Saturday, August 25, 2007

Nevada Couple Abandons Home; Neighbors Care For Animals Left Behind

The Pahrump Valley Times reports:
  • "Donna and Ty Blair never thought they'd end up taking care of a variety of fish, several goats and two pot-bellied pigs, one of them pregnant. But that's exactly what they found themselves doing when their neighbors, Nicole and Adam Ulrich, literally abandoned the Dyer Road property where they were living next door earlier this year."
For more, see Neighbors gone, animals left behind (Fish In Custody Quandry).

Go here for more on pets and foreclosures.

Massachusetts Man Facing Foreclosure Pulls Gun On Bank Employee, Say Cops

WCVB-TV Channel 5 in Boston reports:
  • "A property owner in desperate financial straits held a gun to the head of banker who came to foreclose, police said. NewsCenter 5's Bianca de la Garza reported that Dean Colantuoni was charged with assault with intent to murder. Colantuoni was arrested after he allegedly pulled a gun on Phillip Freeham, a bank employee from East Boston Savings Bank who was attempting to foreclose Colantuoni's property, Stadium Fruit and Flowers, on Monday."

Go here to watch the Channel 5 TV report. To read the online report, see Man Accused Of Pulling Gun During Foreclosure Attempt (Bank Still Plans To Foreclose On Property). DeputyEvictionTheta

More On Buyers Backing Out Of Purchase Contracts In New Construction Condo Projects

Another story is being reported on contract purchasers of units in new construction condo projects - this time by The Wall Street Journal. It reports:
  • "For the nation's real-estate lenders, the other shoe may be about to drop: condominiums. Already plagued by rising home-loan defaults and foreclosures among overstretched consumers, major markets across the country -- including parts of Florida, California and Washington, D.C. -- are seeing rising foreclosures and bankruptcies of entire condo projects. The problems are emerging as some buyers who signed contracts to buy new condos two to three years ago, when construction was just starting, seek ways to back out as they encounter trouble getting financing in the suddenly dicey mortgage market. Falling prices are forcing appraisals down, so banks aren't willing to lend the full amounts that people committed to in the sales contract. "Closings that are scheduled to take place are not taking place," says Marvin Moss, a North Miami Beach real-estate attorney. He is suing several developers to help clients get out of contracts."

For more, see Default Lines - Condo Troubles Further Squeeze Property Lenders (Full Force of Glut Is Felt As Buyers Back Out; 'More of the Iceberg') (if link expires, try here).

For other stories on new construction condo buyers backing out of purchase contracts, see:

Go here for other stories on real estate speculators looking to back out of purchase contracts.

Go here for other posts related to the Miami condo market problem. zebra

Vacant Foreclosed Homes A Headache For One California City

The Merced Sun-Star reports on calls for an emergency ordinance in Merced, California for dealing with the eyesores arising as a result of foreclosures and vacant houses that are causing health and public safety hazards for its neighborhoods:
  • "[W]hen homeowners move out or abandon properties in foreclosure, the empty houses become magnets for a host of problems. With water turned off, grass turns yellow and becomes a fire hazard. Stagnant water in swimming pools becomes a breeding ground for mosquitoes. Worst of all, dark houses with no signs of life houses attract vandals, drug dealers, and other criminals ... .

Reportedly, Merced's current law only allows the city to go onto the property one time, clean it up, and place a lien on the home for its costs. Some type of emergency ordinance is being called for so the city can go in, clean up, and then maintain these homes on a regular basis and get reimbursed for its ongoing costs by placing liens on the property as the maintenance is done. For more, see City works to tackle foreclosure eyesores (Council looks at ways to maintain abandoned properties on an ongoing basis). neighborhood destruction from foreclosures kappa

More Abandoned Animals Found In Foreclosed Home

In North Central Arkansas, The Baxter Bulletin reports:
  • "The Humane Society of North Central Arkansas rescued three dogs and a cat from a house at 701 E. Fourth St. Monday evening and Tuesday. Others may still be in hiding. The house had been foreclosed and the animals in the home had been abandoned, according to Robbie Lockeby, kennel manager. Lockeby estimated there were four or five other dogs and possibly five or six other cats hiding in the house. Traps were left to capture the animals."

For more, see Abandoned animals rescued.

Go here for more on pets and foreclosures.

Building Contractor Gets 15 Years Probation For Leaving Homebuyer, Sub High & Dry

In Colorado, The Greeley Tribune reports:
  • "A former Windsor homebuilder who made Weld County's Most Wanted list in June 2006 was sentenced [August 10] for felony theft. Richard Browning was sentenced to 15 years of supervised probation, 500 hours of useful public service and will have to pay full restitution plus 12 percent interest. His probation will be transferred to California where he lives and is now working."

Reportedly, Browning stole nearly $28,000 from a property owner who hired Browning to build a home, and also accepted $175,000 from Bank of Choice that was to be paid to another contractor, but Browning pocketed the cash instead. For more, see Former Windsor home builder sentenced to 15 years probation in felony theft.

Go here for other stories of builders / contractors stiffing customers and subcontractors. contractors stiff subs customers alpha

Shoddy Construction Exacerbating Foreclosure Crisis?

BusinessWeek has a story that raises the issue of the extent to which foreclsoures are being driven by poor workmanship in new construction. One new homebuyer anecdote describes the first night spent in a brand new home. Reportedly, the homeowner had pulled the plug in the Jacuzzi tub upstairs, and 100 gallons of water came crashing through the ceiling downstairs because the plumbing drains were not connected. The dining room ceiling ended up collapsing. "That was a preview of coming attractions," said the homeowner. The homeowner ended up walking away from the home, which appraised at $408,000 the day it was bought. It ended up selling for $234,000 at a foreclosure auction.

For the rest of the problems enciuntered by the homeowner, see Foreclosure's Building Problem (Is shoddy home construction exacerbating the foreclosure crisis—or is it just an excuse for buyers to walk away?) (Story also available here on MSNBC.com).

Postscript
Whether poor constrution workmanship is driving foreclosures is debatable, but it is driving some disgruntled customers to set up web sites to share "new home horror stories" with others. See Angry Homeowners Take to the Web (As homebuilders struggle and houses get harder to sell, builder-bashing gripe sites are grabbing more attention and more traffic).

For some of the web sites, check out: Homeowners For Better Building, FightPulte.com, FightDivosta.com, FightDelWebb.com, CrapConstruction.com, KhovSucks.com (re: Hovnanian), LevittAndSonsHome.org, Defective-Homes.net, GeorgiaMoldHome.com, JustAnotherLemon.com (re: Pulte Homes).

Friday, August 24, 2007

Calls To Non-Profit Foreclosure Counseling Foundation Doubled In 2nd Quarter

According to a Homeownership Preservation Foundation press release:
  • "Counselors for the Homeownership Preservation Foundation (HPF) fielded a record 30,078 calls from troubled homeowners in the second quarter of 2007 -- more than doubling the call volume of the first three months of 2007 and a more than six fold increase from the same quarter in 2006. A nonprofit organization dedicated to helping Americans avoid foreclosure, HPF operates a national 24/7 helpline -- 888-995-HOPE -- that offers homeowners personalized assistance to help manage mortgage payment concerns."

For more, see National Foreclosure Hotline Calls for Help Double.

NJ Woman Charged With Attempted Murder; Overwhelmed With Financial Trouble, Say Court Docs

The Courier Post reports:
  • "A former [Lumberton, New Jersey] woman was charged [last week] with attempted murder for allegedly trying to poison her husband by putting antifreeze in his juice and cyanide in his food. Karen L. Tubertini, 46, who recently moved to Cherry Hill, was arrested Monday and charged with the attempted murder of Ronald Tubertini, 49, a retired Lumberton policeman. [... T]he wife admitted to a county detective she tried to poison her husband to "punish him" for her problems, according to a court document. She said she was distraught and overwhelmed by the stress of household financial troubles, managing the local family business -- Arylin Construction Co. -- and dealing with her three children. [...] Both the Lumberton home and a farm the couple owns in Monroe, Pa., are both in foreclosure proceedings, county authorities said."

For more, see Police: Woman gave poison to husband (no longer available online).

CNNMoney On Foreclosure Rescue

CNNMoney.com ran an online story today on foreclosure rescue scams, which among other things, summarizes some of the tactics used by those offering services to financially strapped homeowners, and recounts an experience of one Columbus, Ohio homeowner who did business with Foreclosure Assistance Solutions ("FAS") an upront fee foreclosure rescue operator. Coincidentally, FAS is one of the six foreclosure rescue operators that Ohio Attorney General Marc Dann has filed civil lawsuits against (See Ohio AG Conducts Foreclosure Rescue Sweep; Hauls Six Upfront Fee Operators Into Court).

Included in the article is an anectdote of a Brooklyn, New York homeowner who fell prey to an equity stripping scam.

For more on today's CNNMoney article, see Foreclosure fallout: Rescue scams (Scammers are taking advantage of mortgage holders at their most vulnerable: when they're about to lose their homes).

More On Central Ohio Alleged $25 Million Mortgage Fraud

Nine people have been accused in a $25 million mortgage fraud scheme in which the value of more than 500 real estate properties in central Ohio was exaggerated to mortgage lenders and to prospective buyers. The charges include wire fraud, bank fraud, money laundering and tax evasion. Those indicted are: Donald F. Green, 48, of Columbus, real-estate investor; Shawn A. Griffin, 37, of Cleveland, real-estate investor; Aryeh M. Schottenstein, 33, of Oak Park, Mich., real-estate investor; Jeffrey M. Lieberman, 56, of Bexley, real-estate investor; George T. “Terry” Jordan, 50, of Canal Winchester, real-estate agent; Dwayne L. Carter, 37, of Columbus, loan officer; Jonathan L. Boyd, 38, of Columbus, loan officer; Kenyatta Johnson, 37, of Michigan, loan officer; James Darneil Gaither, 37, appraiser.

For a copy of the indictment, see U.S. vs. Green, Schottenstein, et al.

See also, The Columbus Dispatch - 9 accused of home scams (Money laundering, bogus appraisals cited). For story update, see Two mortgage-fraud cases heard in federal court.

In a related story about two victims of this scam, see Mortgage scheme hits home (South Side pair may be homeless after foreclosure).

For a story update (May 2, 2008), see Two More Plead Guilty In Mortgage Fraud Scheme:
  • "Aryeh Schottenstein, age 34, of Columbus, pleaded guilty to one count of conspiracy to commit wire fraud and one count of money laundering, and Shawn A. Griffin, age 38, also of Columbus, pleaded guilty to two counts of conspiracy to commit wire fraud and one count of money laundering. [...] Schottenstein and Griffin were indicted along with Donald F. Green, Jeffrey Lieberman and George "Terry" Jordan for a mortgage fraud scheme in central Ohio in 2003 and 2004. [...] Green pleaded guilty on April 11. Lieberman and Jordan pleaded guilty on April 24. All are free pending sentencing. ).

Ohio AG Indicts 2 In Scheme To Obtain Inflated Mortgages

In Central Ohio, The Columbus Dispatch reports:
  • "Two Columbus-area men were indicted by a Franklin County grand jury today in connection with a mortgage-fraud case related to properties in Franklin and Ottawa counties. Larry Corna, 52, and Alan Csipke, 29, face multiple counts of theft, money laundering and engaging in a pattern of corrupt activity, Ohio Attorney General Marc Dann's office announced. Corna ... and Csipke ..., "conspired to obtain inflated mortgages on the properties in order to obtain monies from the loan proceeds under false pretenses," according to a statement from Dann's office."

For more, see Two indicted in mortgage-fraud case. See also, Ohio AG Press Release, Two Indicted For Mortgage Fraud In Franklin County.

San Diego Feds Get Plea In $30 Million Real Estate, Straw Buyer Scam

The San Diego Union-Tribune reports:
  • "Rollo “Rick” Norton, the local financial planner at the center of a $30 million scheme that decimated the life's savings of dozens of his former clients, pleaded guilty [Wednesday] in federal court to one count of mail fraud. Norton's plea ... came in the midst of a nearly two-year FBI investigation into allegations that ... he stole millions from clients through sham real estate transactions at ... a Pacific Beach condominium complex. Also pleading guilty to mail fraud ... was Scott Greer, 31, of Ramona, a former employee of Norton's. The mail fraud counts were in connection with using the U.S. Postal Service to perpetuate the scheme. [...] At least nine lawsuits have been filed against Norton over the past two years by former clients and investors, many of whom were elderly. In recent depositions in some of those suits, Norton has admitted to a complex fraud scheme and implicated several employees of Chicago Title, one of the nation's largest title insurance companies."

Reportedly, part of the overall scheme involved Norton using his investors as straw purchasers of condos to obtain new loans without their knowledge in an apartment complex that he made into a condo-conversion project. For more, see Financial planner in scam gives guilty plea (Clients lost $30 million in condominium scheme).

For earlier articles on this case, see:

South Florida City's "No Pick-Ups After Dark" Ban Ruled Unconstitutional

In another example of a South Florida city engaging in unconstitutional conduct in connection with the real property rights of its residents, The Miami Herald reports:
  • "The City Beautiful is going to have to make room for trucks ugly. In an opinion peppered with jabs at one of Miami-Dade County's most restrictive hamlets, the state Third District Court of Appeal ruled Wednesday that a Coral Gables ordinance prohibiting pickup trucks from parking in residential areas overnight is unconstitutional. [...] The suit was brought by Lowell Kuvin, who received a $50 ticket in 2003 for parking his Ford F-150 in front of his home overnight. The city ordinance allows residents to own trucks, but they must be kept in garages or outside the city between 7 p.m. and 7 a.m. Kuvin didn't have a garage."

Coral Gables Mayor Don Slesnick is reportedly considering an appeal. For more, see Coral Gables' overnight truck ban ruled illegal (Striking down one of Coral Gables' symbols of exclusivity, an appellate court told the city that it cannot ban all pickup trucks after dark).

For the Florida appeals court decision, see Kuvin vs. City of Coral Gables (case made available online courtesy of Florida's Third District Court of Appeal).

Postscript

Similar to the case also posted today involving the Hallandale Beach, Florida homeowner who was being screwed over by his municipality, Mr. Kuvin initially lost his case in the lower court, and was essentially forced to take his case to an appeals court, where he obtained the reversal he sought - the court declaring the city ordinance unconstitutional.

Egregious Conduct By South Florida City In Violation Of State Homestead Exemption Laws Threatens Loss Of Home

In South Florida, the Broward-Palm Beach New Times reports on the story of a city of Hallandale Beach homeowner whose failure to keep his home properly maintained resulted in the city imposing fines for code enforcement violations against him. While the imposition of fines may well have been justified, those familiar with the Florida homestead laws know that such fines do not constitute liens on the homestead of a Florida resident and, consequently, can't subject the home to foreclosure.

However, that didn't stop the City of Hallandale Beach, their City Attorney, and an apparently out of control mayor from going to court to foreclose the liens anyway. The case was heard by Broward County Judge Patti Englander Henning, who might be described, at best, as "out to lunch," and at worst, as bordering on the corrupt for her decision in this case. The judge ruled in the city's favor despite the homestead laws (Article X, section IV - Florida Constitution) to the contrary. It took the work of skilled legal counsel on behalf of the homeowner to get the lower court decision reversed on appeal, essentially reaffirming the painfully simple proposition that city liens for code enforcement violations do not attach to a property owner's homestead and, accordingly, cannot subject the home to foreclosure.

A year after the Florida appeals court decision, the City of Hallandale Beach started again with the harassment by going back into court, reopening the case (with Judge Englander Henning again presiding), and obtaining a $2.8 million judgment against the homeowner and his wife, reportedly without giving him notice of the court hearing. The homeowner and his counsel are now again drawn into battle with an ostensibly out of control municipal government.

For more, see Storming the Castle (Hallandale Beach and a Broward judge are trying to drive a man from his home).

For those who are "court case oriented," see Pelecanos v. City of Hallandale Beach (Fla. App. Ct. - 4th Dist. - 11-23-2005) for the Florida appeals court reversal of the lower court's decision in this case (case made available online courtesy of Florida's 4th District Court of Appeal).
Postscript

For those of you unfamiliar with Greater Fort Lauderdale and some of the notables who serve or have recently served as part of the Broward County judiciary, here are a couple:

1) Judge Larry Seidlin - He's the judge who humiliated himself by weeping on national television when presiding over a part of the late Anna Nicole Smith child custody proceeding several months ago - see If Anna Nicole Smith case is a circus, judge is ringmaster.

2) Judge Lawrence Korda - He's another judge who presided over a small part of the late Anna Nicole Smith matter several months ago. While he did nothing to embarass himself or the judiciary the way his colleague did, Judge Korda was subsequently caught by cops in a city park smoking marijuana out in the open - see Broward judge faces possible removal by state panel for smoking marijuana.

3) See, generally, Courts Answering ‘a Call for Help’ (South Florida Daily Business Review), which summarizes the recent alleged escapades of several Broward County judges (Judge Larry Seidlin - again, facing a criminal investigation for allegedly asking a lawyer for gifts and financially exploiting an elderly woman; Judge Lawrence Korda resigned after being caught smoking pot in a Hollywood park; Judge Robert Zack faces an investigation for allegedly taking a loan from an attorney; Judge Cheryl Aleman faces ethics charges from the state Judicial Qualifications Commission for acting discourteously to defense attorneys; others).
.
4) See also the Miami Herald (8-19-07): Is Dr. Phil the answer for errant judges in Broward? (Broward's judges are a dysfunctional family in need of treatment, according to a group of high-powered lawyers).

5) Maybe not coincidentally, the presiding ringmaster over all these characters, Broward County Chief Judge Dale Ross, recently resigned his position as Chief Judge after all these events bacame public, although he remains a sitting judge.

Go here for other stories on questionable conduct by members of the judiciary. naughty judges

Thursday, August 23, 2007

Minnesota Feds Indict Two Closing Agents For Allegedly Stealing $2 Million

The Star Tribune reports:
  • "Two Minnesota executives of a real estate closing firm have been charged with stealing more than $2 million in home mortgage loans by routing $370 million in loans to the wrong bank account. A federal grand jury indictment handed down Thursday charged Molly L. Heise, 49, of Chaska, the owner of real estate closing firm Profile Title & Escrow Corp. of Bloomington and New Hope, and Christine A. Hein, 38, of Buffalo, the company's chief financial officer, with multiple counts of criminal wrongdoing, including wire fraud and money laundering. It was the latest in a small flood of real estate scams in Minnesota. In the past two months, 11 people have been charged with types of mortgage fraud and five have pleaded guilty, said the U.S. attorney's office in Minneapolis, which prosecuted the cases."
For more, see Two charged in $2 million scam (The women indicted Thursday were among 11 people in the past two months facing charges of mortgage fraud in Minnesota).

See also: Fraud probe nets pair (Title company execs indicted) (Pioneer Press)

Go here for stories on other alleged escrow agent mishandling of funds. sneaky slick escrow agents alpha

"Better Business Bureau" For Mortgages Now Online To Serve Consumers

RISMedia reports:
  • "With an entire industry quaking, it was bound to happen. A Better Business Bureau-type organization has finally arrived to help the mortgage industry to regain its credibility and footing among consumers. It’s called the Better Mortgage Bureau. Its Web site, http://www.bettermortgagebureau.com went live this week, and it could not have come at a better time. [...] According to the new organization, the Better Mortgage Bureau is the “Good Housekeeping Seal of Approval” for the mortgage industry."

For more, see Mortgage Experts Launch ‘Better Mortgage Bureau,’ for Consumers Looking for Legitimate Home Loans.

Boston Battle Intensifies Between Tenants In Foreclosure Evictions & Deutsch Bank

BostonNow reports:
  • "The rift is growing wider between tenants being evicted from two buildings in Dorchester and Roxbury and the bank they blame for the evictions. Residents met this week with Deutsche Bank officials and later expressed their outrage and frustration. "We're saying to them, 'It's really unjust for you to come into our communities and empty out buildings that will most likely stay empty and really harming people,'" said Cheryl Lawrence of tenant rights organization City Life-Vida Urbana. "Unfortunately they don't seem to get that - it was shameful.""

Deutsch Bank's position is that, as a trustee over a pool of mortgages whose sole responsibility in these matters is dictated by the trust agreenment that creates the mortgage pool, it has no say in the evictions; it claims that responsibility for the decision-making rests with the mortgage servicing companies. For more, see Deutsche Bank and tenants rift grows (Fight is over evictions after foreclosures).

Go here , go here , and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics zebra

Illinois Lawmakers Pass Protection For Tenants Renting Homes In Foreclosure

The Illinois legislature has passed a statute that provides some measure of protection for tenants in possession of a mortgaged home going through the foreclosure process. According to a synopsis of the bill, SB 258:
  • "Provides that, in a case of foreclosure where the tenant is current on his or her rent, any order of possession must allow the tenant to retain possession of the property covered in his or her rental agreement (i) for 120 days following the notice of the hearing on the supplemental petition that has been properly served upon the tenant, or (ii) through the duration of his or her lease, whichever is shorter. Provides that the exception for continued possession by the tenant only applies if the tenant continues to pay his or her rent in full during the 120-day period." (see Bill Status of SB 258)

The bill, which passed both houses of the Illinois legislature in May, was signed by the Governor on August 17. The law becomes effective January 1, 2008 (see Bill Status of SB 258).

The statute itself can be found either at Public Act 95-0262, or at 735 ILCS 5/15‑1701.

More On Stockton Mortgage Fraud

KXTV-TV Channel 10 in Sacramento, California reports:

  • "The FBI has questioned a number of real estate professionals linked to fraudulent transactions involving a Stockton man arrested last week. Investigators say Iftikhar Ahmad, 36, bought and sold more than 100 houses over the past decade. The FBI believes dozens of those transactions involved mortgage fraud."

  • "In her report, FBI Special Agent Kathleen Nicolls said Deborah Timmins, 49, was an escrow officer involved in at least 13 of Ahmad's property sales. Nicolls said Ahmad paid Timmins $7,500 for her services outside of escrow, which she points out is not customary. Timmins admitted to the FBI that she was fired from Chicago Title for misconduct and later went to work for Commonwealth Land Title. Timmins' twin sister, Denise James, was an escrow assistant and her notary seal was used in five of Ahmad's real estate transactions. Two of those transactions involved identity theft."

Loan company employees and the appraisers are also on the FBI radar. In addition to the real estate professionals, the FBI has reportedly identified dozens of individuals it believes may be complicit in the mortgage fraud scheme, including Ahmad's three brothers and people who bought houses from Ahmad.

For more, see Real Estate Pros Probed in Mortgage Fraud.

For story updates, see

  • Mortgage fraud probe widens (Jose Serrano, 44, of Stockton was indicted by a federal grand jury in Sacramento on mail fraud and money laundering charges for his part in the alleged scheme that illegally flipped more than 100 homes, spearheaded by 36-year-old Iftikhar Ahmad, also of Stockton.) (10-26-07)
  • FBI details housing fraud case (Stockton man awaits a court hearing Thursday) (8-26-07).

Go here for other posts on this investigation.

Gangs Moving To Mortgage Fraud; Law Enforcement Concerned

National Public Radio reports:
  • "The housing boom of recent years has turned mortgage fraud into a big business — so big that some of the nation's largest gangs are getting into the act. [...] And while street gangs only account for a portion of [it], the fact that they have moved to mortgage fraud as a money-spinning enterprise worries law enforcement officials. They say it is part of a larger trend: gangs searching for ways to launder drug-dealing and gun-selling dollars."

Reportedly, the price tag for a mortgage fraud case that involved some members of Chicago-area's Black Disciples gang a couple of years ago was $70 million. FBI information about real estate deals involving the Vice Lords [another Chicago-area gang] indicated that perhaps there was $80 million in fraudulent mortgage activity.

For more, see Gangs Find New Source of Revenue: Mortgage Fraud.

Central Ohio Feds Indict 9 In $25 Million Mortgage Fraud Involving 500+ Properties

(revised 8-31-07)
The Associated Press reports:
  • "Nine people have been accused in a $25 million mortgage fraud scheme in which the value of more than 500 real estate properties in central Ohio was exaggerated to mortgage lenders and to prospective buyers, authorities said Wednesday. The nine recruited inexperienced potential buyers, counting on their relative ignorance with real estate to hide the scheme, according to the indictment by the federal grand jury. The defendants are accused of using fraudulent documents to misrepresent the buyers' credit to lending institutions and then obtaining mortgages secured by the inflated value of the properties."
  • "The charges include wire fraud, bank fraud, money laundering and tax evasion. Those indicted are: Donald F. Green, 48, of Columbus, real-estate investor; Shawn A. Griffin, 37, of Cleveland, real-estate investor; Aryeh M. Schottenstein, 33, of Oak Park, Mich., real-estate investor; Jeffrey M. Lieberman, 56, of Bexley, real-estate investor; George T. “Terry” Jordan, 50, of Canal Winchester, real-estate agent; Dwayne L. Carter, 37, of Columbus, loan officer; Jonathan L. Boyd, 38, of Columbus, loan officer; Kenyatta Johnson, 37, of Michigan, loan officer; James Darneil Gaither, 37, appraiser."

Sources: Nine indicted in mortgage-fraud scheme (The Columbus Dispatch), 9 Indicted in Mortgage Fraud Scheme (Houston Chronicle).

For a more complete story, see 9 accused of home scams (Money laundering, bogus appraisals cited) (The Columbus Dispatch). For story update, see Two mortgage-fraud cases heard in federal court.

For a copy of the indictment, see U.S. vs. Green, Schottenstein, et al.

Central Florida Husband & Wife Fraudsters Head To Federal Pen For $6+ Million Swindle

WFTV Channel 9 in Orlando, Florida reports that John Barrington (14.5 years) and his wife, Deanna Barrington (2.5 years) were sentenced in an Orlando Federal Court for swindling more than $6 million from home buyers. The fraud charges included several real estate developments in Central Florida where they took money from people and their homes were never built. For more, see Central Florida Couple Headed To Prison After Taking Customers For Millions.

Go here to watch the on air news report.

Wednesday, August 22, 2007

Mississippi Feds Indict Six, Charge Four Others In Alleged Multi Million $ Flipping Scam

In Mississippi, the Bates Daily Guard reports:
  • United States Attorney Dunn Lampton and Supervisory Postal Inspector Guy Robinson with the United States Postal Inspection Service announced Friday that 10 people have been charged in a multi-million dollar mortgage fraud scheme.

  • Patrick McGee, Thomas Griffin, Edward Young and Berry are charged in a 12-count indictment with conspiracy and mail fraud charges involving 30 fraudulent mortgage loans totaling over $10 million.

  • Leroy Garrett is charged in a separate six-count indictment with mail fraud charges involving five fraudulent mortgage loans totaling just under $2 million.

  • Kelvin Brooks is charged separately in a three-count indictment with mail fraud charges involving two fraudulent loans totaling over $500,000.

  • Four other defendants, Marvin Dawson, Anthony Burroughs, Lyndon Posey and Tellis McLin, have all agreed to waive indictment and have been charged with playing roles in the scam.

For more, see Former Ash Flat woman indicted in Mississippi along with others in house flipping scheme.

Tennessee Escrow Agent Awarded 15 Month Stay In Federal Pen

In Tennessee, The Chattanoogan reports:
  • "A former escrow agent who authorities say defrauded Milligan-Reynolds Title Company of over $76,000 over a three-year period was sentenced Monday to 15 months in federal prison. Cindy Gail Almany pleaded for no jail time, saying it would make her family suffer. [...] But Federal Judge Sandy Mattice said some prison time was warranted to deter others from committing similar fraud. Ms. Almany was also ordered to repay the $76,487 she took."

Reportedly, the theft was accidentally discovered while she was away from the office. For more, see Escrow Agent Gets 15 Months In Federal Prison.

Go here for stories on other alleged escrow agent mishandling of funds. sneaky slick escrow agents alpha

Florida Widow Loses Home In Mortgage Scam; Police Charge 3, Look for 2 More

In Florida, the St. Petersburg Times reports that Hillsborough County sheriff's deputies have arrested Ron and Lois Lichte and charged them with exploiting the elderly grand theft, money laundering, conspiracy and related crimes where, among other things, they allegedly tricked a 77 year old Tampa, Florida widow into signing a mortgage on her home of 35 + years. They, along with three other conspirators, allegedly swindled a total of at least $335,000 from the widow and another Hillsborough woman, according to police. The widow ended up forced to sell her home to pay off the mortgage and now lives in a nursing home.

As for the other alleged conspirators, authorities are still searching for Clyde Fretwell, 37, of Ruskin, and Joel Hill, 37, of Tampa. Michael Richardson, 34, of Bradenton, is the fifth member of the alleged ring and is already being held without bond after being arrested on June 25 on unrelated charges, police said.

Investigators believe that the group has struck many more bay area victims. For more, see A 'trusting soul' is fleeced (Hillsborough deputies believe Mary Shower is one of many conned by a five-person ring).

See also, Sheriff's office says scam exploited elderly.

Story updates:

Virginia Widow Facing Loss Of Home After Subprime Surprise

In Virginia, C-Ville Weekly reports on the story of a 78 year old widow who reportedly was led to believe that she was being given a fixed rate mortgage on her home, but instead, was given an adjustable rate, subprime loan and now faces the loss of her home of 27 years. Kathleen Caldwell, an attorney with Legal Aid Justice Center in Charlottesville, Virginia and familiar with the woman's case is quoted:
  • "The good faith estimate that was sent to her was for a 30-year, fixed-rate mortgage. Later, the closing attorney brought a stack of papers for her to sign that were different from those that had been previewed for her."

Reportedly, upon receiving her first monthly statement, the widow discovered that she'd taken out not one, but two mortgages, one of which was an adjustable rate mortgage and the other a high rate balloon mortgage. Upon the reset of the interest rate on the ARM loan, she will effectively be priced out of her home, according to the story. For more, see Virginia mortgage foreclosures increase (Metro area has nation's worst racial discrepancy in high-cost lending).

Tuesday, August 21, 2007

Bankruptcy Judge Approves Deal Between HomeBanc, Stiffed Closing Attorneys

The Associated Press reports:
  • "A bankruptcy judge has cleared the way for HomeBanc Corp. to surrender more than $20 million worth of mortgages to Georgia lawyers who were forced to fund the loans when HomeBanc's checks started to bounce. Judge Kevin J. Carey of the U.S. Bankruptcy Court in Wilmington ruled Monday after hearing testimony from veteran Atlanta real estate lawyer Edwin R. Neel, who said he put up his own home to make sure that rubber checks from the failed lender wouldn't ruin home sales his firm handled for HomeBanc."

Upon receipt of the mortgages from HomeBanc, the attorneys will then have to quickly unload them on other lenders, possibly (and hopefully for them) in time to make sure the homeowners' first checks are received and processed properly. For all the details, see Judge Approves HomeBanc Deal.

For prior post on this story, see HomeBanc Stiffs 26 Closing Attorneys With An Estimated $20 Million In Rubber Checks; Fires 1,100, Files Chapter 11.

Missouri Cash Back Mortgage Scam Foiled By FBI At Closing Table

The St. Louis Post-Dispatch reports that mortgage broker Angela Renee Williams-Buchanan approached the owners of a four-family building in St. Louis that was listed for $171,000 and presented an offer for $254,000. Rather than going to the sellers, the extra money was part of a "cash back" mortgage fraud scam that landed Williams-Buchanan in Federal Court on criminal charges. What she hadn't counted on was that the seller knew an FBI agent. FBI agents broke up the attempted scam at the title company's offices before the deal closed. Williams-Buchanan pleaded guilty of wire fraud on Thursday and received six months of house arrest and three years probation. For the whole story, see Mortgage broker avoids prison.

State AGs Target Califormia Upfront Fee Foreclosure Rescue Operator

American Housing Authority ("AHA"), a California-based company in the business of providing foreclosure consulting services in exchange for an upfront fee has been recently sued by the Attorneys General for Illinois and Ohio for alleged conduct in connection with its foreclosure consulting business.

In Illinois, Attorney General Lisa Madigan filed suit against AHA (doing business as American Housing Help) and its president, Brandon Roberts, for violating Illinois ' recently-enacted Mortgage Rescue Fraud Act, as well as the Consumer Fraud and Deceptive Business Practices Act and alleges that AHA and Roberts defrauded homeowners by falsely promising to help them escape foreclosure, taking their money as a fee, and then failing to provide any real help.

In Ohio, Attorney General Marc Dann filed suit against AHA and, according to the complaint, affiliate American Housing Financial, Inc. ("AHF") - principal place of business in Phoenix, Arizona - for violating a number of Ohio consumer protection laws. The complaint in this case identifies Brandon Roberts as AHA's president, and Mace Miller as AHF's president.

For more on the Illinois case against AHA and Roberts, see:

For more on the Ohio case against AHA and AHF, see:

A recent media report mentions American Housing Authority in connection with an alleged problem that a Texas resident facing foreclosure reportedly had with the foreclosure consulting services (see Texas Homeowner Facing Foreclosure Falls For Upfront Fee "Rescue" Offer). No word if any official investigation has taken place in that reported incident.

Woman Charged With Trying To Rent Out Vacant Foreclosure Belonging To Bank

In California, the Daily Breeze reports:
  • "A woman accused of trying to rent out a Torrance house she didn't own testified Friday she was hired by the owner as a property manager. [The judge] said at the conclusion of 24-year-old Glenda Anderson's preliminary hearing that she gave an "arguably reasonable explanation for her presence at the house." However, [he] ruled there was enough evidence to send her to trial on two counts of attempted grand theft because there was no evidence to support her explanation. The judge ordered her to return to court Aug. 31."

For more, including the details of how the alleged scam was discovered, how police set up an undercover "sting" to catch Anderson in the alleged illegal act, and the uncooperative response given to police by an employee of Nationwide Mortgage, the company Anderson said she worked for, see Woman says she's a victim during preliminary hearing (But judge orders her to stand trial for trying to rent out a Torrance house she didn't own).

For the story of an Austin, Texas man accused of swindling money from people by purportedly renting houses not belonging to him (reportedly used the Internet and Craigslist to find victims), see Real estate fraud suspect caught.

Go here for other posts on tenant victims of rent scams. unwitting tenant rent scam zebra unwitting tenant rent scam zebra

Upstate NY Widow Loses Home By "Helping A Friend"

The Times Herald-Record reports on a 76 year old, Warwick, New York widow who "made the mistake of taking out a $236,000 mortgage on her home at the request of her friend's son-in-law ... who told her he needed the money for his business. Then she left the payments in his hands — and he didn't pay a dime. One foreclosure later, [the widow] no longer owns her home." The friend's son-in-law, Mitchell Ames, also had his name added to the title to her home as part of the refinancing transaction. Once he got the cash, the widow reportedly said that she never heard from him again. When reached for the story, Mitchell Ames had no comment other than to say that he wasn't a thief who wouldn't take advantage of anybody. For more, see Trust turns to terror for Warwick widow.

For story updates, see:

Monday, August 20, 2007

More On Metro Dream Homes / Metropolitan Grapevine

In Virginia, The Free Lance-Star reports:

  • "The owner of a brand-new house in Spotsylvania County rues the day he went to a Metro Dream Homes meeting in Herndon. He was skeptical at first of the company's promise to pay off a new mortgage in five years if some of the sale price was invested in its related businesses. "It seemed too good to be true," he said of the company, which is currently being investigated by Virginia's State Corporation Commission."

Reportedly, the La Plata, Maryland resident and his wife paid the then-$4,500 admission fee for the Metro Dream Homes' program. Ultmately, they purchased a newly constructed home from Castle Builders of Fredericksburg. Reportedly, at the closing, Castle Builders cut a check for $50,000 directly to Metro Dream Homes. Among other things, the homebuyer is wondering if the $50,000 should have been included on the closing statement. As promised, Metro Dream Homes began making the $5,000 monthly mortgage payment and, as of now, there has been no official determination of wrongdoing by a court or state regulators.

However, now that the Maryland Attorney General ordered Metro Dream Homes to cease recruiting new members to the program until a hearing on the matter can be had in front of a judge, the couple is concerned about the legitimacy of the program.

For more, see Is his 'Dream' house turning into nightmare? (Spotsylvania County home owner is embarrassed to discover Metro Dream Homes wasn't what it seemed).

For story update, see Federal Court Denies "Dream Homes" Request To Lift Cease & Desist Order (10-2-07).

Go here for other posts on Metro Dream Homes.

HomeBanc Stiffs 26 Closing Attorneys With An Estimated $20 Million In Rubber Checks; Fires 1,100, Files Chapter 11

(last revised 8-21-07)
Daily Report (Atlanta, Georgia) reports:
  • "John K. Haley, a real estate closing attorney in Buford [Georgia] left work July 31 thinking the HomeBanc mortgages he’d closed earlier that day had cleared. That turned out not to be true. Haley was one of dozens of Atlanta-area real estate closing attorneys who received bounced checks last month from HomeBanc Mortgage Corp. Lawyers estimate HomeBanc may have issued $20 million or more in bounced checks July 30 and July 31. HomeBanc filed for Chapter 11 bankruptcy protection Aug. 9."

  • "Because HomeBanc’s primary lender, JPMorgan Chase, stopped financing the company around the end of July, HomeBanc could no longer provide funds on the mortgages it had sold. That caused a big problem for some lawyers: HomeBanc had already issued checks to these lawyers, who then disbursed the money to sellers, real estate agents, surveyors and others. That left numerous lawyers high and dry."

  • "Unfortunately for many real estate closing lawyers, that has meant taking out home equity loans on their own homes, maxing out credit cards or scrounging up money in some other way from their own personal accounts to cover for HomeBanc’s mistake."

For the whole story, see Closing attorneys see red after receiving bad checks from HomeBanc Mortgage (Lawyers scramble to cover HomeBanc Mortgage’s mistake of bouncing checks or face bar violations).

See also, Georgia Lawyers Stranded by HomeBanc (Forbes)

Postscript I

Shortly after the estimated $20 million mass stiffing of the closing attorneys, HomeBanc reportedly fired most of its 1,100 employees and is shutting down its 22 branches and 139 kiosks in real-estate and builders’ offices, exiting the mortgage-loan origination business and processing no new loans, including ones in its pipeline (see Mortgage woes take toll on HomeBanc Corp.). They really went out with a bang, didn't they?

Postscript II

An Associated Press report on the WTXL-TV Channel 27 website (Tallahassee, Florida) states:

  • "HomeBanc Corporation will ask a judge [today] to approve a settlement that will aid worried Georgia lawyers who have dug into their own pockets to fund mortgage deals caught in the pipeline when the lender collapsed. About $28 million worth of Georgia home loans were headed to closing when Atlanta-based HomeBanc filed for Chapter Eleven on August Tenth. [...] If the judge approves the settlement, it would clear the way for lawyers who have been stuck covering shortfalls in their escrow accounts with their own funds by allowing the mortgages to be funded elsewhere. Otherwise, the lawyers would be left holding the bag and hoping for a partial recovery from HomeBanc's Chapter Eleven liquidation."

For more, see HomeBanc to seek court OK to settle with Georgia lawyers.

See also, HomeBanc to seek court OK to settle with Georgia lawyers (Macon Telegraph).

Postscript III

A Federal Bankruptcy Court approves a deal for the transfer of over $20 million in mortgages from Homebanc to the Georgia closing attorneys who were forced to cover HomeBanc's bad checks with their own funds. See Judge Approves HomeBanc Deal. (8-21-07 - The Associated Press).

Virginia Homeowner Files Suit Against Foreclosure Rescue Operator To Void Sale Leaseback

The Virginian-Pilot reports that a Portsmouth, Virginia homeowner has filed a lawsuit in state court against CFF Properties in connection with a foreclosure rescue transaction in which reportedly, she unwittingly signed over title to her home in foreclosure for $100 and received in exchange an agreement to rent back the home with an option to buy it back in the future. She only found out that she was no longer the owner when she asked the city earlier this year to replace a broken trash bin, she told The Virginian-Pilot. According to the story, the lawsuit claims that the homeowner had over $170,000 in equity at the time of the transaction.

Chuck Brinkman, an officer of CFF Properties, denied the allegations in the homeowner's lawsuit.

In her suit, the homeowner claims to have been defrauded by CFF and seeks to have the arrangement voided. The suit asks for actual damages of $173,110 for equity she had in the house as well as punitive damages. Representing the homeowner is attorney Tanya Bullock of Virginia Beach.

Editorial Note

The imposition of punitive damages on a foreclosure rescue operator by a court is not unheard of (and I suspect will become quite common). See, for example:

Maryland Mortgage Consultant Cops Plea In Foreclosure Rescue Scam

The Washington Post reports that Nicholas D. McLeod, 31, of Gaithersburg, Maryland pleaded guilty last week to felony theft, embezzlement and prohibited activities while acting as a foreclosure consultant. According to the story:
  • "Shortly after the tighter rules for foreclosure consultants kicked in [in 2005], McLeod bilked nine homeowners -- including his 83-year-old grandmother -- out of hundreds of thousands of dollars, authorities said. He spent the proceeds on a new house, a BMW, outings to strip clubs and trips to Thailand, Las Vegas and Miami, prosecutors said. The homeowners were left with far greater problems than the ones they had entrusted him to solve. "Most of them, if not all of them, have lost their homes," Montgomery County Assistant State's Attorney Robert Hill said in court [last week] as McLeod admitted scamming the homeowners. "This is a very serious and elaborate scheme." Hill said McLeod told investigators that he "started out honestly but along the way began skimming the equity" from refinanced homes."

Reportedly, Montgomery County, Maryland prosecutors were able to include in the indictment properties in the District of Columbia and Virginia because the proceeds came back to Montgomery County.

For more, see Gaithersburg Man Admits to Equity-Skimming Scam.

Go here for links to the 2005 Maryland Statute, Protection of Homeowners in Foreclosure (Sections 7-301 through 7-321), which regulates the activities of foreclosure rescue operators (foreclosure purchasers and consultants) in Maryland.

Go here for other cases of Criminal Prosecutions Of Foreclosure Rescue Operators.

Foreclosing Mortgage Lender Screw-Up Results In Whopping IRS Tax Bill For Ex-Homeowner

The New York Times reports on a story that, in my view, may already be occurring with great frequency all over the country given the current real estate market conditions. The issue involved here is the liability to pay Federal income tax that a homeowner has when a foreclosing mortgage lender acquires title to the home at a foreclosure sale and subsequently forgives or cancels the homeowner's remaining balance on the unpaid loan.

According to the story, a Pennsylvania homeowner lost his home at a foreclosure auction two years ago where, due to the fact that there were no interested third party bidders, the lender, Wells Fargo Home Mortgage, acquired title to the home for a nominal bid of $1. Reportedly, the outstanding loan balance was approximately $106,000. On July 8 of this year, the now ex-homeowner received a tax bill from the IRS for $34,603 for back taxes, penalties, and late fees on the cancelled debt.

After some investigation and inquiry, it turns out that the value of the home acquired by Wells Fargo at the foreclosure sale was, in fact, higher than the amount the homeowner owed on the unpaid loan. After reviewing the matter, Wells Fargo said last week that it would be filing a corrected 1099 tax form to show that no debt had been cancelled, because the fair market value of the home was actually more than what was owed.

In addition to this story, there is a brief anecdote in the article about another homeowner who received a tax bill from the IRS after losing a home in foreclosure who was able to avoid paying the tax by proving that she was insolvent at the time of the foreclosure sale.

For more, see After Foreclosure, a Big Tax Bill From the I.R.S. (same article also available here).

Postscript

Prior posts on this blog have referred to employing the "insolvency exception" to minimize or altogether avoid paying income tax on a debt cancellation resulting from a foreclosure sale or short sale (see Dodging The Income Tax On Foreclosure & Real Estate "Short Sales"), as well as the "bankruptcy exception" and other exceptions to the general rule that tax is owed on the amount of debt cancellation (see Debt Forgiveness On "Short Sales" Not Always Subject To Income Tax).

What's instructive about today's New York Times article is that it provides strong support for the proposition that (at least when foreclosure sales are involved) you can't just assume that the Form 1099 was correctly prepared by the mortgage lender. Before you even reach the issue of whether the rule exceptions are applicable, one must first question whether the foreclosing lender properly calculated the amount of income from debt cancellation and, if not, one must then get the lender to reissue a corrected Form 1099 to the IRS reflecting the correct amount. Too often, a taxpayer will just assume that whatever number appears on a Form 1099 is correct.

(Note to mortgage lenders: When you take title to foreclosed property at a foreclosure or trustee's sale for a nominal winning bid - ie. $1, $100, etc. - or for an obviously less than market value bid, the amount of debt cancellation is based on the amount that the unpaid loan exceeds the property's fair market value on the day of the foreclosure sale, not the nominal bid.)

Sunday, August 19, 2007

Kansas Mother, Daughters Charged In Alleged $7.7 Million Loan Fraud, I.D. Theft Scam Using Dead People's Social Security Numbers

KMBC-TV Channel 9 (Kansas City, Missouri) reports:
  • "Three women indicted in a case involving about $7.7 million in fraudulent mortgages have been accused of using the Social Security numbers of dead people to help illegal immigrants get home loans. Officials said the fraud scheme generated about $128,000 in fraudulent loan origination fees and $228,000 in real estate commissions for the three women. The Johnson County [Kansas] grand jury this week indicted Doris Toledo, 67, and her two daughters, Sonia Toledo, 38, and Sylvia Toledo, 42, all of Leawood. They were charged with 11 counts of computer crimes, 11 counts of making a false writing and one count of theft by deception."

Reportedly, a total of 102 loans were processed through Building & Loan Mortgage Company in Olathe, Kansas, where Sonia Toledo was a mortgage loan officer.

For more, watch the KMBC-TV report, or to read the online report, see Leawood Women Charged In Mortgage Fraud Scam.

Understanding Reasons For Subprime Mess "Like Figuring Out A Card Trick"

A column in today's New York Times says this about understanding how we arrived at the current subprime mortgage mess:

  • Understanding how subprime mortgages led to the current market meltdown is a bit like figuring out a card trick. Lenders and financial wizards took the joker — the risk that certain borrowers might default — and hid it in the deck. They shuffled all those risky subprime mortgages into much bigger investment pools, then cut the deck twice, fanned the cards and presto, it disappeared. Magic.

  • But then borrowers were shown the sleight of hand. Of course, the joker was always there, and the risks were real. Now people are defaulting on loans, and investors are spooked, prompting the Federal Reserve late last week to act by cutting the rate it charges banks on loans, which buoyed the stock market Friday.

For the entire column, see Wall Street Quake - The Unforgivingness of Forgetfulness.

NJ Feds Get 2 To Cop To Guilty Pleas In Alleged $50 Million Real Estate Fraud

The Newark Star Ledger reports:
  • "A former employee of NJ Affordable Homes and an appraiser who worked for the real estate investment company pleaded guilty to criminal charges yesterday, admitting their roles in a scheme that cost hundreds of investors more than $50 million. [... Thursday], former employee John Morris and former real estate appraiser William Page acknowledged participating in the fraud before U.S. District Judge Jose Linares in Newark. Morris, 60, of Fort Lee, pleaded guilty to conspiracy to commit wire fraud. Page, 47, of Old Bridge, pleaded guilty to conspiracy to commit mail fraud."

For more, see More NJ Affordable guilty pleas.

Milwaukee Tenants Win Class Action For Recovery Of Security Deposits

Buried in a recent Milwaukee Journal Sentinel article about the current problems facing Milwaukee landlord Timothy J. Brophy Jr. is a reference to a recent class action lawsuit brought against him and won by a group of his former tenants where they alleged that they were cheated out of their security deposits. The suit, reportedly said to be the first of its kind in the country, resulted in the creation of a $300,000 fund from which the tenants can recover their unreturned security deposits.

Source: Milwaukee landlord files Chapter 11 bankruptcy (Brophy lists more than $1 million in debt; lawyers say city created unfair reputation).

Disbarred Massachusetts Attorney Convicted Of Stealing $1.2 Million From Clients

WPRI-TV Channel 12 in Providence, Rhode Island reports that Gerard Battista, a disbarred Marshfield attorney was convicted of stealing more than $1 million from his own clients. He was also accused of keeping $200,000 in proceeds from a client's real estate sale, and only paid it back after he was sued. For more, see:

Pennsylvania Feds Indict State Appeals Court Judge; Allegedly Fleeced Insurance Companies Of $400,000+

The Pittsburgh Tribune-Review reports:
  • "The state Supreme Court on Friday suspended an appeals court judge accused of fleecing two insurance companies out of more than $400,000. Superior Court Judge Michael T. Joyce, 58, ... was indicted this week by a federal grand jury on nine counts of mail fraud and money laundering. Prosecutors accuse him of defrauding the insurance companies by feigning injuries following a low-speed car accident in 2001."

For the rest of the story, see State Supreme Court suspends Erie judge.

To read Federal court documents filed in the matter, see:

Go here for other stories on questionable conduct by members of the judiciary. naughty judges