Wednesday, April 25, 2007

Phones "Ringing Off The Hook" At Ohio Foreclosure Assistance Program

Stateline.org reports that at the Ohio Housing Finance Agency, which recently began an emergency foreclosure assistance program for Ohio homeowners:

  • "[T]he phones have barely stopped ringing in the past three weeks. The number of calls doubled to 200 a day after the state launched a first-in-the-nation program April 2 to help homeowners whose once-affordable mortgage payments are now busting family bank accounts."

  • "The Ohio program is designed to help strapped borrowers refinance their mortgages. The Ohio agency has a network of 185 lending partners in the state that will work to offer 30- or 20-year loans with “fixed” rates that won’t change. All borrowers are required to participate in one-on-one financial counseling as part of the Opportunity Loan Refinance Program."

For more, see Ohio tries to fend off foreclosures on home loans.

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California Real Estate Appraiser Fights Mortgage Fraud

KGET-TV Channel 17 in Bakersfield, California and The Bakersfield Californian report that local real estate appraiser Gary Crabtree, President of Affiliated Appraisers is conduting his own battle against mortgage fraud by compiling and submitting to the California Department of Real Estate and the FBI documented evidence of suspicious activities in over 30 cases of suspected mortgage fraud, involving inflated appraisals, shaky lending practices, and cash kickbacks to buyers, sellers and real estate agents in Bakersfield. Reportedly, Mr. Crabtree said:
  • "he began tracking the questionable transactions so he wouldn’t use them as comparable properties when doing appraisals"
  • "word is out in local real estate circles that he has provided information to agencies about potential improprieties"
  • "he has lost business as a result and others in the industry have stopped talking to him for fear of being implicated."
For more, see:

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Curbs Sought On Pressure For Inflated Appraisals

Appraiser groups have called on federal regulators to come down harder on lenders that pressure appraisers to boost valuations in order to permit overpriced deals to proceed, according to a Baltimore Sun article.

Reportedly, in one poll, 90 percent of the appraisers reported having been the victims of such forms of coercion as nonpayment of fees and outright threats, with many having lost business when they opted not to go along with the plan. For more, see Appraisers seek curbs on lender pressure.
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Tuesday, April 24, 2007

Minnesota Contractor Cops Plea In Swindle Of Elderly Couple

The Star Tribune reports that building contractor Richard D. Gurewitz, of Home Update Co., pleaded guilty Monday to swindling an elderly Minneapolis couple out of $789,000 while remodeling their tiny house, which had a market value of $102,000. Authorities say that Gurewitz could account for less than $80,000 in materials and other expenses. The victims lived for the past two years with ripped-out walls, code violations and structural hazards. The husband, 79, suffers from Alzheimer's disease and is now living in a nursing home. The wife passed away in December at age 82. For more, see Contractor pleads guilty to swindling elderly couple in remodel.

Caretaker Caught Stealing Elderly Clients' Home; May Get 8 Years In Jail

An 89 year old Cardiff, California man, partially paralyzed by a stroke, and his 95-year-old wife, who was blind and suffering from dementia, contracted with a network of private home care agencies that matches clients with caretakers for home care assistance. According to an article on SignOnSanDiego.com (Union Tribune - San Diego):

  • "They expected to find an honest professional to help them with household chores and other nonmedical needs. Instead they got convicted felon Gina Trevino, who stole their house just five months later by tricking the couple into placing the deed in her name."

For more, see Better protection for elderly, retirees sought.

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Flipping Deals Running Rampant In Southwest Florida

The News-Press in Fort Myers, Florida reports that "[it] has uncovered almost 70 Southwest Florida home sales in which sellers or government officials say people either were duped or appraisals inflated so people could pad their profits. Sales totaled roughly $45 million and the profits more than $10 million." Some of the deals reportedly "involved a group of business people selling homes among themselves at inflated values."

According to Douglas Molloy, chief assistant U.S. attorney in Fort Myers, "The problem is as bad as I've seen it here. We're planning to send a message that this won't be tolerated here."

For all the details set forth in this investigative report, see Southwest Florida real estate sellers beware (Schemes multiply and they subtract from industry's credibility).
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Private Sector Players Pledge Mortgage Bailout Relief

Syndicated columnist Kenneth Harney reports that major mortgage market players are expressing intentions to provide mortgage bailout relief, in an article reported in Realty Times. According to the article:

  • "Freddie Mac told a Senate foreclosure-avoidance summit last Wednesday that it planned to devote $20 billion to help refinance subprime buyers facing unaffordable payment adjustments or foreclosure into fixed rate conventional loans."

  • "Fannie Mae earlier had announced a new refinancing program of yet-undetermined dollar volume to reach out to ailing subprime borrowers with adjustable rates on the rise."

  • "Washington Mutual announced last week that it would refinance up to $2 billion worth of subprime adjustables into 30-year fixed rate loans, and cut one half percentage point off its regular fixed rates to make the deals more affordable."
Citigroup and the Federal Housing Administration have also reportedly chimed in with their intentions to participate in the expected subprime bailout. For more, see Major Mortgage Players Pledge Foreclosure Relief; May Alleviate Fallout.
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Monday, April 23, 2007

Foreclosure Rescue A Concern In Arizona

The Arizona Republic warns of foreclosure rescue operators that make rescue offers that "are thinly veiled schemes to take control of a struggling homeowner's house and strip any equity left in it. As the number of people falling behind on their mortgages in metropolitan Phoenix has soared, so too has the number of schemes that cost homeowners their houses." For more, including the stories of two scam victims, and comments from regulators and others, see Scam takes owners' home, equity (Scheme targets owners faced with foreclosure).
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Foreclosure Rescue, Sale Leasebacks, Usury, & Substance Over Form

I came across a court case decided (in 1988) by the Court of Appeals for the District of Columbia (D.C.'s high court) that involved the prosecution and conviction of two foreclosure rescue operators for violating a D.C. law then in effect known as the Loan Sharking Act. This law (D.C. Code Ann. § 26-701 (1981)) provided in pertinent part that it was unlawful and illegal to engage in the District of Columbia in the business of loaning money upon which a rate of interest greater than 6 per centum per annum is charged on any security of any kind, direct or collateral, tangible or intangible, without procuring a license.

The principal question in this case was whether the two foreclosure rescue operators (husband and wife), according to the court, "[w]ere actually engaged in the criminal enterprise of making loans in a disguised form at legally impermissible rates and without a license."

The transactions for which the foreclosure rescue operators were prosecuted and convicted were the typical, "sale-leaseback-repurchase option" foreclosure rescue deals. While the transactions (which took place in 1981 and 1982) took the form of actual purchases of people's homes with a contemporaneous leasing back of the premises to the homeowner with an accompanying buyback option, the D.C. trial court disregarded the form of the transactions and, instead, looked to the substance of the transactions and treated the deals as disguised loans, and then applied the then-existing D.C. statute accordingly. The D.C. Court of Appeals subsequently affirmed the convictions.

While the foreclosure rescue operators insisted at their criminal trial that they were not in the business of lending money, the D.C. Court of Appeals listed a number of factors that, in their view, supported the trial judge's determination that the transactions were nothing more than disguised loans. The court's observations follow (bold text is my emphasis):
  • "Each of the homeowners was drawn to the [operators] by advertising which promised the availability of "money to lend" to stop imminent foreclosure"

  • "When the homeowners asked for the loans which they believed that the advertisements were describing, and then posed questions about the form of the transactions, the [operators] couched their answers to these questions in language which confirmed to the [homeowners] that they were receiving the very loans for which they had come"

  • "The [operators] often simply calmed the inquiring homeowners' fears by pretending that it was usual practice, perhaps required by the accountant, to sign instruments transferring title to the homes."

The D.C. Court of Appeals then went on to make these additional observations:

  • "Moreover, if the transactions were in fact sales, as [the operators] contend, they were surely most extraordinary ones. When a homeowner sells his home, which is usually his most valuable possession, one would expect at least some measure of bargaining over the sales price. Here, there was none. In each instance, what the [operators] characterize as the "sales" price bore no relation whatever to the value of the equity. It is absurd to suggest that Mrs. Carroll would knowingly sell her home, in which she had an equity of more than $ 36,500.00, for $ 8,100.00. None of the "sellers" had placed his or her home on the market or expressed the slightest interest in selling it. Each "seller" remained in possession after the purported sale, and [the operators] were indeed depicting their service as one that would enable their clients to "save" their homes from foreclosure. Although the transaction also lacked one of the common characteristics of a loan -- an evaluation of the borrower's credit -- no such investigation was needed because the home itself, which in each case was worth far more than the amount expended by the [operators], served as their security. It was therefore altogether reasonable for the trial judge to find that the depiction of each of these transactions as a sale and lease back was a transparent sham which masked an unlawful loan."

The D.C. Court of Appeals opinion cites cases from a number of states (ie. New York, Oregon, Alaska, Hawaii, Washington State, Tennessee, and California), so if any of these states is your home state, there might be something of interest in this case for you.

In conclusion, the D.C. high court, quoting from a case decided by the New York Court of Appeals (New York's high court), made the following memorable quote (among others) about usury laws:

  • "The purpose of usury laws, from time immemorial, has been to protect desperately poor people from the consequences of their own desperation. Law-making authorities in almost all civilizations have recognized that the crush of financial burdens causes people to agree to almost any conditions of the lender and to consent to even the most improvident loans. Lenders, with the money, have all the leverage; borrowers, in dire need of money, have none."

For the text of the entire D.C. case, see:

Browner v. Dist. of Columbia, 549 A.2d 1107 (D.C. 1988).

For other posts on the issue of usury in the context of a sale leaseback, see:

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Sunday, April 22, 2007

Foreclosure Rescue Posts On This Blog

For a list of links to posts on foreclosure rescue on this blog, go to Foreclosure Rescue Posts.
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Alaska Mortgage Scammer Cops Plea

The Anchorage Daily News reports that


  • "Kourosh Partow, an accused conspirator in a a seven-member mortgage fraud ring that operated in Anchorage since 2002, pleaded guilty to wire fraud in federal District Court on Friday morning. The six others have already pleaded guilty this year to charges in the criminal case, which involved deceiving mortgage lenders by overstating income or making other false statements on loan applications."
The real estate closings allegedly took place at Alyeska Title Company in Anchorage. For more, see Anchorage man pleads guilty to wire fraud (Mortgage Scam: Partow faces a prison term and as much as a $250,000 fine).

For story update, see Mortgage banker gets more than 2 years in prison (Associated Press - 8-27-07).

Go here for other posts on Anchorage mortgage scam.
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Weekend I.D. Theft Blotter

The following identity theft stories this week caught my eye:

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ACORN To Kick Off National Foreclosure Prevention Campaign

Ben Hanna at YourHub.com reports that:
  • "As part of a national campaign to address the foreclosure crisis, ACORN members in Denver announced their plans to conduct a large scale outreach program to find homeowners at risk of losing their home due to a predatory loan, and to organize these homeowners to fight back to save their homes and win major policy changes presented in a ten point platform."

Based on what is reported in the article, it appears that ACORN (Association of Community Organizations for Reform Now) community organizers will arm themselves with lists of homeowners in foreclosure or with subprime loans and will go door to door in the neighborhoods most affected by the problem, and involve homeowners in the group's campaign activities.

ACORN will also provide homeowners with information regarding, among other things, how to avoid foreclosure rescue scams.

ACORN has established a toll-free national hotline, 1-866-67ACORN, to take calls from homeowners facing foreclosure or suffering from predatory loans. For borrowers in Colorado, please call the ACORN office at 303-534-1948.

For more, see ACORN fights to stop foreclosure crisis.

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Washington Mutual Commits Up To $2 Billion To Help Subprime Customers Avert Foreclosure

Mortgage lender Washington Mutual has announced a commitment to refinance up to $2 billion in its customers' subprime loans at discounted interest rates in an attempt to help customers stabilize their finances and avoid foreclosure.

Under the program, WaMu subprime borrowers who remain current on their existing loans and anticipate pending payment increases may apply for new discounted fixed-rate loans or other mortgage products available to them.

A toll-free number (1-800-881-7099) is available to Washington Mutual customers who would like to inquire about this special program.

They have also joined forces with a number of foreclosure prevention groups, including the NeighborWorks® Center for Foreclosure Solutions and the Homeownership Preservation Foundation, to launch a national effort to avert foreclosures.

For more, see WaMu Commits up to $2 Billion in Assistance to Help Subprime Borrowers.
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Consumer Advocacy Group Calls For Slowdown In Foreclosure Process

According to a press release issued by the National Community Reinvestment Coalition ("NCRC"), it is recommending to Federal lawmakers "to pass legislation that provides for 60-to-90 day stays in foreclosure proceedings nationwide to ensure that homeowners situations are properly assessed prior to facing needless and expensive foreclosure actions that strip equity."

The NCRC has been working directly with subprime borrowers helping them work out problem loans with lenders and servicers. They claim, however, that "its loan workouts have turned into fast sprints against law firms involved in the foreclosures."

The NCRC also asserts that "a congressionally-mandated stay would establish uniform and reasonable time periods across all states for loan workouts that often contain multiple lending abuses, not just one or two. He presented to the committee a list of 27 abuses often found in subprime borrowers' loans."

For more, see NCRC Calls For a Congressionally-Mandated Stay To Slow Down 'Foreclosure Mills' Operated By Law Firms Seeking to Profit from Borrowers' Troubled Loans (Repeats Call For FHA Re-financing, Responsible Servicing, National Rescue Fund & Strong Anti-Predatory Lending Law)
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Saturday, April 21, 2007

Mortgage Lenders Getting Into The Foreclosure Business?

An Associated Press story appearing on Daily Report says:
  • "Consumer advocates have begun criticizing major mortgage lenders, such as Countrywide Financial Corp. and GMAC Financial, that also have in-house foreclosure businesses. It is "mind-boggling" that in many states, people can lose their homes in foreclosure without any court hearing and that the foreclosure is done by a company with ties to the lender, says Ira Rheingold, general counsel for the National Association of Consumer Advocates in Washington."
For more, see Lenders get into foreclosure business, particularly in West.
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More Layoffs By Subprime Mortgage Lenders

Housing Wire reports that at:

  • WMC Mortgage, about half of the company’s national workforce — roughly 750 employees, were given their walking papers on Thursday. For more, see WMC Gutted, Lays Off Half of Workforce.
  • GMAC LLC’s Residential Capital, roughly 600 to 700 workers — or five percent of its U.S.-based employees — will be cut loose during the next few months, a GMAC spokeswoman said Thursday. For more, see ResCap To Shed 700 More Jobs Amid Subprime Turndown.

For an interesting look at the current implosion in the subprime mortgage industry, see The Mortgage Lender Implode-O-Meter.

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Subprime Mortgage Weakness Spreading to Alt-A Market?

A recent Associated Press article appearing on the Florida Association of Realtors website reports that "[t]he so-called Alternative-A mortgage sector, which loans to borrowers with better credit than subprime borrowers but not quite prime, is starting to hurt." For more, see Weakness spreads from subprime mortgage market to so-called Alt-A segment.
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More On Subprime Mortgage Lending

For a perspective on the current subprime mortgage lending emvironment from public policy expert Alex J. Pollock, a resident fellow at the American Enterprise Institute ("AEI"), see:

AEI is a private, nonpartisan, not-for-profit institution dedicated to research and education on issues of government, politics, economics, and social welfare.

Mr. Pollock served for twelve years as President and Chief Executive Officer of the Federal Home Loan Bank Board of Chicago.

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Friday, April 20, 2007

New York Judge Convicted Of Bribe Taking

In another story that has absolutely nothing to do with the subject matter of this blog (and for which I respectfully request your indulgence), EmpireStateNews.net reports that, in Brooklyn, New York, Kings County District Attorney Charles Hynes announced yesterday the conviction of former Brooklyn trial court judge Gerald Garson on charges of Bribe Receiving in the Third Degree, and two counts of Receiving a Reward for Official Misconduct in the Second Degree.

The charges were reportedly based on a relationship the former judge had with attorney Paul Siminovsky involving buying numerous lunches, dinners and drinks in exchange for favorable treatment and lucrative court appointments; and giving "gifts" of expensive cigars and $1,000 in cash which were caught on video surveillance.

For more, see Ex-judge convicted for taking cash bribes and gifts from attorney.

Go here for other stories on questionable conduct by members of the judiciary. naughty judges
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Arrest Warrant Issued For Florida Homebuilder

The Sarasota Herald Tribune reports that Florida prosecutors say they have obtained an arrest warrant for Joseph Pufta, the chief executive of Avalon Homes, a homebuilder that reportedly "[c]ollapsed last fall, leaving 50 homes unfinished and dozens of home buyers ... saddled with mortgages for homes they may never be able to finish building."

According to the article:
  • "Authorities say Avalon took hundreds of thousands of dollars from banks for work that was never completed. And they say subcontractors were never paid for work done on dozens of homes, causing them to levy liens. Assistant State Attorney Kate Wallace said Pufta will be charged with 20 felony counts of misappropriation of construction funds and one count of grand theft. More charges could be filed if more families come forward, she said."

While other builders have gone "belly-up" with the downturn in Southwest Florida's building industry, it is believed that Pufta could be the first homebuilder in the area to face criminal charges.

For more, see Builder left homes undone; CEO faces arrest.

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In a related story, the Sarasota Herald Tribune reports that "The contractor who allowed Avalon Homes to use his building license says he had no idea the company was leaving its customers broke and homeless."

Based on the reported facts in the article, contractor James Leake, in effect, "rented" his contractor license to Avalon Homes for $1,000 per home site to build houses under his license. Reportedly, the city of North Port, Florida issued 92 building permits to Avalon Homes under Leake's license.

For more, see Builder costs contractor his license.

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For story update, see Avalon home builder is booked on charges ("The former head of now-defunct Avalon Homes is charged with 20 felony counts of misapplication of construction funds and one felony count of grand theft. [...] According to an arrest report released Wednesday, Avalon Homes took "several withdrawals" of money from Schaller's construction loans "and failed to complete the work that these withdrawals were designed to pay for.").

For other posts on builders accused of stiffing customers & subs, go here and go here. contractors stiff subs customers zeta

NJ Man Indicted In Alleged Home Improvement Scam

The Jersey Journal reports that Miguel Perez, owner of New Jersey home improvement firm Miaggiamar Home Designers, was indicted on four counts of theft by deception in connection with allegedly conning more than $150,000 from four victims for home improvements that weren't completed. To read the story of one victim, who spent almost $400,000, on top of the $97,000 she said she'd already paid to Perez, to finish the job, see Took Our Money And Ran (ripping off homeowners in $150G con job).
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Colorado Man Indicted In Alleged Real Estate Scam

An arrest warrant has been issued for Darin DeVoe, who was indicted by a grand jury in Weld County, Colorado last week on 11 counts of felony securities fraud and theft in connection with an alleged real estate investment scam.

According to media reports, the grand jury indictment states that DeVoe stole $2.6 million from 19 of his investors by inducing them to invest in the business of buying distressed homes. The investors claim that Devoe not only failed to provide property management services as he agreed to, "[b]ut robbed the home of the investors’ equity, leaving the homeowners with homes in disrepair and massive upside-down mortgages with no way out."

For more, see Law enforcement looking for former Ogallala resident, reported in the North Platte Telegarph.

For other stories on Darin DeVoe, see:

Thursday, April 19, 2007

Massachusetts AG Gets Preliminary Injunction Against Foreclosure Rescue Operator

Massachusetts Attorney General Martha Coakley’s Office has announced that it has obtained a preliminary injunction in Suffolk Superior Court against fifteen individuals and companies allegedly involved in mortgage fraud and a foreclosure rescue scheme; preventing them from engaging in any further foreclosure rescue transactions.

The injunction was ordered against 15 defendants:
  • Leo Desire, Sr., a salesperson who works on behalf of Primary Mortgage Resource, Inc.,
  • Primary Mortgage Resource, Inc., Mortgage Broker and where Desire Sr. worked,
  • Valerie Hanserd, a closing attorney,
  • Home Pride Management, a company that took fees for unrendered services,
  • Leo Desire Jr., President and Treasurer of Home Pride Management,
  • Dr. Joel Charles (d/b/a Sourie Corp.),
  • Louis R. Joseph, Pierre N. Joseph and his wife Daphne Mompoint, Robens Joseph, Paul A. Joseph, Jean Joseph, Advie Charles, Neville Francis and Marie Betey Mereus, all property buyers.

For more, see Massachusetts AG Press Release.

For a Boston Herald article, see Home scheme halted: AG slams Mass. firms’ foreclosure ‘rescue’.

Florida Regulators "Sting" Unlicensed Contractors

The Pensacola News Journal reports:
  • "The Department of Business and Professional Regulation completed a sting that resulted in the arrest of 11 people for performing unlicensed work.The sting was an effort by the department, the Escambia County Sheriff’s Office and the Office of the State Attorney."
For more, see 11 arrested for unlicensed work.
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Feds Nail Preparer For Phony Tax Returns Used In Straw Buyer Scam

The Times-Picayune reports that Robert Green, who was allegedly paid about $8,000 for preparing false tax documents for straw buyers who submitted fraudulent mortgage applications for federally insured loans in a house flipping scam, pleaded guilty in a New Orleans, Louisiana federal court last week as part of a deal that requires him to cooperate with the government's continuing investigation of the scam.

According to prosecutors, the mortgage fraud scheme involved local businessman Calvin Davis, who recruited straw buyers to buy his houses at inflated prices and submit fraudulent applications to obtaining financing and, further, they claim that local real estate appraiser Donald White was paid an unspecified amount for furnishing false and inflated appraisals of the property that Davis was getting rid of. According to federal court records, White and Davis have not been charged.

Prior to Green entering his guilty plea, three other participants in the scam, Dennis LeBlanc, Dennis Addison and Timothy Falls have also entered guilty pleas and await sentencing. The latter three acted as the straw buyers in the scheme. For more, see House flipping scam nets plea (N.O. man will be sentenced in July).
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