California Foreclosure Scandal - Tip of the Iceberg

As California Attorney General Kamala Harris debates her next move on the 50 State settlement proposal surrounding the nation-wide foreclosure scandal, we want to impart information from a recent court case that sheds further light on the problem facing Kamala Harris. We imagine this particular court case is just the tip of the Iceberg as it relates to the foreclosure scandal as a whole within California.

As referenced in prior installments, Ms. Knox and a co-tenant investor procured a residential investment property located in Alameda County. Court records specify Ms. Knox’s co-tenant investor demanded termination of their business relationship and the prompt sale of the co-owned property. The co-investors demands were based on the uncovering of unauthorized use by Ms. Knox of the property in question as collateral for a loan. (See prior installment)

In spite of Ms. Knox agreeing to sell the co-tenant property as requested by her co-investor, Ms. Knox concealed the fact she had no intention of signing a listing agreement therefore rendering a sale impossible. Court records and an independent source confirmed this. Both co-tenants must sign a listing agreement per California Law to allow for active marketing and sale of a property.

Court records and Ms. Knox’s own testimony reflect that while concealing her intentions not to sell the property, Ms. Knox sold a real estate option and non-compete agreement to a neighboring property owner. This option and agreement were sold without the approval or knowledge of the co-tenant investor or Bank of America, the Bank holding the mortgage on the property. The option was a right of first refusal. Ms. Knox was paid a substantial amount of money for the option and non-compete agreement.

A non-compete agreement is such that a property can no longer be operated for its intended purpose for a certain period of time. The right of first refusal option makes listing and marketing a property nearly impossible. Such an option must be disclosed, therefore telling any prospective buyer a third party holds a right to match your offer. Therefore, no interested party would waste their time or money with due diligence, knowing a third party would have the contracted right to match his offer.

As a result of the above events, the co-tenant property was foreclosed on by Bank of America without any attempt on their part to seek an understanding of the problems that lead to foreclosure. There is no evidence Bank of America was aware of Ms. Knox’s activities. However, in light of the fact, Bank of America was aware of Ms, Knox’s unauthorized use of the property to collateralize a loan, Bank of America was on notice.

The co-investor’s entire investment was lost, and no funds from either the non-compete agreement or option for right of first refusal were distributed by Ms. Knox to her co-investor.

The Back Story has been informed the Alameda County District Attorney, the State Attorney General, Bank of America and the FTC have been notified of this matter.