A curious case of foreclosure

A curious case. Read on.

Foreclosure halted for couple who say they were tricked into selling home

From Daily Business Review (again) July 24, 2008

By: Vesselin Mitev

Applying a recently passed New York state law to a "questionable"
transaction, a Nassau County judge has halted a foreclosure to give
the homeowners a chance to prove they were tricked into selling their
house.

In Washington Mutual Bank v. Sholomov, 021490/07, Supreme Court
Justice Daniel R. Palmieri denied a motion by Washington Mutual to
foreclose and sell the Glen Cove, N.Y., residence of Frank and Vincenza Dizazzo.

Noting "inconsistencies" in the homeowners' arguments, Palmieri suggested that Washington Mutual Bank ultimately might prevail and rejected a motion to dismiss the action. But he gave the Dizarros 30 days to submit an answer and allowed discovery to go forward.

According to recent news reports, a surge in foreclosure actions has prompted courts to take a variety of actions to slow the pace.

Here, the decision required Palmieri to apply New York's Home Equity Theft Prevention Act, which went into effect on Feb. 1, 2007. In doing so, the judge weighed "the rights of both homeowners claiming to have been duped out of their home and the lending institution now seeking to foreclose on a mortgage made to the party the homeowners claim was part of the scheme."

The Dizzazos claim they were "defrauded" into signing over ownership
o f the home where they still live to Oleg Sholomov. Their allegations are detailed in affidavits filed in connection with the foreclosure action and in papers filed in Dizzazzo v. Capital Gains Plus Inc., 523/08, a separate fraud action. Washington Mutual is not named in the fraud action.

According to Palmieri's decision, the Dizazzos' home at 39 Titus Road
in Glen Cove was in foreclosure under an action started in February 2007 by Wells Fargo Bank.

With that action pending, Vincenza Dizazzo sought another loan. She was referred to Stanley Shvartsman, a representative of an entity she identified as the "Home Funding Group." On April 16, "under circumstances not fully explained by the Dizazzos," she was faxed a contract of sale with Sholomov as the buyer. She reported that she had signed the document and returned it.

Palmieri pointed out that the Dizazzos stated in one part of their moving affidavit that they thought they were merely getting a mortgage and did not realize they were selling their home. But the judge said another section of the affidavit indicated that the possibility of a sale had been discussed earlier but not represented in the agreement.

On May 22, Ms. Dizazzo said she was driven to a location in Queens for a closing she had been told her husband need not attend. She was represented by attorney Diego A. Estrada, while Terence Scheurer represented Sholomov, who also was present. Estrada and Scheuer could not be reached for comment.

Ms. Dizzazo allegedly signed "a series of papers without knowing what they were." She claimed that she was driven to a location in East Meadow, N.Y., where her husband's forged signature was allegedly notarized onto several documents including a deed to Sholomov. She said she was then driven back to the closing where the transaction was completed.

According to the decision, the forged signature also appeared on a settlement statement issued by Kaufman & Khaldarov, a Mount Kisco, N.Y., law firm.

"I was there on behalf of the bank and the other parties all had attorneys who instructed me how to distribute the loan," said Harry Kaufman, a principal in the firm.

Kaufman said that the entire transaction "looked legit" as all parties were represented by lawyers, who dealt with one another.

The stated purchase price of the house was $615,000, of which Sholomov made a $1,000 down payment. Washington Mutual loaned $584,250. The sale netted the Dizzazos $217,766, according to the decision, but they received only $156,126.

The foreclosure was commenced on Dec. 3, 2007, but the Dizzazos defaulted. The bank then moved for a judgment of foreclosure.

'SUBSTANTIAL IRREGULARITIES'

While the documentary evidence presented "only pieces of a puzzle, it is sufficient for the Court to conclude that the defendants may have a defense to this action based upon a questionable mortgage transaction," Palmieri wrote.

Among the "substantial irregularities" listed by the judge were the absence of Frank Dizzazo from the closing, despite his purported signature on closing documents; "the disappearance and return of Vincenza with the documents now bearing Frank's signature, including a deed, with no independent question of identity being raised by the plaintiff," and the absence of more than $52,000 purportedly due the Dizazzos.

Moreover, the judge said these factors had to be seen "in light of the pending foreclosure action, knowledge of which the plaintiff bank must be charged."

In his analysis, Palmieri focused on Real Property Law 265-a, otherwise known as the Home Equity Theft Prevention Act. He noted that the statute was enacted to protect homeowners against "aggressive equity purchasers'" who, using deceitful practices, could induce the sale of a home for a fraction of its market value.

Palmieri said that the law was enacted to provide the homeowner with the information needed to make an "intelligent and informed" decision. Here, a number of requirements under the statute were not followed, among them a written notice of rights to the seller in the contract of sale and a separate writing containing notice of the right to cancel the transaction.

It is "certainly questionable" that Sholomov, who also was in default, was a "bona fide purchaser for value," wrote the judge, as the Dizzazos continue to reside in their Glen Cove home, and the transaction only required a down payment of $1,000 for a home worth roughly 600 times more.

In turn, while Washington Mutual "is not directly implicated as 'equity purchaser'" because of its loan to Sholomov, Palmieri held the bank "still must be charged with knowledge, through its agent, of the possible application of the statute and of its violation."

The judge noted that the Dizzazos' arguments had "inconsistencies" which may ultimately prove fatal to their case if it is shown that they willingly took part in a scheme to save their home.

However, the evidence presented by Washington Mutual, consisting solely of an attorney's affirmation, did not explain away the irregularities in the transaction and lacked "any probative value."

The court set a conference date of Sept. 30. After discovery is completed, the judge said that the bank could reapply for its judgment by means of a summary judgment motion.

Jace McColley of the New Jersey office of Fein, Such, Kahn & Shepard,
represented Washington Mutual. McColley did not return phone calls.

Frank Mitchell Corso of Jericho, N.Y., represented the Dizzazos.

In an interview, Corso characterized the decision as important to banks that lend money to purchasers who may be involved in mortgage fraud schemes, as delineated in the state act.
"The banks now have to be extremely careful as far as following procedure because they may become a party to the fraud," Corso said

Henry B. Nathan is a Florida Realtor at United Realty Group Inc.
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