Fraud Charges Against Florida Foreclosure Investor, Title Agency Clerk

The Palm Beach Post reports that foreclosure investor Kevin Klier, who operated Kevin Klier Real Estate, and title company employee Christine Portuese have been the subject of a year-long criminal investigation that brought the arrest of Portuese last Thursday on charges of organized fraud. Klier is expected to surrender on fraud charges this week, according to law enforcement officials. These charges were the culmination of a joint investigation conducted by the Florida Department of Law Enforcement, the Martin County Sheriff's Office and several other state and federal agencies.

Reportedly, as many as two dozen Florida homeowners facing foreclosure thought that, in selling their homes to Klier, he was going to pay off the outstanding mortgages on their homes. Klier, however, apparently took title to the homes subject to (and without paying off) the mortgages. Further, neither he nor Portuese reportedly ever bothered to tell the mortgage lenders holding the loans secured by the homes about the sales out of a concern that they (the lenders) would exercise their right to call in the entire balance on the loans.

For more, see 2 charged with fraud in 'sales' of homes.

Editor's Note

What is interesting about this story is that there is no allegation that Klier engaged in either equity skimming (where rent is "milked" from the home without making the mortgage payments), or in an equity stripping scam, or a pattern of sale-leaseback, foreclosure rescue arrangements (although a passing reference is made to a sale leaseback deal made with one financially strapped homeowner; presumably, the homeowners in the other sales simply sold the homes to Klier and moved out). Further, based on the quotes from law enforcement in the article, they seem to implicitly (and possibly, begrudgingly) acknowledge that Klier actually made all the mortgage payments and he paid off the mortgages as he sold off properties at a profit. There was no allegation of any actual damage done to any of the homeowners' credit, which would have occurred had Klier stiffed the mortgage holders and "milked" rent out of the properties.

Based on how the article reads, the possible "bad acts" involved seem to be limited to (1) not paying off the homeowners' existing mortgages when title exchanged hands, and (2) not telling the lenders holding the mortgages that the homes were sold. To the extent that Klier and Portuese in some way actually tricked or otherwise intentionally deceived the homeowners into believing that their mortgage loans would be paid off as part of inducing them into selling to Klier, they (Klier and Portuese) possibly should get hammered to some degree.

However, as far as not telling the lenders of the property transfers, I didn't (and still don't) think that there is anything criminal about that. In all the mortgages I have read (although I confess to not reading any lately), I can't recall reading anything that contractually mandates anyone to inform the mortgage lender of a property sale. The only thing I've seen that may come close is that, if the property is sold without getting the lender's approval of the new buyer assuming the existing mortgage, the lender can call in the entire balance of the loan and initiate a foreclosure action if not paid within 30 days of the call-in (ie. "due-on-sale clause").

Maybe the article is missing some additional key facts. If so, I hope that come out soon in a follow-up story. If not, I must comment that as commendable as it is for law enforcement to begin directing their focus on organized fraud committed in the context of real estate foreclosures, I hope that future investigations are directed towards those who are doing much worse things than what the two individuals described in the article allegedly did (and hopefully, the investigations don't take a whole year to complete).
.