Saturday, March 19, 2011

The Strange Case of Iowa Code 561.13

A couple of recent newspaper articles here detailed the story of Matthew Danielson et ux, who figured out how to get a $320,000 house for free. It also demonstrates that as always, attention to detail is the sine qua non of any profession where money is involved.

It also indicates the truth of Tony Hillerman's fictional detective Joe Leaphorn's maxim: If you believe in coincidence you aren't looking close enough.

How's that, you say? Read on.

It seems that there's a section in the Iowa Code, 561.13, hoary with age, that provides that if there's a conveyance or encumbrance of a homestead, and the owner is married, the conveyance or encumbrance is not valid unless signed by both husband and wife. The reasons are simple-the intent was to prevent one half of a marriage to encumber or mortgage the homestead without the other's knowledge and consent.

Danielson, a convicted felon, applied for a mortgage using a broker named Jason Larson, employed by Once Source Mortgage who fronted the entire mess to Citibank, and the application did not include his wife's signature as has been required since the first Code of 1851. Danielson made one payment and then defaulted.

Citibank attempted to foreclose the mortgage, and Danielson raised the failure to obtain a signature of his spouse as an affirmative defense. The trial court heard the matter and denied Citi's claim that the mortgage had been fraudulently obtained. It also held that the mortgage was void as between Danielson, his wife, and the bank. The end result was that Danielson took the home free and clear and Citi was left with nothing.

Justice? Read on.

Two years previously, Troy Hudson treated Wells Fargo Bank to some of the same medicine and obtained his home free and clear because the mortgage application did not include his wife's signature.

Here's where the plot thickens, as disclosed by the Register's inquiring reporter Lee Rood.

Troy Hudson is Jamie Danielson's cousin.

Both couples obtained refinancing through a firm, First Horizon, where Danielson's wife worked and where her mother, Rita van Zee, was the branch manager.

The Danielsons refinanced through First Horizon for double the price of the original mortgage (far more than the assessed value of the property) and lost the home in foreclosure to First Horizon, having obtained $625,000 more or less in the process. They'd sold some of the property for far more cash than it was worth to dear old Mom a year later. Dear old Mom and her husband are doing pretty well in the property ownership business if the Polk County Assessor can be believed.

Matt Danielson also obtained a mortgage in 2007 to buy a home and it appears from the article that he may have misrepresented his finances and assets on the mortgage application he made.

The mortgage broker in all of this, Jason Larson, has a checkered history as well if court records are reasonably accurate.

All of this has dodgy dealings written all over it, and we expect the U.S. Attorney to take an interest in these matters.

Tuesday, March 08, 2011

Debt Collector Lies, Gets Hammmered By 9th Circuit

It's been a while since I visited this blog, but I'm determined to make amends and get back on the case.

This one is a little off topic, but since debt has been part of the farm equation since the first shylock squeezed the first dirt farmer out of his last shekel, it seemed appropriate-as well as being a sorely needed breath of fresh air in these times.

There's also a very important lesson here. Stay with me.

McCollough v. Johnson, Rodenburg & Lauinger, no. 09-35767 (9th Cir. Mar. 4, 2011)

McCollough, a school custodian now disabled, got behind in his credit cards like a lot of other folks. He owed Chase around $3,000 and didn't pay, making his last payment in 1999. Chase charged off the debt and sold the account to CACV of Colorado, a buyer of bad debts.

When McCollough didn't pay, he was sued in Yellowstone County, Montana by CACV in 2005. Representing himself, McCollough asserted the Montana 5 year statute of limitations on account collections and the case was dismissed by CACV.

One year later CACV retained the law firm to collect the debt and alleged that McCollough had made a payment in 2004, which would have tolled the statute of limitations-which starts to run when the last payment is made. The law firm sued McCollough.

McCollough filed a pro se answer asserting the statute of limitations and retained counsel. It had become apparent to the law firm at that point that the lawsuit had a statute of limitations problem. McCollough then sued the law firm under the Federal Fair Debt Collection Practices Act, and the jury awarded him $1,000 statutory damages, $60,000 in punitives and $250,000 for emotional distress.

The law firm, as you would expect, appealed.

The 9th circuit affirmed the trial court, among other things finding that the law firm's interrogatories propounded to McCollough contained requests for him to admit things that they knew were not true, having that information in their possession. Service of such requests on a pro se defendant without the obligatory notice that if not answered in 30 days the requests are deemed admitted was 'unfair, unconscionable, ...false, deceptive and misleading means to collect a debt.'

The teaching, however, is this. Keeping careful records and not making a further payment once you've stopped paying is the best defense to preserve your FDCPA rights and your rights under the applicable statutes of limitations.