Los Angeles Attorneys Catch Section 1695 Violations; Save Owners Home Equity

In representing a California homeowner who fell victim to scam artists and lost her home in a foreclosure sale, a Los Angeles law firm found that the scammers violated provisions of the California Home Equity Sales Contract Act in the purchase contract. As a result, the scammers released their claim to over $110,000 of the $130,000+ in excess cash surplus that resulted when their client's home was sold in the foreclosure sale. To read more, see Angela Shaw v. Raymond Mendoza.

Foreclosure Rescue Victim's Case Tossed Out Of Court

A Deer Park, New York couple's four year fight to reclaim the house they lost in a foreclosure rescue scam to a crooked mortgage broker may have come to an abrupt end Tuesday when a judge dismissed their federal lawsuit on a procedural technicality. To read the latest article, reported by Newsday (Long Island) at newsday.com, see Family loses home, then their case

See Long Island Couple Lose Home, "Skimmer" Convicted for previous coverage of this story.

Admitted Flipper "Earns" Federal "Get Out Of Jail Free Card"

An admitted mortgage fraudster who, by his own account, profitted, among other ways, "by selling nine "uninhabitable" homes to inexperienced home buyers" and who, overall and with 13 others, ripped off banks and home buyers out of approximately $15 million, avoided conviction on all mortgage fraud charges and instead, was sentenced to three months in a halfway house, four months home confinement, a $15,000 fine and three years' probation on two misdemeanor tax charges for failure to pay tax on his earnings in Federal Court in Springfield, Massachusetts.

He earned his "Get Out Of Jail Free Card" because of "[his] role as a cooperating witness in overlapping mortgage fraud and public corruption cases" which resulted in convictions against a dozen defendants in the real estate fraud cases, with an additional 33 people either being convicted or pleading guilty in the overlapping public corruption probe.

To read more, see the article in The Republican, reported at MassLive.com, Tax defendant spared prison.
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Mortgage Fraud In Central Florida Home Building Operation Suspected

(revised 8-11-07)
A situation that has been described as a "$110 million residential loan dilemma" is currently facing Coast Bank and St. Petersburg-based homebuilder CCI Homes, according to an article in the Bradenton Herald at Bradenton.com.

Sarasota attorney Alan Tannenbaum has reportedly been contacted by about 100 potential clients and anticipates representing at least 50 to 75 who claim to have lost money in the deal. He says the way investors were approached to buy homes constitutes investment fraud. He is representing clients in a potential class action suit against two other companies that worked on investor packages linked to the residential home development.

At least two other attorneys are representing groups of investors whose homes were being built by CCI.

Reportedly, some investors were promised a portion of the home sale price in exchange for allowing their credit scores to be used to obtain construction loans on homes being built by CCI. Bank loans totaling $110 million to 482 borrowers were made and, to date, "[a]bout half of those "homes" still amount to empty lots" according to a recent SEC filing.

To read more, see Coast Bank loan holders may file lawsuit.

For a more recent story on Coast Bank, see Coast Bank discloses SEC inquiry (Bradenton Herald - 8-11-07).

The Equitable Mortgage Doctrine, The Truth In Lending Laws, Usury & Foreclosure Rescue

Foreclosure rescue operators are being sued by financially strapped homeowners around the country for the "sale leaseback" / "lease buyback" arrangements they are entering into. Some cases are invoking the equitable mortgage doctrine in order to have a purported conveyance from a homeowner to a foreclosure rescue operator with a simultaneously executed leaseback and purchase option be declared a mortgage; and then attacking the transaction as being violative of the Federal Truth In Lending Law disclosure requirements and state usury law, among other claims. For a more extensive post, see The Equitable Mortgage Doctrine, The Truth In Lending Laws, Usury & Foreclosure Rescue.
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Unwitting Title Transfers & Foreclosure Rescue Tactics

In an effort to organize the posts on this blog dealing with the unwitting transfers of ownership by homeowners facing foreclosure to foreclosure rescue operators, I have prepared an index of all posts dealing with this issue. Click here for the index to posts dealing with unwitting title transfers.

There is also a permanent link to this index in the sidebar to the right of the screen, under the caption Search For Blog Posts On, labeled Unwitting Title Transfers.
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Iowa Bankruptcy Court Calls Conditional Sale Contract An Equitable Mortgage

A Federal Bankruptcy Court in Iowa ruled last month that the equitable mortgage doctrine was applicable to a real estate transaction between a "financially strapped" property owner and an investor involving a contract of sale coupled with a simultaneously executed lease agreement. The court disrgarded the form of the transcaction as portrayed by the executed documents and looked to the substance of the deal and called the entire transaction an equitable mortgage. For a more extensive post, including the link to the case, see In re Litwiller; Iowa Bankruptcy Court Calls Conditional Sale Contract An Equitable Mortgage
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Pittsburgh Area Neighborhoods Victimized By Flipping Scam

Homes in the communities of Wilkinsburg, East Liberty and other Pittsburgh area communities were involved in a mortgage flipping scam which ultimately led to prison time for those involved and victimized the neighborhood around it. To read more, see IRS and FBI report real estate fraud on increase, reported in the Pittsburgh Post-Gazette at post-gazette.com.
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Two Fraud Investigators Charged With Mortgage Fraud

In New South Wales, Australia, a senior fraud investigator and a team leader in the Fraud Squad's Assets Confiscation Unit have each been charged with one count of obtaining financial advantage by making a false or misleading statement in a mortgage loan application by the Police Integrity Commission, according to an article from The Daily Telegraph, reported at news.com.au. To read more, see Fraud Squad officers charged over loan bid.
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Massachusetts Cops Probe Attorney Involvement In Loan Scams

Lawrence, Massachusetts police have launched an exploratory probe into mortgage broker fraud, focusing on the participation of local attorneys who may have taken "under-the-table money" from home buyers who got duped into taking out loans they couldn't afford, according to a report in The Eagle-Tribune Online. To read more, see Police looking for help from victims of lawyers suspected in loan fraud.
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Accused Equity Skimmer Commits Suicide; Attorney's Law License Suspended

This story (originally covered by The Ledger - Lakeland, Florida beginning in March, 2005) is of a real estate operator who was engaged in an equity skimming operation in and around the city of Lakeland, in Central Florida's Polk County. The operator bought homes from home sellers whereby he promised to take over and continue to make the sellers' mortgage payments. He would then turn around and sell the same homes to new buyers, whereby he would collect downpayments from them and allow the new buyers to make monthly payments to him for the balance of the purchase price.

When authorities arrested him after a 15 month investigation on March 30, 2005, he was accused of collecting nearly $153,000 in excess of the mortgage payments and more than $86,000 in down payments and monthly rent but did not pay off debts on the homes that he promised the original sellers he would pay. The bogus deals reportedly involved 19 Polk County homes.

Less than two weeks after he was arrested, local authorities arrested an attorney for his role in the fraudulent transactions. The attorney acted as the title agent and closed loans on a few, but not all, of the real estate transactions involved.

About a year later, after having his bail revoked for contacting the victims of his alleged fraud and after a four hour standoff, the real estate operator fatally shot himself in front of Polk County Sheriff's deputies who were attempting to execute an arrest warrant to take him into custody. He was reportedly distraught about the prospect of going to prison for up to 30 years and facing an order to pay restitution (roughly estimated at between $700,000 to $800,000) to the scam victims on account of the charges he was facing.

After pleading guilty for his role in the transaction, the attorney was sentenced to five years probation. At the time of sentencing the attorney had already fully paid the amount of victim restitution attributed to his role (just under $115,000).

According to an e-mail reportedly sent by the attorney to The Ledger after his sentencing, there were apparently 40 or so victims that may never see any compensation for their losses in this scam.

The attorney was ultimately suspended by the Florida Supreme Court from practicing law in Florida for three years, according to the Florida Bar.

Sources:

Head of firm arrested, reported in The Mortgage Fraud Blog, The Prieston Group, based on an article appearing in The Ledger, (3-31-05)

Lakeland Lawyer Is Arrested In Inquiry, The Ledger (5-11-05)

Standoff With Deputies Ends With Suicide, The Ledger (5-2-06)

Officials: Death Won't Stop Case, The Ledger (5-3-06)

Lawyer Receives 5 Years' Probation, The Ledger (7-15-06)

Polk Attorney Reprimanded, The Ledger (1-12-07)

Lawyer Loses License for Real Estate Fraud, The Ledger (1-13-07)
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North Carolina Mortgage Fraud Links

1) Vance County, North Carolina
Convicted Mobile Home Mogul Gets 75 Months, $7.5M Restitution Order

Vance County mobile home operator was sentenced after pleading guilty in March to mail and bank fraud and money laundering while selling mobile homes and preparing falsified mortgage documents. See:
Donald Gupton to face punishment today (1-24-07)
Gupton sentenced to 75 months in prison, $7.5 million restitution (1-25-07)
Man sentenced in mortgage scheme (1-25-07)

2) Fayetteville, North Carolina
Banks commissioner cites fraud, ID theft in revoking loan officer's license (1-25-07)

A Fayetteville mortgage loan officer's license was revoked for allegedly falsifying documents in connection with mortgage loan closings and for allegedly stealing and using the financial identities of her customers to fraudulently obtain loans for her personal benefit in their names.
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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)