’s death.

For certain foreclosure actions, the new law would expand the account history and related information a mortgagee must provide a mediator and mortgagor by including copies of any agreements that modify the note or mortgage. Under the bill, a mortgagee must also provide the most current version of required evaluation forms.

“This is one of those rare and good examples of a government program that works and helps Connecticut homeowners. The Foreclosure Mediation Program is being extended because it has provides vital services to those consumers facing foreclosure. Of course we need to extend the program, these services are needed as the Connecticut economy is still in recovery and homeowners may still be at risk of foreclosure, said Rep. Kupchick, the ranking member of the legislature’s Housing committee.

The program has helped many individuals and families avoid foreclosure, and this bill will help ensure that the program can continue to function and serve more Connecticut residents. Since the program was created, it has saved more than 14,000 homes. The foreclosure crisis is expected to last another three years, and the majority of homeowners facing foreclosure will most likely represent themselves in court without a lawyer.

Under the foreclosure mediation program, homeowners facing foreclosure have been able to receive legal help so that they have a better chance in court proceedings. The bill also proposes improvements to the foreclosure mediation program, as it reflects changes in federal law and by Fannie Mae and Freddie Mac.

State Rep. Brenda Kupchick (R-132, Fairfield)

State Rep. Brenda Kupchick (R-132, Fairfield)

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How the Zombie House Crisis Mutated and What Cities Are Doing About It

Are there more zombies in our city than ever before, or are we just paying more attention to them?

“Zombie properties” is a clever name to describe residential buildings that are neither alive nor dead: They are caught in the limbo of an incomplete foreclosure. The real estate title stayed with the homeowner even after foreclosure proceedings began. The lender walked away — in some cases to avoid having the risk of a low-value property on the books. Homeowners walked away thinking the property was no longer theirs.

With no one explicitly responsible for the property, the zombie house falls into vacancy and decay.

As the National Community Stabilization Trust’s Annie Carvalho describes it, even though the national mortgage settlement has made incomplete foreclosures less common, cities, especially in the Midwest, still struggle with those that were abandoned before the settlement was reached. “It’s still very difficult for folks locally to identify where they can go to make something happen to a property,” Carvalho says.

The longer a house is empty, the more dilapidated it gets. That’s partly why it now seems like zombies are everywhere.

Their ubiquity is somewhat misleading, in part because the zombie label is sometimes used to describe any kind of empty property. Whole neighborhoods, of course, particularly in the Northeast and Midwest, long ago saw disinvestment and were effectively abandoned because of suburban flight that began in the 1950s.

“The thing that happened because of the housing crisis [in 2007-2008] is that this started trickling into different neighborhoods. The problem just ballooned,” Carvalho says. (Carvalho and other experts talked about the very visible problem at the Center for Community Progress’ Reclaiming Vacant Properties conference in Detroit last week.)

The memorable “zombie” branding blurs some of the nuances of the technical term, says the Housing Partnership Network’s Danielle Samalin — vacancy does not necessarily mean a foreclosure is in limbo. But more pointedly, “one reason we may be hearing more about zombie properties than in years past is because one of the worst enemies to ending the foreclosure crisis is time,” Samalin says. “With time, delinquencies become worse, turn into defaults, into foreclosure, and then for a variety of reasons, people may walk away from their homes. … I have the sense that this dynamic of properties in a limbo foreclosure state has become the latest mutation at this late point in the foreclosure crisis.”

The result? Demoralized homeowners, the debilitating infection of blight on a community, and no easy way to push property into the hands of somebody who will take responsibility for it.

Since the mortgage crisis, says Samalin, the community development sector has been working with renewed fervor (and more visibility) to respond to the plague of zombies. The “key to effective solutions is that we understand that this foreclosure crisis is not steady state,” Samalin says. “As time goes on, the virus mutates and we need to find new solutions.” That means strategies that are both preventive and curative.

HPN, for example, takes the preventive approach by counseling its members around the nation to stave off foreclosure. Working with two of its members in Chicago and Cleveland, and other partners, it developed the Resolution Specialist Program to help develop loan modifications that can assist homeowners so that they can stay in their homes. “We have found that when high-quality, intensive nonprofit counselors are integrated into the loss mitigation process, rather than as an adjunct social service provider, the outcomes improve for all stakeholders,” Samalin says.

HPN also is working with the NCST on the ReClaim Project, which interrupts the “not-mine-not-yours” dynamic of zombie properties with an entity that seizes responsibility for them. ReClaim acquires “very low-value distressed assets” that are likely to become zombies, often through a donation that includes a cash contribution to cover program expenses. HPN’s Resolution Specialist Program is integrated into the process, in case homeowners can still be found and contacted in the hopes of completely avoiding foreclosure. But if that’s not possible, and a foreclosure needs to proceed to get a resolution on the property, ReClaim is a way to expedite it, so that it can get back into local hands as quickly as possible. In many states, Carvalho said, foreclosures can drag on for years, leading to neighborhood instability and a vacant property that has a less and less chance of being rehabilitated. In worst-case scenarios, the program also expedites a demolition.

ReClaim is a national program, but it focuses on specific communities. Carvalho mentions parts of Florida and large Midwestern cities like Indianapolis, Detroit, Cleveland and Columbus.

A home sits vacant in Youngstown, Ohio. The city passed bold legislation to combat “zombie properties.” (AP/Photo Mark Stahl)

Samalin describes ReClaim as “deeply rooted in local place.” It succeeds “because of an ability to balance national scale and efficiency with deep local engagement,” she said. “We are able to work with large banks and servicers because of our national platform, and yet our goal is to enable community control of properties.”

But it’s not just outside programs that are fighting zombie properties. Cities, too, are stepping up.

Baltimore has streamlined its code enforcement program through the Vacants to Value program, targeting vacant properties in neighborhoods that are on the “tipping point” of blight. Enforcement pushes owners who are in code violation — creating a real health and safety hazard — to take care of it. If they don’t, the property goes into receivership so that the city can do the repairs themselves. With continued negligence by the owner, the matters ends up in a courtroom, with the city petitioning for an ownership transfer. Then, they put the property up for auction, pre-screening potential buyers to be sure that they can begin work on the property within 12 months.

Tennessee’s Shelby County, which includes Memphis, recently enacted a similar program, and Milwaukee is also exploring options to obtain deteriorating vacant homes faster. In all cases, this gives the public sector some power to take care of property even before it is foreclosed upon and a title is officially transferred. And in Wisconsin, the state Supreme Court recently ruled unanimously that any lender that files a foreclosure action is obliged to complete the process and sell the property before it is abandoned.

Youngstown, Ohio, though, has the boldest plan. Through legislation passed in 2013, it created a foreclosure bond program: Lenders, including the big banks, must put up $10,000 in bond whenever they issue a mortgage in the city. If that property ends up deteriorating in a zombie state, then the city can use that money to maintain and repair the house, or if necessary, to demolish it. As Samalin says, it is “a legal and grassroots approach to make banks pay for the damage to the community of vacant, abandoned properties” — not with a fine, but as a pre-emptive incentive. After all, if the bank keeps up its responsibilities, it will recoup its money.

While initially, according to Carvalho, banks were not enthusiastic about the bond program, “most banks just got over it and are dealing with it now. It’s an effective way of keeping the process moving,” Carvalho says. “Otherwise, the city has no resource or path to hold anyone accountable.” And fears that banks would be reluctant to lend to homeowners in Youngstown, because of the added $10,000 risk on the back end of the mortgage, have not come to bear.

It’s innovative work like this that gives Samalin hope that zombie properties are not an inevitable part of the urban landscape. The next great leap, she says, is developing more accessible language and stories that translate the intricacies of the housing crisis and its legacy to the public. “I suppose that’s why it’s a good thing the term zombie is so catchy,” she said. “It gets the public’s attention, and spurs a real desire to collectively fight to end this crisis.”

This post is part of a 10-part series underwritten by the Center for Community Progress. Read all posts in the series here.

Anna Clark is an independent journalist living in Detroit. She has written for the New York Times, the New Republic, NBC News online, Pacific Standard and other publications. She is a political media correspondent for the Columbia Journalism Review. Anna is also a writer-in-residence in Detroit high schools through the InsideOut Literary Arts Project, and the editor of A Detroit Anthology. Her website is

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Lawmakers want to pare down HOAs’ power in foreclosure

CARSON CITY, Nev. (AP) — Lawmakers who say a recent Nevada Supreme Court decision has given homeowners associations too much power to foreclose over unpaid dues are pushing for a last-minute legislative fix, saying the ruling could drag down the recovering market and threaten Nevadans’ ability to get federally backed loans.

Changes could come through Republican Assemblyman David Gardner’s bill, AB 359, which deals with so-called “super-priority liens” placed on homes by HOAs. The bill has not yet been scheduled for a hearing, but Gardner said lawmakers are actively working on the measure and he expects it will be up for discussion sometime in the final four days of the legislative session.

Real estate agents and mortgage lenders are sounding the alarm about the Supreme Court’s September decision, which said that unpaid HOA dues should not only be the first thing paid when a foreclosed home is sold, but that that they can also extinguish a mortgage itself if a bank doesn’t address the lien for HOA dues.

That goes further than the how many interpreted the law in the past — as requiring up to nine months of HOA dues and collection costs paid off first when a foreclosed home is sold.

HOA industry representatives support the stronger interpretation. They say the high stakes force banks to take HOAs seriously and pay dues, ensuring responsible HOA members aren’t picking up the slack from their delinquent neighbors and the infrastructure, landscaping and public areas of an HOA are maintained.

“If the bankers and realtors succeed in eliminating the super priority lien, the entire burden of unpaid assessments will shift to those owners that do pay while banks continue to strategically delay foreclosure,” wrote Norm Rosensteel and Donna Zanetti of the Community Association Institute Legislative Action Committee in an editorial published earlier this week in the Reno Gazette-Journal. “Once again, the homeowners that have worked hard to play by the rules will end up paying the price. It is time to protect homeowners, not predatory lenders.”

But real estate agents and banks say the balance of power is too far in the favor of HOAs, and such a situation is a threat to the market. They back AB 359, which would prevent mortgages and other liens from being wiped out in an HOA foreclosure.

Realtors say the Supreme Court ruling has led to expensive homes being foreclosed upon and auctioned for a fraction of their worth because the owners haven’t caught up on relatively small HOA dues of often less than $100 a month. When the HOA forecloses and an HOA’s super-priority lien cancels a bank’s legal claims to the mortgage, the ownership trail becomes murky, the cost of title insurance goes up and the home’s resale value drops.

The Federal Housing Finance Agency, which regulates federal lending agencies, including Fannie Mae and Freddie Mac, has already raised concerns about the situation in Nevada. An official from the agency testified on the matter before the Legislature in April, and the agency later issued a statement saying it would aggressively challenge HOAs whose foreclosures wiped out federally backed mortgages.

“Their signal is strong. Their signal is pretty to-the-point,” said Keith Lynam, president of the Greater Las Vegas Association of Realtors. “We’re such a tumultuous market. It’s irresponsible of us not to take it seriously.”

Lawmakers have sought to ease the high stakes with SB 306, a bill that aims to give banks and borrowers more warning before their homes go to auction and a mortgage liens are extinguished. That bill is awaiting Gov. Brian Sandoval’s signature.

Republican Sen. Becky Harris is backing a bill, AB 240, that creates an intermediate-level solution — one that would require “impound accounts” where lenders store up money that could be withdrawn to pay HOA dues in case of default.

Real estate industry representatives say something needs to be done to avoid a setback in the market.

“We don’t need another shot to the stomach,” Lynam said. “The Legislature has got to act.”

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Mobile man gets probation, fine for conspiring to rig foreclosure auctions

After eight postponements, a federal judge in Mobile on Thursday finally sentenced a man for his role in a conspiracy to rig real estate foreclosure auctions.

Chief U.S. District Judge William Steele sentenced Steven J. Cox to three years on probation for conspiracy to violate the Sherman Antitrust Act and conspiracy to commit mail fraud. The judge also fined Cox $10,000 and ordered him to immediately pay $15,558, which is the balance of the $82,101 that he owed to lien-holders who were cheated by the rigged auctions.

Cox pleaded guilty in 2012, but federal prosecutors asked for the sentencing to be postponed eight separate times. Court filings by prosecutors indicted that Cox helped the government make other cases against people and businesses involved in the scheme. Ten people and two businesses have pleaded guilty. That includes Chad E. Foster, who is scheduled to be sentenced on Sept. 29.

According to court records, Cox and other members of the conspiracy would agree to designate one person to bid on properties at foreclosure auctions at Mobile Government Plaza. After one investor would acquire property cheaply, according to court records, participants in the scheme would hold a secret second auction among themselves.

The winning bidder would make payoffs to other investors for not competing at the public auction and money would be paid out based on predetermined specifications. 

An attorney for one of the first defendants to get busted, in 2011, described it as a “complicated formula” based on an informal “gentlemen’s agreement” that became more formal over time.

Because the conspiracy subverted a free and open auction, it depressed prices and cheated banks and other institutions with liens on the foreclosed properties.

Updated at 9:23 a.m. to add the first name of defendant Steven J. Cox.

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Foreclosure scam ordered to repay $11M to distressed homeowners

The lawyers behind a foreclosure scam were ordered Friday in federal court to repay more than $11 million that it took for vulnerable homeowners.

The Consumer Financial Protection Bureau and the state of Florida accused the scammers, led by the Hoffman Law Group, of tricking distressed homeowners into joining frivolous lawsuits that would supposedly provide foreclosure relief.

But the homeowners were required to pay illegal advance fees.

The scammers have been ordered to repay $11.7 million in illegal advance fees collected from distressed homeowners. They will also pay a $10 million civil penalty to the state of Florida. 

“These companies preyed on vulnerable consumers who were trying to save their homes from foreclosure,” said CFPB Director Richard Cordray. “The false promises made by these companies lured struggling homeowners into scams that led to greater financial hardship. We are working to protect consumers from illegal predatory practices by holding bad actors accountable for their actions.” 

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Pasco wants to change foreclosure ordinance

Pasco wants to change foreclosure ordinance

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Federal Housing Finance Agency: Prices Back near April 2007 Peak

Federal Housing Finance Agency: Prices Back near April 2007 Peak

The Federal Housing Finance Agency reports prices continue to climb

In March 2015, home prices grew 0.3% month-over-month, up 5% year-over-year. Prices are now within 2.3% of their April 2007 peak, which corresponds to January 2006 levels. February’s 0.7% gain was revised downward to 0.6%.

FHFA House Price IndexEnlarge Graph

Real estate values drive consumer confidence and spending. In fact, asset price appreciation was a big driver of consumption during the bubble years, masking wage stagnation.

Now that people are having a difficult time funding consumption through equity expansion, a dialogue about the lack of wage growth has begun. In fact, one of the unstated purposes of quantitative easing was to increase asset prices so as to spur spending.

What makes the FHFA House Price Index different

The FHFA (Federal Housing Finance Agency) House Price Index differs from other house price indices including those from Case-Shiller and Radar Logic. The FHFA House Price Index only looks at houses with mortgages guaranteed by Fannie Mae and Freddie Mac.

This means the home prices are below the conforming threshold of $417,000. It also means the borrower has a mortgage that eliminates cash-only transactions. Finally, the FHFA House Price Index eliminates jumbos, making it more of a central tendency index.

Implications for REITs and real estate companies

Increasing real estate prices are good for the real estate securities owned by real estate companies like Colony Financial (CLNY) and Northstar Realty Finance (NRF). These companies aren’t like Annaly Capital (NLY) or American Capital Agency (AGNC), which primarily invest in agency—or government-insured—mortgage-backed securities. Instead, they take the credit risk, and if the borrower defaults, they’re stuck with the collateral.

Investors interested in trading the real estate sector via an ETF should look at the iShares Mortgage Real Estate Capped ETF (REM). If you want to isolate interest rate risk, consider the iShares 20+ Year Treasury Bond ETF (TLT).

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