Boston Cops, Feds Sting Alleged Home Thieves

Three alleged identity theft scammers were arrested by Boston police and federal investigators as they were about to "sell" the home out from under a 63 year old Dorchester woman. The arrests took place as a "mock closing" for the "sale" of the home, orchestrated by law enforcement, was about to take place. Investigators attended the "closing" posing as real estate lawyers.

The suspects have been alleged to have stolen the woman's identity to buy three other properties prior to the attempted "sale" of the victim's own home.

The alleged mortgage fraud involved the use of phony drivers' licenses, falsified W-2 forms and other phony financial paperwork using the victim's identity.

The suspects are believed to be part of a "sophisticated interstate identity theft ring", according to authorities. A series of additional arrests in connection with this identity theft ring is expected next week.

To read more, see these reports by the Boston Herald, at BostonHerald.com:

Bid to swindle ex-nun thwarted: Three nabbed in home scam (1-26-07)
More busts expected in identity theft, home-sale scam (1-27-07)
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Foreclosure Rescue Tactics: An Outline

Stan Derwin Brown, a Maryland attorney who includes "Foreclosure Rescue Scams Litigation" and "Foreclosure Fraud: Recover deeds, homes & home equity for Md. homeowners" as two of his practice areas, provides an outline of typical tactics employed in these scams on his website.

His outline is based on the National Consumer Law Center's report, DREAMS FORECLOSED: The Rampant Theft of Americans’ Homes Through Equity-stripping Foreclosure 'Rescue' Scams.
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Equitable Mortgage - Table Of Posts

In an attempt to organize the equitable mortgage posts appearing on this blog, I have prepared a Table of Posts, listing all the posts on this issue. This Table of Posts is available here.
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Michigan Court Recharacterizes A Deed As A Mortgage (Again)

equitable mortgage
The Michigan Court of Appeals (in a 2005 case) again ruled that a deed, given as security for a loan, is not an absolute conveyance; rather, it is to be treated as nothing more than a secured loan. This is the third case that I've reported on that, in interpreting and applying Michigan law, a court has refused to follow the form of a transaction as a conveyance and, instead, looked to the actual substance of an arrangement to declare a deed (absolute in form, given as security for a loan) a mortgage.

To read a more extensive post on this case, see Paris v. Green; Michigan Court Declares Deed A Mortgage (Again) at a companion blog, The Home Equity Theft Reporter Cases & Articles.

Click here to search for similar posts on this issue on this blog.
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$10 Million In "Suspect Loans" Referred To NJ Prosecutors

Almost $10 million in suspicious loans involving a New Jersey real estate operator's collapsed empire have been referred to both Federal & State prosecutors for investigation of mortgage fraud.

A court appointed receiver is handling a court ordered "dismantling" of the operator's holdings to pay off more than $340 million in claims already against him as a result of prior court action.

While not actually accusing the operator of wrongdoing, the receiver has provided to the U.S. Attorney's Office for New Jersey and the Monmouth County Prosecutor's Office his findings regarding the real estate operation that give him reason to suspect that crimes involving mortgage fraud may have been committed. Some of the findings were first reported by the Asbury Park Press in August.

To read all the details, see 10M in Dwek loans "suspicious", reported by the Asbury Park Press at app.com. (This article also contains over 30 related links to other stories & information concerning this heavily covered New Jersey story.)
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Illinois Mortgage Rescue Fraud Act & Free Legal Services

The Illinois Mortgage Rescue Fraud Act is the subject of an article in today's Chicago Sun-Times. The article, One law comes and another law goes, is general in nature and contains a link to the Illinois Attorney General's Consumer Protection Division's web page.

Illinois residents who are unable to afford hiring an attorney can check out these links to pro bono legal service providers throughout Illinois, courtesy of the Illinois AG's office.
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Convicted Con Artist Shows System Flaws That May Result In Home Thefts

Sitting in a Federal transfer detention center in Leavenworth, Kansas, a convicted mortgage fraud scammer "spent more than two hours explaining to a reporter how to find victims, steal from homeowners and lenders, and hide the crimes. Then he offered advice on how to avoid being scammed."

For the whole story, reported by USA Today at usatoday.com, see:

Convicted con artist shows how system flaws could allow him to steal your home

West Palm Beach Attorney Representing "A Dozen" Foreclosure Rescue Victims

Today's South Florida Sun-Sentinel reports of home equity theft cases involving foreclosure rescue arrangements that two South Florida homeowners found themselves in and are fighting back.

Reportedly, the attorney for one of the homeowners, West Palm Beach-area attorney James Bonfiglio, is handling a dozen such cases on behalf of financially strapped homeowners, including three against one South Florida real estate operator.

I found the following interesting quote in the story:

• "What's more, such [foreclosure rescue] cases are difficult to win in Florida, real estate lawyers say, because judges in the state tend to enforce what's written in a contract."

While I'm sure that there may be real estate lawyers who "say" this, readers of this blog and savvy consumer protection and real estate attorneys know that, when invoking the "equitable mortgage" doctrine in order to treat a foreclosure rescue arrangement simply as a secured (& possibly usurious) loan, courts are not limited to reviewing the written documents. They are to listen to the testimony of the parties and look to all of the surrounding facts and circumstances when determining whether a deed transfer with a simultaneous lease back / buy back arrangement is an equitable mortgage.

(Florida has codified the equitable mortgage doctrine at Chapter 697.01 of the Florida Statutes.)

Further, in a prior blog post, I referred to the recent Florida appellate court case, Guest v. Claycomb, 932 So. 2d 567 (Fla. App. Ct. 5th Dist., 2006), which reminds us that Florida courts (and I'm sure non-Florida courts as well) have long held that when someone brings legal action in a case involving a written contract and specifically requests some form of "equitable relief", the court will not limit their review solely to the written documents. They are duty bound to listen to and consider the oral testimony of all witnesses in the transaction as well as to look to all of the surrounding facts and circumstances in determining what actually happened (unfortunately for the homeowner in this case, the trial judge apparently disregarded this legal principle and ruled incorrectly against him; fortunately for the homeowner, however, he had an attorney who was prepared to appeal the incorrect decision to a state appeals court which did, in fact, reverse the lower court decision).

To read the entire Sun-Sentinel article by Ian Katz, see:

Facing foreclosure? Beware of 'rescue firms' offering to help you

Click here for the prior post referencing Guest v. Claycomb.

Click here for a prior post of a foreclosure rescue operator who violated Federal Truth In Lending and state usury law.

Click here to search for other blog posts on equitable mortgages on this blog.

(revised 1-26-07)

Minneapolis Real Estate Agent Steals I.D., Buys 15 Properties

The Hennepin County attorney's office on Monday filed criminal charges against a Minneapolis area real estate agent alleging that she used the identities of five people she'd met to secure about $3 million in housing loans for 15 metro-area properties, according to a report by the (Minneapolis - St. Paul) Star Tribune, reported at StarTribune.com.

According to an investigative aide for the Eden Prairie Police Department who worked the case, in one deal, the "equity that a grandmother had built up in her north Minneapolis home [ended up in the suspect's] husband's bank account."

Reportedly, one victim, who was new to the area and wanted to buy a home, was offered assistance by the suspect, whom she had met at her local church.

To read more, see Realtor used stolen IDs to get loans, charges say
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British Government Using Civil Forfeiture In Pursuit Of Mortgage Fraudsters

This story involves a British government freeze of assets with a value of 11.8 million British pounds following a Property Freezing Order issued by their High Court as part of an ongoing investigation into a large scale mortgage fraud and money laundering operation. The British government, through their recently created (2002) Assets Recovery Agency ("ARA"), alleges that 77 properties have been funded by the proceeds of financial crime and used to launder money. The equity value of the property is estimated at 4.7 million British pounds, and consists largely of rental homes & flats.

Editor's Note:

In this story, it appears that the British government, through ARA, is seeking civil recovery of the proceeds of unlawful activity (mortgage fraud & money laundering) by an action in the British High Court without actually arresting and charging anybody with crimes (as of now, anyway). (If I'm not mistaken, I think that U.S. Federal law enforcement authorities (and possibly even state law enforcement authorities) also have the power to initiate civil actions to seek recovery of the proceeds of unlawful activity in the U.S.).

Reportedly, "[ARA] can also issue tax assessments where there are reasonable grounds to suspect that there is taxable income, gain or profit from criminal conduct" (I think the Internal Revenue Service as well as state taxing authorities can do that in the U.S.).

On January 11, 2007, the British Government has laid out a proposal before the British Parliament requesting, among other things, an extension to prosecutors of the power to launch civil recovery action under the British Proceeds of Crime Act 2002 (the law that created ARA). This proposal, the Written Ministerial Statement, can be viewed here.

(I don't have a clue whether local county prosecutors in the U.S. can initiate civil actions against suspected mortgage fraud scammers and money launderers to recover assets acquired through unlawful activity. If there are any local prosecutors out there who can shed some light on this as it relates to their District Attorney's / State Attorney's office, click "Comments" below and drop me a line.)

While the British are apparently doing it, I can't recall having seen anything in the U.S. where Federal or State authorities have used civil actions to go after mortgage fraud (outside of foreclosure rescue situations). It seems to me that, at a minimum, the Internal Revenue Service can always investigate the "cash back" fraudsters and the "flippers" to see that they've paid the proper amount of income taxes on any fraud-tainted proceeds they received from those deals (and obviously, prosecute them if they haven't).

Put another way, if Federal & State law enforcement authorities are having a tough time prosecuting all the mortgage fraud complaints that they're getting (with the labor intensive criminal investigations that go along with that), it may be that prosecuting some of the alleged scammers (the ones who have actually accumulated some wealth from their unlawful activities) for failure to pay Federal & State income taxes on the proceeds of their fraud may be an easier prosecution (the government successfully used this approach against famous gangster Al Capone, after unsuccessfully prosecuting him on racketeering charges).

Further, it seems to me that the threat of criminal tax prosecution can be used to "squeeze", or otherwise "persuade", one or more members of organized mortgage fraud groups to cooperate in a criminal investigation by "explaining" how the ringleaders conducted their operations, thereby making the prosecutions of the frauds themselves easier.

To read more on the British Government's use of civil recovery actions to attack mortgage fraud and money laundering operations, see:

ARA freezes #11.8 million of property in Manchester
Manchester Property Portfolio at Heart of Fraud Scandal
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Recent Mortgage Fraud Links From Around The Country

The following links are to recent stories involving home flipping, loan flipping, and a "Double HUD" scheme.

New Orleans, Louisiana
2nd man guilty in house scam (1-20-07)
(HUD was left stuck with defaulted loan)

Kansas City, Missouri
Investor’s fraud spurs lawsuit (1-20-07)
(California man claims he was a victim of Brent Barber’s property flipping)

Cinncinati, Ohio
Thousands face loss of homes (1-22-07)
(Rash of foreclosures stirs debate on blame)

Washington, D.C. (District of Columbia)
Originator Gets 24 Year Sentence in $5.2 Million Fraud Conspiracy (12-27-06)

Chattanooga, Tennessee
Prosecutor Says Wilkins Got Cash From "Double HUD" Scheme (1-22-07)
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Two Former Pro Athletes Testify In Atlanta "Flipping" Trial

An ex-NBA player and an ex-NFL player have testified on behalf of the prosecution in an ongoing mortgage fraud trial in Atlanta Federal Court, according to an article in Daily Report reported at DailyReportOnline.com. Both have testified that their dealings with one of the defendants left them a total of $350,000 lighter in the wallet.

(My January 17 post links to an article announcing the beginning of this trial.)

To read more, see:

Athletes caught up in mortgage fraud case (Two testify that deals with defendant Phil Hill cost a total of $350,000) (link no longer available)

Go here for other posts on the Phillip E. Hill property flipping operation.

Houston DA Indicts 8 In Alleged Scam Involving 300 Homes Worth Over $40 Million

The Harris County District Attorney's Office has announced the indictment of eight Houston-area individuals in connection with alleged mortgage fraud that entangled 300 homes worth more than $40 million.

An article in the Houston Chronicle, reported at chron.com, reports that, according to authorities, "[n]ot all of the individuals indicted on felony theft charges worked together, but one common escrow agent was involved in all the transactions."

To read more, see:

Eight indicted in mortgage cases
(Officials say inflating loan amounts one aspect of schemes)
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Wahington Couple Victimized By Family Friend; Mortgage Forgery Involved

An elderly Ridgefield, Washington couple was financially victimized by a family friend whom they had taken into their home and treated like a member of the family. The theft, estimated at more than $125,000, included a forgery of their name to obtain a home equity line of credit on the couple's farm.

The scam artist is scheduled to appear in court tomorrow (January 24) and plead guilty to identity theft, forgery and first degree theft and is looking at a 15 month prison sentence.

To read more, see Sparky's instincts were spot on, reported by The Oregonian, at OregonLive.com.
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Arizona Lawmaker Introduces Legislation To Aid Prosecutors In Pursuing Mortgage Fraudsters

An Arizona state senator introduced Senate bill 1221 yesterday in the Arizona legislature, which would reportedly make it easier for state prosecutors to prosecute mortgage fraud in Arizona, according to this article in The Arizona Republic, reported at azcentral.com.

Felecia Rotellini, superintendent of the Arizona Department of Financial Institutions, "[s]aid her agency was deluged with calls Monday from people reporting cash-back deals and other potential mortgage fraud" in response to Sunday's story in The Republic (which I posted on here).

According to the article, "Sunday's ... story also struck a cord with people in the real estate industry and homeowners across the Valley as more than 350 people e-mailed or phoned with concerns or accounts of deals they thought were fishy. [...] Dozens of people provided details on cash-back deals or sales that suggested cash-back pricing. Most asked to remain anonymous."

Complaints or concerns about cash-back deals can be filed with the Arizona Department of Financial Institutions and the Arizona Department of Real Estate.

The article also contains links to the following four local Channel 12 video reports on "cash back" mortgage fraud sweeping Arizona (which I posted on Sunday):

• How the cash-back deals work
• How the deals affect you the consumer
• Cracking down on the fraudulent scheme
• 12 News: Arizona lawmakers looking to punish those involved in mortgage fraud

See related article reported by the Arizona Daily Star at azstarnet.com:

• Bill would ease prosecution of mortgage fraud

(revised 1-23-07, 6:46 a.m.)

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New York Home Equity Theft Prevention Act - Title Insurance Issues

(revised 8-11-07)

Attorney Marvin Bagwell, Esq., of United General Title Insurance Company (a subsidiary of First American Title Insurance Company) has written this Title Advisory on the NYS Home Equity Theft Prevention Act (made available online by Benchmark Title Agency, LLC).

This article offers a brief discussion of four features that have an immediate impact on title insurance underwriters doing business in New York. The article is written for industry professionals, so if you are in the title insurance industry or legal counsel for mortgage lenders doing business in New York, you might find this information helpful.

Included in the article is a copy of the standard notice "Help For Homeowners In Foreclosure" now required (as of February 1, 2007) to be served on homeowners in foreclosure when initiating a foreclosure action, and an affidavit required when an "exempt equity purchaser" is acquiring title from an "equity seller" in foreclosure.
For the full article, see Title Advisory on the NYS Home Equity Theft Prevention Act

For other articles on the Home EquityTheft Prevention Act, see:

• The Negative Impact Of The Home Equity Theft Prevention Act On Legitimate Investors And Lenders, by Thomas Weiss and Kafi J. Harris (originally published in the New York Law Journal, October 17, 2006)
• Home Equity 'Theft', by Bruce J. Bergman (originally published in the New York Law Journal, October 11, 2006)
• New York State Passes the “Home Equity Theft Prevention Act”, by Kirsten Keefe
• Overview of the New Law, from New York State Bar Association Bar Blog

To obtain a copy of the New York Home Equity Theft Prevention Act, please refer to my January 4, 2007 post and my January 12, 2007 post.

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Two South Bend Retirees Duped Into Flipping Scam, Class Action Lawsuit A Possibility

Two Indiana retirees, in separate cases, filed lawsuits against an alleged home flipping group, who operated a local Century 21 real estate brokerage franchise, in Saint Joseph County courts alleging mortgage fraud, according to a story reported at SouthBendTribune.com.

In the first case, the victim ended up owning twelve houses that were worth considerably less than wht he paid for them. A former office manager for the group engaged in the flipping deals came forward in this case and, in effect, acted as a whistleblower, as she filed an affidavit (details in the article) in the victim's lawsuit outlining exactly how the flipping operators conducted their activities. This case ultimately resulted in a confidential, out of court settlement, according to attorney Lee Korzan, who represented the victim.

In the second case, the victim was having trouble selling her home when she was approached by two members of the group with an offer to buy the house. The bottom line in this case was that the house became the subject of a "property flip" where the house was sold for more than double the asking price. Further, while the victim only received the lower price that she originally agreed to, she got stuck with an IRS 1099 form reflecting that she received the entire sale price of the "flip."

Because the victim in the second case learned that others have been similarly scammed by the same group, her South Bend attorney, Douglas Small, has reportedly indicated that he will be seeking class action status for his client's lawsuit (thereby enabling similarly situated victims to join the lawsuit). In this regard, Small may be seeking to have the court force the home flipping group to "provide him copies of all sales transactions they have handled, and he will use those documents to identify other potential victims."

The article also reports on the story of a third victim of the group, who ended up buying three homes worth less than they were worth.

Reportedly, the flipping operation involved:

• recruiting "investors" with satisfactory credit scores,
• phony appraisals,
• intimidating employees to have mortgages placed in their names,
• fabricating documents reflecting false incomes and "phantom" employers for those applying for the mortgage loans,
• fictitious repair invoices from home repair companies that existed only on paper,
• failing to provide the "investors" with copies of the closing documents,
• promises of help finding tenants paying enough rent to cover mortgage payments.

To read the entire story (which is loaded with details) and is Part 2 of a South Bend Tribune story I posted on yesterday, see:

Whistle-blower backs alleged victims' claims of mortgage fraud, reported at SouthBendTribune.com.

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South Bend Man Lured Into Mortgage Scam, Left "Holding The Bag"

A South Bend, Indiana man, lured by the prospect of owning many rental properties without the need for any downpayment while receiving "cash back at closing", and by promises that tenant rentals would cover the mortgage payments, now finds himself mired in over $1 million of debt and the owner of 14 properties, according to a report in the South Bend Tribune.

According to the story, the man, an African immigrant, "is one of a growing number of local people, including other African immigrants, who say in interviews and lawsuits that they have been victimized by mortgage fraud scams" operated by one local alleged scam group.

The story goes on to say that "The Tribune contacted several other African immigrants who live in South Bend and said they had been defrauded by the Shenemans, but they declined to be identified -- either out of embarrassment or because they fear retribution of some kind."

Attorney Lee Korzan is representing the man and another victimized immigrant in civil lawsuits brought against the alleged scam group. To date, law enforcement authorities have made no arrests of the defendants named in the ongoing civil cases.

To read the whole story, reported at SouthBendTribune.com, see

Mortgage maelstrom
(Scheme appears to target African immigrants)
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"Cash Back" Real Estate Scams Sweeping Across Arizona

A wave of mortgage fraud known as "cash back" deals is rippling through Arizona. The fraud involves getting phony appraisals which falsely represent the value of a home, obtaining a mortgage for more than the home is worth and pocketing the extra money in cash.

Whether it's organized groups of speculators that have bought multiple homes this way or individual deals done by amateurs, this type of mortgage fraud has become a concern for Arizona regulators. Reportedly, in one neighborhood, a group of buyers has been selling and reselling homes to one another.

Calls from homeowners, real estate agents and lenders asking if the "cash back" deals are legal are increasing every month and now come in every day, according to Felecia Rotellini, the head of the Arizona Department of Financial Institutions. She recently hired two consumer complaint investigators and plans to devote the bulk of her agency's resources to investigating mortgage fraud.

In November, Rotellini organized a mortgage fraud task force that includes the Arizona Department of Real Estate, Arizona Housing Department, FBI, Housing and Urban Development, IRS and State Board of Appraisers. They plan to share information and collaborate on cases. Reportedly, local police departments will also be working with the new task force.

To read the entire story, see Valley fighting mortgage fraud wave, reported in The Arizona Republic at azcentral.com. You can also find links to the following series of Channel 12 video reports:

• How the cash-back deals work
• How the deals affect you the consumer
• Cracking down on the fraudulent scheme

Click below to read other mortgage fraud articles published this week by The Arizona Republic:

• Mortgage Fraud Q&A
• Who profits, who suffers; tips to protect yourself
• How the experts see it
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