Previously I wrote a couple of articles about Fidelity Land Trust, that appeared to be selling a service to consumers where the consumer would deed their property over to the land trust company, for a fee.
In the past few days Fidelity Land Trust and others have resurfaced in the news, specifically in the Palm Beach Post. Kimberly Miller of the Palm Beach Post wrote about two issues that involved Fidelity.
In the first, Miller described a Florida title agent that is facing up to 30 years in prison and $5 million in fines from federal charges. Dawn Herndon, who ran Accurate Title Closings, LLC is said to have deeded both homes Fidelity Land Trust.
“According to Palm Beach County Clerk of Courts and property appraiser records, Herndon and her husband owned two homes in Wellington, including a 5,800-square-foot pool home that has a December 2009 foreclosure judgment against it for more than $1 million.
A 2011 bankruptcy filing by Dawn Herndon delayed the foreclosure auction, but in August the bank asked to reschedule the sale.
In April, however, the Herndons deeded both homes to the Fidelity Land Trust Co. Fidelity, which has a Boca Raton address in state records, has been soliciting homeowners statewide to sign their deeds over to it in an attempt to have their mortgages cancelled through lawsuits Fidelity files against lenders. – Source, Source”
In the second story, which appeared the following day, Miller describes how the land trust business in Florida is growing in an effort to allegedly cancel mortgages with lawsuits against the lenders.
“At least two new firms in Florida are trying to cancel mortgage debt with lawsuits that lenders call “baseless” and “nonsensical” but that some borrowers say are their last chance at keeping their homes.
The companies, including one with a Jupiter address, are in addition to the Fidelity Land Trust Company that opened last year in Boca Raton. Together, they have filed scores of lawsuits statewide and collected hundreds of deeds from homeowners, who are typically solicited by phone because they have underwater mortgages.
And desperate borrowers are biting.
Lee County homeowner Tom Meyers contracted with Heritage National Land Trust last month, signing over the deed to his house and writing checks for about $11,000, he said.
He will be delinquent on his estimated $560,000 loan as of Friday, using the money for his mortgage to pay the trust instead. After trying for years to get a loan modification following a divorce that left him with one income and an upside down loan, he felt the land trust was his only option to keep the house.
“They’ve done everything they’ve said they would do so far,” Meyers said about the trust. “I made it clear I better see some results.”
Jupiter-based Heritage National Land Trust registered with the state in July and has since collected 33 deeds, including 17 in Palm Beach County. – Source”
While there have been cases filed by these land trusts, it is far to early to determine if this strategy is a real solution to consumers having mortgage delinquency issues.
Some attorneys and title agents are skeptical of the maneuver, saying it’s not legally sound and relies on the banks not responding to the lawsuit. They fear homeowners will pay for the land trust service while going further in debt to their lender and have nothing to show for it at the end.
“To think you as a downstream interest holder can destroy a prior creditor or interest holder’s rights in the property flies in the face of logic,” said Greg Clark, a Clearwater title and foreclosure defense attorney. “The basic premise is flawed.” – Source
But the land trusts say this strategy will work and point to at least one case in which a mortgage was cancelled.
Another upstart land trust company, AAF Investments Land Trust Company is not a registered company in Florida yet is said to have already convinced four consumers to sign over their property to them.
But the underlying issue for consumers should be that no substantial track record exists for this land trust approach to cancel mortgages.
“Lenders have asked the federal court to hear cases filed in Palm Beach County by Fidelity and Heritage.
One of the cases, filed by Heritage, attempts to cancel a 2007 mortgage for $447,792 on a Jupiter home. The homeowners signed their deed over on April 12 and Heritage filed its lawsuit June 5.
Attorneys for the bank said the lawsuit is “baseless,” “meritless” and “nonsensical.”
“This case is an example of a disturbing new trend among borrowers in Florida who deed their homes, which are either in foreclosure or soon will be, to a trust (of which they are purportedly the beneficiary) and then bring suit to quiet-title and invalidate the mortgage,” the bank’s motion to dismiss says.”
In a case filed by Heritage National Land Trust, the defendants, Mortgage Electronic Registration System (MERS), Bank of New York, and others filed a recent motion in the case. In this motion the lawyers for the lenders made some bold statements.
“Plaintiff Heritage National Land Trust LLC’s (Heritage) action is merely a subterfuge improperly attempting to absolve borrowers Stephen F. Rogers and Penny A. Rogers from their mortgage obligations. This case is an example of a disturbing new trend among borrowers in Florida who deed their homes, which are either in foreclosure or soon will be, to a trust (of which they are purportedly the beneficiary) and then bring suit to quiet-title and invalidate the mortgage.
This action is premised on the baseless notion that some unrecorded transfer of the mortgage exists which is now void on the grounds that unrecorded transfers are ineffective against subsequent purchasers (i.e. the new trust owner). Heritage concedes, however, that the mortgage was duly recorded, and offers no evidence that the mortgage is void.
Heritage’s first count of its complaint is to discharge the mortgage as an unrecorded interest under FLA. STAT. § 695.01. This is not only meritless, it is nonsensical.
Count I seeks to discharge the mortgage on the grounds that MERS transferred its interest in the mortgage, or never legally owned it, and the true owner never recorded its interest making the mortgage ineffectual against Heritage. (see complaint ¶ 14.) This does not make any sense. Heritage’s own complaint admits and attaches a copy of the duly recorded mortgage which lists MERS as nominee for the lender. (See complaint ¶ 5, Exh. B.) The mortgage is recorded, and is a valid lien against the property.
Heritage took title to the property in April 2012. (See complaint ¶ 8.) The mortgage has been a lien on the property since January 2007. (See complaint ¶ 5.) Heritage took title subject to this mortgage, and is therefore estopped from denying its validity.
“A purchaser who takes title to property subject to a mortgage without assuming any personal liability for repayment of the underlying personal liability for repayment of the underlying debt is also estopped from contesting the validity of the mortgage.” – Source
But the Heritage case is not the only one where lenders have responded against the land trust company.
In the August 24, 2012 case moved to federal court The Fidelity Land Trust is the plaintiff in a case against Mortgage Electronic Registration System and Beazer Mortgage Corporation. In this case the response says that Fidelity is not a bona fide purchaser and that the “purported transfer of the subject property to Fidelity is a violation of the terms of the Mortgage.”
The case also attaches a transcript of a hearing of Eastwinds Partnership against MERS. The court appearance was by Howard Feinmel of the Delta Law Firm, Peter Snyder as attorneys for the plaintiffs. It lists that Edward Cherry and Paul Gallenbeck were in attendance as well.
At the time of that court appearance it appears the theories behind the legal attempts to cancel the mortgages had not been fully explored.
In the transcript, Gallenbeck identifies himself as a general partner of Eastwinds Partnership. Mr. Cherry is said to have drafted pleadings for attorney Feinmel and Feinmel filed the document but had problems explaining it.
“THE COURT: I’ve pulled the mortgage itself and received it and there is nothing that shows that it would be invalid on its face, and there’s nothing contained in the complaint that would lead me to belive that there’s a legal basis for the removal of it.
So I asked Mr. Feinmel to try and explain that to me and he was unable to do so at that hearing. In fact, he advised me that he had not drafted the pleading, but his client’s representative, Mr. Edward Cherry — Mr. Cherry, are you a member of the Florida Bar?
MR. CHERRY: No, I’m not.
THE COURT: And that his client had drafted the pleading and that he placed his bar number and signature on it and filed it with the court.
That gave me some concern when he couldn’t explain it. So he filed a — I requested that he prepare a memorandum explaining his theory of the case. I asked him how much time he needed, and he told me he needed 10 days, which I granted him.”
“THE COURT: Okay. Mr. Feinmel, I am unfamiliar — or I’ve had an opportunity to look at your memorandum of law. I am unfamiliar with this cause of action, a quiet title to try and wipe out what appears to be a valid mortgage.
Are you familiar with JP Morgan Chase versus New Millennial, LC case found at 6 So. 3d 681? It’s a second DCA case.
MR. FEINMEL: No, your honor.”
“THE COURT: I’m very familiar with that statute. And you’re right. That’s a good way to claim title if someone does not rightfully claim an interest in a piece of property.
What leads you to believe that this mortgage was not rightfully placed in the chain of title? There is an allegation contained in the complaint which you signed, and I’ll quote it again for the record, which says that the defendant — paragraph four — MERA and defendant FMFC recorded a mortgage dated July 27th, 2006 on August 2nd, 2006 in Official Records Book 20680 at page 0902 of the public records of Palm Beach County, Florida.
Paragraph five. The defendant MERS and Defendant FMFC claim an interest in the property adverse to the plaintiff. However, the claims of the defendants MERS and defendants FMFC have no legal right or equitable right, claim or interest in the property.
What leads you to believe that statement you put in the complaint is true, sir?
MR. FEINMEL: Well, your honor, as far as MERS go, they basically are a nominee. And FMFC is in bankruptcy and we’ve received no response to our estoppel letter —
THE COURT: Wait a second. FMFC is in bankruptcy? Did you advise the bankruptcy trustee that this action was pending?
MR. FEINMEL: I believe we did notify the trustee to find out if they were represented by counsel.
THE COURT: Did you serve them with a copy of this complaint? Wait a second. Aren’t you in violation of Section 362 of the automatic stay of the the Bankruptcy Code if they are in fact in bankruptcy? Are they in bankruptcy?
Help me out here.
MR. FEINMEL: I believe they are in bankruptcy, your honor.
THE COURT: Okay. Well, are you familiar with Section 362 of the United States Bankruptcy Code?
MR. FEINMEL: Not intimately, your honor.
THE COURT: Do you understand that you if you violate that provision, there are sanctions available through the federal court, including without limitation, incarceration for willful violations?
MR. FEINMEL: Yes — well, no your honor.”
These are just sections out of a larger transcript and you can read the full transcript here.