by Joe Shaheeli
Councilman Curtis Jones’ Public Safety Committee will introduce a series of recommendations to City Council which should end loopholes that have created an epidemic of mortgage fraud in this city.
When approved by the full Council and signed by the Mayor, it will close a history of families suffering mortgage foreclosures who have long sought redress for their lost homes, taken from them through fraudulent methods. Hundreds, if not thousands, in this city have found their very homes, in which they live, taken from them in any number of ways, and some of it criminally.
Few are these who understand their rights fully. Those who don’t, follow lead after lead from housing counseling agencies designed to help them. Eventually they are steered to the court’s mortgage diversion program, considered a model initiative back in 2007, and which was emulated in other cities around the country.
When they appear before a judge – usually Idee Fox or Nina Wright Padilla – they are given a form which gives them an opportunity to have their cases heard. When heard a month or more downstream, the contesting law firm and the homeowner were to have already met, made an agreement, or worked to build up their side of the argument before the judge.
During that time period, however, the Public Record has learned, in some cases the lawyer or law firm finds it has an opportunity to circumvent the judges’ orders by moving ahead on the foreclosure. By hearing date, the judges find the case is moot: The property has been foreclosed upon despite their ruling. The victim is without home or shelter. The case may then be dismissed without a query as to how this happened.
Enter into this picture “The Families of Philadelphia”, a natural coming together of individuals who have found themselves in this same boat, floating on a judicial wave that takes them on a journey ending on the shores of lost property. In the four years they have been drawn together as dispossessed property owners, they’ve learned what needs to be done to prevent more victims.
They’ve learned the hard way that the City’s Mortgage Foreclosure Diversion program, which is funded by City Council, contains loopholes. Over the past year, The Families of Philadelphia demonstrated to Council Members separately, raising the concern of Council. This resulted in a public hearing chaired by Councilman Curtis Jones under Council Resolution 150361 on Oct. 6.
The Families of Philadelphia made a series of recommendations that would close the loopholes used by a few law firms and others to circumvent the judicial orders designed to help those facing foreclosures to settle them.
Judges and Public Officers of this Court are deficient in areas in the laws involving “security instruments” and basic federal rules established by the Fair Debt Collection Practices Act. Federal and state laws require “validation and verification” of any unclaimed or unsubstantiated claim. So litigants seeking dispositions of properties have been able to turn the process of mortgage foreclosure into the sale of security instruments. They get away with the property, without proving legality to their claims.
This happened in the case of Raheema Beyah, 53, a hard-working mother of three who is a bank maintenance worker. She went to probate her father’s will in City Hall October 2013. In it she was bequeathed her family’s home at 5748 Woodcrest Avenue.
To her surprise, she learned last August from attorney Stacey Graham of Councilman Jones’ office a judgment had been placed against the property in amount of over $120,000.
Beyah hadn’t been served any notice despite the claim of the litigant law firm to the contrary. No record of her signature on any subpoena could be found. She went to the Prothonotary’s Office and was told what to do to strike the judgement. She did – but her petition was denied.
She then requested a subpoena to require the law firm, by law, to declare “an issue”, and prove their point. That, too, was denied, even though such a response was required by law. She was never told why. She learned, through a Qualified Written Request to litigant JP Morgan Chase. This financial institution answered the client listed as its litigant to retrieve their money, Rebecca Bingham, did not exist according to its records.
This highlights one of the major criminal acts discovered by TPOF: robo-signing of fictitious names by representatives.
Two national banks have between successfully sued for this practice. In March 2015he US Justice Dept. announced JP Morgan was ordered to pay $50 million to settle allegations it had improperly submitted robo-signed documents to bankruptcy courts around the county in connection with cases involving more than 25,000 homeowners.
Beyah was guided to file bankruptcy Nov. 30 of last year, only to find her house had been sold the next day.
On Dec. 3, 2015, ReMax posted her property, saying it was managing the property on behalf of the new owners.
She had filed for reconsideration before Judge Linda Carpenter. That, too, was denied. She is now filing an “adversary complaint” requesting the proper document showing her signature. She worries it too will be denied. The question is why?
In another case, a litigant in the case of Sheila Lloyd vs. PennyMac, a Philadelphia law firm allegedly claimed they represented PennyMac, which is a national mortgage lender.
When PennyMac received a subpoena to prove their claim from Lloyd, that institution hired the law firm of Blank Rome LLP to represent them. The next day, that firm asked for and received an emergency hearing which Lloyd was ordered to attend. PennyMac denied any connection to the law firm which claimed to represent it. But her petition was denied.
Why this did not elicit a query from the judge? There was reason to suspect one of these law firms was lying in an effort to steal a property. It was also obvious PennyMac wasn’t guilty. So why did the judge not issue a subpoena to the misrepresenting law firm?
Sheila is still receiving documentation carrying PennyMac’s logo which is being mailed to her by that law firm.
As a result of The Families of Philadelphia’s testimony before Jones’ Committee, the Councilman has drafted a series of recommendations to be presented in the form of a bill to be introduced this week. They include some proposals by The Families of Philadelphia and some by Councilman Jones and his staff.
This could prove an end to long reign of injustice. It may trigger a series of legal actions seeking redress as well. Anxious to see the results are those who have been defrauded, those practicing the fraud, and the judiciary whose hands have been tied by existing loopholes. We hope they bring a better day for the city’s homeowners.
COUNCILMAN CURTIS JONES, JR.’S STATEMENT
On Oct. 6, 2015, a hearing was conducted to explore numerous citizen complaints and allegations of illegal mortgage foreclosures occurring in Philadelphia. Witnesses testified from virtually every councilmanic district about illegal processes occurring in our courts that are taking homes from property owners without the property owner ever receiving notice that a foreclosure action was pending against them.
Highlighted below are a summary of concerns that were raised along with proposed resolutions to abate such concerns. Some of the proposals will require budgetary appropriations, some will require guidance and collaboration from independent city departments and some will require legislative action. As elected officials, we must do all that we can to keep Philadelphians in their homes.
A relatively small sample review of judicial records on mortgage foreclosures by my staff indicates many default judgments have been entered against a debtor or property owner without that debtor or property owner ever appearing in court. This seems to validate the complaint that many constituents regularly report to the elected officials they had no knowledge of a default judgment entered against them until the Philadelphia Sheriff’s Office posted a notice for Sheriff’s Sale on the property itself, or until the Water Dept. issued a bill for the property in the name of a different property owner. When the Sheriff’s notice is posted or the PWD statement changes, a judicial ruling has already been made that the property owner owes the debt alleged by the plaintiff. In many cases in Philadelphia, the property owner has never had an opportunity to dispute the alleged entitlement by the mortgagor or the amount allegedly owed.
Conduct an audit and analysis of all default and summary judgment decisions on mortgage foreclosure actions adjudicated in the last five years. Thereafter, require an annual report on mortgage foreclosure adjudications to be submitted to the following: Mayor’s Office, City Council, District Attorney’s Office and the Philadelphia Police Dept. This will dramatically increase transparency into mortgage foreclosure actions.
Some members of the Mortgage Foreclosure Diversion Court Steering Committee have come under scrutiny for illegal mortgage foreclosure activities in Pennsylvania and other jurisdictions. These same individuals now hold leadership roles on the Steering Committee responsible for designing the systems and processes by which mortgage-foreclosure actions are adjudicated in Philadelphia. In order to eliminate any appearance of impropriety or conflict of interest, such individuals should be removed from Steering Committee immediately. Furthermore, all members of the Steering Committee should be subject to strict ethical guidelines that require annual disclosure of income, contributions and financial interest or ownership of real estate.
Require all members of the Mortgage Foreclosure Diversion Court Steering Committee to agree to ethics compliance and annual financial disclosures. Further require Steering Committee members to be in good standing with other jurisdictions on matters related to foreclosure.
Under subprime mortgage lending practices, many mortgages were bundled together and sold to investors as security instruments on the stock market. This resulted in numerous buys, sells and transfers of mortgages that were purchased as investments which, unlike real estate, do not require a clean, traceable, chain of title ownership. These lending practices resulted in two illegal activities concerning real property: (1) Many investors who purchased bundled real-estate transactions failed to legally record its ownership interest in the real property which is a state law requirement that puts all parties who have an interest in the property on notice that there is a financial encumbrance held by another party; and (2) the transfer or conversion of a real-estate mortgage into an investment instrument legally terminates the repayment obligation because such transfer automatically converts the financial interest into an investment which may or may not produce profits to be paid to the purchaser of the investment; therefore the repayment obligation is automatically destroyed by the conversion of a mortgage to a security.
Institute a moratorium on default judgments and summary judgments without evidence and validation of the debt alleged by the plaintiff as required under the Fair Debt Collection Practices Act of 1978. Such validation would minimally require a mortgage to real estate lawfully recorded with the Philadelphia County Deed of Recorders office and an original copy of the Promissory Note which entitled the holder of such note to collect the promise to pay.
Subprime-mortgage lending practices created new complex legal issues regarding the conversion of real property into securities which are instruments that provide entitlement to a portion of future profits, if any are realized. These complex issues touch upon multiple areas of law beyond the training of the Office of Housing & Community Development and beyond judicial authority of Philadelphia 1st Judicial Dist. judges and officers. Moreover, many of the legal issues created by subprime mortgage lending practices are still being analyzed and adjudicated across the nation. Philadelphia judges are not properly trained on securities law or the new mortgage lending rules to fairly adjudicate mortgage foreclosures that fall squarely within the subprime mortgage lending practices.
Increase department operation budgets to fund and require training for OHCD staff, housing counselor contractors and judges on the Fair Debt Collection Practices Act, specifically validation of the debt as it relates to mortgage foreclosures resulting from subprime lending practices.
Many constituents reported falling behind on their mortgages as a result of job loss during the Great Recession. After a period of unemployment, many property-owners were unable to resolve the mortgage foreclosure action or purchase their property back during the Pennsylvania redemption period solely because of the enormity of attorney fees awarded by the court and wrapped into the debt owed against the property. Some constituents reported the “reasonable attorney’s fees” awarded by the court totaled more than the outstanding mortgage debt.
Require the Philadelphia Bar Association and Community Legal Services to collaboratively develop and publish a payment range for “reasonable attorney fees” for mortgage foreclosure actions, similar to the HUD Schedule of Standard Attorney’s Fees which can serve as guidance. This fee and payment schedule will guide Philadelphia judges in assessing whether plaintiff’s attorney’s fees are indeed “reasonable” and help more owners save their homes after a period of unemployment.
Many constituents report to elected officials that they are denied opportunities to file documents with the Prothonotary’s Office, including pre-printed, fill-in-the-blank forms. There is a strong belief and public perception that pro se litigants are arbitrarily prevented from filing necessary forms in the Prothonotary’s Office. The furtherance of this perception is perpetrated by the lack of publicly available information on the minimum requirements for filing documents in the Prothonotary’s Office. The failure to publicly post minimum guidelines for filing documents results in Prothonotary staff making determinations in excess of its authority regarding the validity and legal compliance of document, a decision reserved for the court.
Immediately require public posting of the rules and minimum requirements for filing documents with the Prothonotary’s Office. Allocate funding for the installation of surveillance cameras at the Prothonotary filing desk to record the time/date stamp of all documents filed at the counter. Staff a “Filing Ombudsmen” in the Prothonotary’s Office to provide a second review if Prothonotary staff do not accept and file a document.
Currently, there is no professional standard, training, license or other systemic process to assure conformity and legal compliance in the delivery standards of process service. Moreover, 90% of mortgage foreclosures in Philadelphia are performed by two private law firms which employ their own process-delivery personnel without independent oversight of how such notice is served.
Institute a standardized training and licensure system for private process-servers in Philadelphia to be implemented by the Sheriff’s Office.