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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.

Florida Firm Frivolously Forestalls Foreclosures

Federal court rules against land trust

Dec. 28, 2012

By Mortgage Daily staff

Despite legal actions by the state of Florida, a ruling by a state judge and a decision by a federal judge -- a Florida company continues to utilize a bogus legal theory to delay foreclosures on negative-equity properties.

A March 2 news release from Fidelity Land Trust claimed that it had "developed a process, unique to the industry where homeowners are rescued from foreclosure, approved for a new first mortgage with favorable terms and reduced existing monthly payments regardless of credit rating."

The Deerfield Beach, Fla., firm touted a 100 percent success rate and said it had initiated hundreds of active lawsuits. At the time, Fidelity claimed that it was a corporate land trustee for more than 180 properties valued at more than $36 million.

"A land trust is a corporation that sets aside property to be used for the benefit of another person and to manage the property as provided by the terms of the document that created the arrangement," the announcement stated. "Trusts not only have tax advantages but also cannot be attacked by creditors. The trustee is not shown in public record and is not subject to any type of liens. The sale of your property is easy and private in that your shares of stock in the land trust are sold as personal property and is not disclosed to anyone except your trustee."

In September, Florida Attorney General Pam Bondi sued The Fidelity Land Trust Company LLC and related defendants and obtained a temporary injunction and asset freeze.

The state alleged that the defendants were charging distressed borrowers up-front fees of $3,500 in return for false guarantees that negative-equity mortgages would be voided. The defendants allegedly claimed to "cancel or otherwise void previously recorded mortgages so that the mortgages are not enforceable against defendants or any other party because the mortgage assignments were not recorded," the announcement said.

A federal judge has now ruled against the company in a lawsuit filed by Fidelity against Mortgage Electronic Registration Systems Inc. and Homecomings Financial Network Inc., a bankrupt unit formerly owned by Ally Financial Inc.

The decision, filed on Thursday, noted that although Fidelity knew that its claims were meritless, its business model relies on delaying lawful foreclosures.

"Like the magistrate judge, this court concludes that plaintiff initiated and pursued this litigation in bad faith," U.S. District Judge Roy B. Dalton wrote in the decision. "The evidence of this is legion: a state judge has told plaintiff that its legal theory is meritless; a federal judge has told plaintiff its legal theory is frivolous; and the Florida attorney general has obtained injunctive relief against plaintiff to prevent it from asserting claims based on the legal theory advanced in this lawsuit. Yet even in its objection, plaintiff clings to the notion that its claims have merit.

"They do not."

Dalton said that litigants pursuing meritless claims should be sanctioned and warned the plaintiff's counsel, Howard Feinmel, that if he continues to commence lawsuits or prosecute any claims based on the flawed legal theories -- then the court could refer the matter to the federal court's grievance committee for an investigation and recommendation as to whether such conduct merits disciplinary action by the court.

Case No. 6:12-cv-1367-Orl-37TBS, decided on Dec. 27, 2012 (U.S. District Court for the Middle District of Florida).

Office of the Attorney General, Department of Legal Affairs, State of Florida, Plaintiff, vs. Edward Cherry, Lawrence Diodata, Paul Gellenbeck, Shane Frankovic, Anthony C. Pintsopoulos, The Fidelity Land Trust Company, LLC, The Sunshine State Land Trust Company, LLC, Florida Land Trust Services, LLC, Growth Capital Funding, LLC, Zion Partners Irrevocable Trust, LLC, Zion Partners Irrev Trust, LLC, August Belmont and Company, LLC, Esquire Litigation Support, LLC,, LLC, Click Media Consulting, LLC, doing business as Florida Home Rescue Mission, and American Federal Trust, LLC, Defendants.
Case no. 12-26987, Sept. 25, 2012 (Circuit Court of the Seventeenth Judicial Circuit, In and For Broward County, Florida).

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