Wednesday, September 26, 2007

KCRA 3 Investigation Results In Federal Mortgage Fraud Indictments

A Federal and state mortgage fraud investigation involving four Sacramento-area men who were suspected of falsifying millions of dollars in loan applications so investors could qualify for loans they couldn't afford, and triggered by a KCRA 3 investigation by Investigative Reporter Josh Bernstein, has resulted in a 120 count Federal grand jury indictment of the four men on various charges. According to the KCRA 3 report:

  • In an indictment unsealed Tuesday, a federal grand jury charged James Roy Martin [Jim Martin], 36, Mario Fellini III, 38, Gabriel Richard Viramontes, 44, and Joseph Salvatore Gallo, 34, with bank fraud and conspiracy to launder money, [U.S. Attorney McGregor W.] Scott said. Martin, Fellini and Gallo were also indicted on charges of making false statements in loan applications, and Martin, Fellini and Viramontes were indicted on mail fraud charges, Scott said.
Go here to watch Josh Bernstein's report. To read the KCRA 3 online story, see Four Indicted In Mortgage Fraud Investigation (Charges Follow Extensive KCRA 3 Investigation).

For a copy of the grand jury charges, see Indictment - U.S. v. Martin, et al.

See also, the U.S. Attorney Press Release, and Four indicted in mortgage scheme (Sacramento Bee).

Go here for other posts on this investigation.

Easy Credit Creates Mini Ghost Town In One Section Of NYC & Foreclosure Rescue Scams Throughout City

The New York Times reports:
  • Along the streets of Far Rockaway, many recently built two- and three-family town houses sit waiting for even one family to move in. Some have boarded-up windows, while others have clumps of garbage in driveways that have never seen a car. Desperate developers hoping to cover their bets — and stem their losses — tape up both For Rent and For Sale signs inside windows that face nearly deserted streets. The same blocks were once home to sprawling single-family houses with wraparound porches. But during the superheated real estate market of just a few years ago, longtime residents sold out to developers who rapidly demolished the old to build rows of plain vanilla town houses sold, it seemed, to anyone who could sign a mortgage application. But as the market cooled and credit got tighter, many of the new homes sat empty. On a few blocks, developers have built nothing but plywood walls to hide the weed-choked lots after the old houses were torn down.

In addition, The Times article had this excerpt on the plight of homeowners facing foreclosure who have fallen victim to foreclosure rescue scams:

  • The people who can legitimately help them are already overwhelmed and not looking for new clients. The people who are not legit are looking for them and they treat them nice. That is why people end up signing papers now not even thinking about it.
In the case of one married couple, a friend of the husband’s "offered to help them save the house. Instead, ..., they wound up signing over the deed to him and had the house sold out from under them."

For more, see Risky Loans Help Build Ghost Town of New Homes (if link expired, try here).

Arizona Foreclosure Rescue Operator Files For Chapter 11 Bankruptcy

The Arizona Daily Star reports:


  • As more homeowners end up in foreclosure, one investor in distressed properties has ended up in financial trouble, too. Deed and Note Traders LLC, which has operated a foreclosure rescue service under the name HomeSavers, filed for Chapter 11 bankruptcy Sept. 7.

[...]

  • [S]ome investors who provided financing to Deed and Note Traders said the bankruptcy filing might ... have to do with dubious business practices. Previously, under the HomeSavers program, the company offered to buy houses from people on the brink of foreclosure, and allowed sellers to continue to live in the properties through rent-to-own arrangements.

  • Last year, Deed and Note Traders agreed to pay fees and restitution of $400,000 after being sued by the state Attorney General's Office for using deceptive tactics and luring customers into rental deals they couldn't afford [see Arizona AG Press Release]. In the settlement, Deed and Note Traders agreed to stop conducting its rent-to-own foreclosure rescue program and allow customers still living in their homes to repurchase the houses at a discount.

  • One of the company's largest unsecured creditors ... said Deed and Note Traders has also been unfair to investors.

[...]

  • Another distressed property buyer, HomeVestors, is getting plenty of calls in Tucson, said Fred Hubbard, a local franchisee of the Dallas, Texas-based firm. The company does not offer rent-to-own deals for its sellers because of the potential for legal complications, Hubbard said. "There's been a lot of abuse in lease-backs," he said.
For more, see HomeSavers' parent files for bankruptcy.

For other stories on Deed and Note Traders, see:

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Another Financially Troubled Homebuilder Stiffs Customers & Subs

WGCL-TV Channel 46 in Atlanta, Georgia reports on the problems some new home buyers in brand new subdivisions developed by Tradewinds builders may face. In the case of one recently married new home buyer couple who just moved into their first home:
  • Just weeks after moving into the house in Clayton County, lien letters started arriving in the mail. [The homeowners'] liens totaled about $22,000 all because the builder had not paid contractors. Court documents show long lists of contractor liens on Tradewinds properties in several Georgia locations.
As new homebuyers, they weren't aware of the need for title insurance and say it was never offered to them. When CBS 46 Investigates tried to reach Tradewinds at their headquarters, they discovered newspapers covering the windows and the doors locked. For more, see CBS46 Investigates: The Broken American Dream.

Go here to watch the WGCL-TV Channel 46 story.

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

Final Defendant Sentenced In Central Florida Foreclosure Rescue Scam

The Saint Petersburg Times reports:
  • The judge's message was clear: If Amy Hudd Paukner had stood trial with co-workers charged with running a massive mortgage fraud scheme, she would be in federal prison now like the rest of them. "I think you deserve to go to jail, quite candidly," U.S. District Judge James D. Whittemore said to Paukner on Monday. But Paukner, 36, has chronic multiple sclerosis. So Whittemore sentenced her to time served. Others received sentences ranging from a year and a day to five years.

  • In March, a federal jury convicted five Tampa residents that Paukner worked with for scamming homeowners into selling their homes to avoid foreclosure.

For more, see Of 6 in scam, one goes free (The woman with multiple sclerosis aided in defrauding owners facing foreclosure).

For prior post on this story, see Florida Foreclosure Rescue Operators Found Guilty In Federal Fraud Trial.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Tuesday, September 25, 2007

Congress Considers "Forced Mortgage Modifications" For Homeowners In Bankruptcy; Elimination Of Credit Counseling For Ch. 13 Homeowners In Foreclosure

In a story that may be unpleasant news to some mortgage lenders, mortgage servicing companies, and some foreclosure rescue operators, Inman News reports:
  • Legislation that would allow bankruptcy courts to modify the terms of a homeowner's mortgage loan could save 600,000 homes from foreclosure, the bill's sponsor claims. HR 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, would repeal a legal provision that prohibits bankruptcy courts from modifying the repayment terms of home mortgages. Bankruptcy courts already have the power to modify payments on other secured debts, including mortgages on other properties. "Responsible lenders who made loans on reasonable terms have nothing to worry about in bankruptcy court, but predatory lenders will end up with the loans they should have made in the first place," said bill sponsor Rep. Brad Miller, D-N.C., in a press release.
For more, see Bill would let bankruptcy courts impose loan mods (Moody's: Subprime servicers modify only 1% of loans).

See also, House bill would let courts alter mortgages (Reuters) or here for same article) (ABC News).

Postscript: Section 5 of the proposed legislation, if passed, would eliminate the credit counseling requirement for homeowners facing foreclosure who have filed Chapter 13 bankruptcy.

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

More On Minnesota Builder Subject Of Grand Jury Investigation; Straw Buyer Scam, Equity Skimming Suspected

Another story on Eagan homebuilder Parish Marketing and Development is reported in the Pioneer Press. Among other things, the article reports:
  • Two hundred homes Parish constructed in the south metro are entering foreclosure, drawing the attention of local and federal authorities. The U.S. attorney's office has convened a grand jury to investigate the real estate deals and Parish's role in them. An Apple Valley bank officer and a real estate closer from Elko New Market recently pleaded guilty in U.S. District Court to mail fraud in connection with millions of dollars in mortgage deals under investigation. Their attorneys allege Parish is at the center of the elaborate mortgage scheme now under federal investigation. They link the developer to their clients, who admit bilking lenders and borrowers in that scheme.

  • [Bank officer Ramiz] Saadeh, 30, of Apple Valley, and Kristopher Robbins, 27, of Elko New Market, each pleaded guilty to one count of mail fraud this month. Robbins, a self-employed notary and real estate closer, and Saadeh waived their rights to an indictment and are cooperating "in the investigation and prosecution of other suspects," according to their plea agreements. Saadeh's and Robbins' plea bargain stated that the scam involved 200 homes.

Reportedly, the scam involved, among other things, straw buyers buying multiple homes from homebuilder Parish with fraudulently obtained mortgage loans. Many of the homes reportedly ended up being rented to tenants with options to buy, or sold to buyers under contracts for deed. Payments made by the tenants or contract buyers that were to be applied to the existing mortgages weren't and now the homes have either been foreclosed or currently face foreclosure.

For more, see Mortgage scam threatens 200 homes with foreclosure.

Go here for other posts on Minnesota homebuilder Parish Marketing and Development.

Go here for other posts on "rent to own" scams.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. rent to own lease purchase option scams zebra equity skimming unwittingly epsilon

Foreclosure Rescue Operator Violates State "Rescue" Statute; Court Invokes Equitable Mortgage Doctrine

A Minnesota Federal Court last week ruled that, in a sale leaseback transaction involving the home of a financially strapped homeowner and a foreclosure rescue operator, the rescue operator violated a number of provisions of the Minnesota statute regulating foreclosure rescue transactions, Chapter 325N.

Further, inspite of the fact that the sale leaseback transaction between the foreclosure rescue operator and the financially strapped homeowners did not involve any formal paperwork evidencing the existence of a consumer debt or mortgage , the court ruled that the evidence presented supported a finding that the sale leaseback of the plaintiff's home was an equitable mortgage, rather than a true sale leaseback.

For the longer version of this post, see Federal Court Finds Violations Of State "Foreclosure Rescue" Statutes; Invokes Equitable Mortgage Doctrine In Homeowners' Favor.

For the court's opinion in this case, see Jones vs. Rees-Max, LLC, et al. (Sept. 17, 2007).

Representing the homeowner in the Federal action were attorneys Kristine K. Nogosek and Robert B. Bauer, with the firm Severson Sheldon Dougherty & Molenda, PA., Apple Valley, Minnesota.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). equitable mortgage yak

Upstate New York Homeowner Stung By Upfront Fee Foreclosure Rescue Scam

In Rochester, New York, WHEC-TV Channel 10 reports:
  • Kristy Farrand's house has been in her family for half a century but when her lender wrongly put her home in foreclosure, she feared she might lose it. She was flooded with letters from companies offering assistance. Desperate, she answered one that promised to help her avoid the loss of her property. She took $1300 out of her 401k to pay the upfront fee. More than a year later, all they've done is put her deeper in debt.

For more, see I-Team 10: Foreclosure chasers (if link expired, try here).

Failure To Read "Junk Mail" Lands One Maryland Homeowner In Foreclosure

The Baltimore Sun reports:
  • John Woodard says the notice from his new mortgage company looked like typical junk mail. But it wasn't. It was a letter telling him that his recently refinanced loan had been sold to another lender. By the time the Rosedale homeowner realized he had been paying the wrong lender, he owed thousands of dollars in late fees and he soon racked up more in lawyer bills from fending off foreclosure. "My mortgage company never notified me to send the checks somewhere else," he said. "I did get something in the mail from the new company, but it looked like an advertisement so I thought it was junk." Woodard's story is a cautionary tale in the age of bankrupt mortgage companies and failing lenders.

For more, including the potential problems homeowners face when mortgage lenders go out of business and (1) loan payments get lost or misdirected or (2) lenders fail to pay your home's real estate taxes and insurance out of your mortgage escrow account, see The mortgage handoff (With lenders struggling and home loans shuffling, it's up to homeowners to keep tabs on their mortgages) (Try here if link expired).

Monday, September 24, 2007

More On Metro Dream Homes

(original post 9-23-07)
Another story came out in The Washington Post on the POS Metro Dream Homes investment program that promised to pay the mortgages of its approximately 900 participants and operates in Maryland, Washington, D.C., and Virginia (and reportedly in some other states). According to the story:
  • Some Dream Homes members are still willing to sign their names to sworn affidavits and to appear en masse at a courthouse to defend their participation. They're not victims, they say.

[...]

  • According to members who have contacted [Washington Post columnist Elizabeth Razzi], Dream Homes is not making participants' mortgage payments for September and October. For participants who have three or four or even five properties in the program, that's a whole lot of dough they will have to pay this month to remain current on their debt.
The position of Metropolitan Grapevine, the parent organization, is that participants shouldn't expect the payments to be on time, the way a landlord does. For more, see Neighbors Bear Dream Homes' Risk.

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

Go here for other posts on Metropolitan Grapevine / Metro Dream Homes.

Northern California Prosecutors Get "No Contest" Pleas In Foreclosure Rescue Scam

In Stanislaus County, California, The Modesto Bee reports:
  • Two men who swindled homes from vulnerable families by posing as Christian do-gooders avoided trial and state prison with a plea deal Wednesday, and agreed to make restitution to some victims. Lonni Ashlock, 56, of Waterford and Ronald Buhler, 26, of Riverbank entered no contest pleas to six felony counts and were sentenced to one year in Stanislaus County Jail. They may be eligible for alternate work programs, Judge Hurl Johnson said.

  • The plea bargain negated most of the 50 felony counts they would have faced at a trial scheduled to begin next month. Those counts stemmed from cases involving 12 families.
    A Bee review showed Ashlock and Buhler acquired at least 142 properties from owners facing foreclosure in four counties. They were charged only in Stanislaus County.
[...]
  • The men gained the trust of owners about to lose their homes at public auction, sometimes by praying with them, then duped them into signing over deeds, witnesses said at their preliminary hearing last fall. Several continued paying rent but eventually were evicted. Those who say they were victims include an 86-year-old woman with dementia, a 66-year-old schizophrenic, a woman with brain lesions and several other disabled people, according to court documents and testimony.

  • "They took away people's dignity. How are they going to get that back? There is no amount of money," said John "J.J." Martin, one of 28 former clients who sued Ashlock and Buhler. Though the men formally admitted to swindling six families, they agreed in the plea deal to make restitution to 20. Some are among those with active civil lawsuits against Ashlock and Buhler; Martin is not.

[...]

  • Of the 20 to receive restitution, 12 no longer live in the homes they lost to the men. The remaining eight were not evicted, but all face foreclosure, attorneys said.

[...]

  • Ashlock specifically pleaded no contest to violations of the Home Equity Sales Act, which protects homeowners from deceiving pitches. Buhler pleaded no contest to two identical counts plus four counts of theft by false pretenses.

[...]

  • [One victim] said he lost the home his parents had hoped would stay in the family forever. He since has suffered two heart attacks, brought on by stress, he said.

According to an earlier Modesto Bee report, the men and their companies have been named in at least 27 lawsuits in Stanislaus, San Joaquin and Merced counties (see Plea deal for men accused of fraud?).

For more, see 2 plead guilty to swindling homeowners (One year in jail, restitution for 20 families mark deal).

For prior posts on this story, see:

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Queens Brokerage Suspected Of Mortgage Fraud; Faces Administrative Charges

In New York City, The Daily News reports in an I-Team Special Investigation reports on allegations that real estate brokerage 2000 Homes arranged for the purchase by a local woman of a Queens home for $538,000 even though the brokerage knew she had bad credit and "lived on an amalgam of government subsidies". The brokerage also reportedly had the woman sign a blank loan application and listed her as a $9,000-a-month "marketing manager" for a company owned by her loan officer's husband, even though she has no full-time job. The woman is now facing foreclosure. According to the story:
  • [The woman's] mess is increasingly common among vulnerable low-income borrowers, facilitated by questionable brokers like 2000 Homes, a Daily News investigation has found.

[...]

  • With an office in Queens Village and 20 licensed brokers, 2000 Homes has been fined $3,900 for violating regulations aimed at curbing aggressive sales tactics, officials say. Next month, the company faces a hearing and possible loss of its real estate broker's license in the 2005 sale of a home in St. Albans, Queens, records show.

For the whole story, including the stories of a couple of others who were allegedly duped by 2000 Homes, see Queens woman victimized in brokers' mortgage scam.

Homeowner Files Suit Against Wachovia, World Savings For Deceptive "Option ARMs"; Seeks Class Action Status

The San Francisco Business Times reports:
  • A lawsuit filed against Wachovia Corp.'s mortgage unit and World Savings Bank in Oakland alleges the bank was less than honest in explaining its option-adjustable-rate mortgages to consumers, according to the Charlotte Business Journal. That "campaign of deceptive conduct and concealment" led customers to lose their homes through foreclosure, contends the suit, which seeks class-action status. It was filed Aug. 30 in federal court in San Jose.

[...]

  • The suit claims the bank did not disclose the actual interest rate on its loans, which were often raised "immediately and significantly" after closing. It also says if borrowers made payments at the teaser rate, the principal on the loan would actually increase, which is called negative amortization.

For more, see Wachovia sued over option-ARM mortgages. For a copy of the lawsuit, either:

For another lawsuit, filed in a Charleston, South Carolina Federal Court, involving "Option ARMs," see World Savings, Wachovia Sued Again For TILA Violations; Class Action Status Sought.

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For links to media stories of other refinancing homeowners who lost equity in their homes and found themselves in or near foreclosure as a result of these or other types of exotic mortgages, see Subprime Refinancing Leaving Some Homeowners Financially Strapped.

Go here for other posts on homeowners suing lenders to undo subprime / predatory loans. undo mortgage loans TILA alpha

IRS Shows Foreclosed Homeowners How To Dodge Income Tax On "Cancellation Of Debt" Income

Possibly in response to the recent letter sent to them by three U.S senators (see Tax relief urged for families who lose homes- Marketwatch, 9-14-07), the Internal Revenue Service issued an Information Release last week (IR-2007-159, Sept. 17, 2007) announcing a new section of their website intended to get the word out that under current Federal income tax law, "special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes." According to the IRS:
  • Under the tax law, if the debt wiped out through foreclosure exceeds the value of the property, the difference is normally taxable income. But a special rule allows insolvent borrowers to offset that income to the extent their liabilities exceed their assets.
Of particular note in the IRS Information Release is this caution to foreclosed homeowners:
  • The IRS urges borrowers to check the Form 1099-C carefully. They should notify the lender immediately if any of the information shown on their form is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home (Box 7).

(Editorial Note: I think the secret is coming out that foreclosing mortgage lenders are really screwing up badly in preparing the Form 1099-C notices that they are issuing to foreclosed homeowners.)

For more on the IRS Information Release, see IR-2007-159 - Special Web Section Unveiled for Homeowners Who Lose Homes; Foreclosure Tax Relief Available to Many.

To go to the new IRS section on their website, go to Questions and Answers on Home Foreclosure and Debt Cancellation.

For related articles on this new information, see:

Go here for other posts on dodging the income tax on a short sale / foreclosure sale (including handy links to IRS forms and publications related to this subject). short sale income tax

Home Equity Investment Program Goes "Belly Up" Leaving 800 Customers On The Hook

In Lancaster County, Pennsylvania, Lancaster Online reports:
  • Creative refinancing contracts devised by a Reading-based mortgage broker have unraveled, leaving 800 customers on the hook for higher payments and possible foreclosure on their homes. Wesley A. Snyder filed for Chapter 7 bankruptcy protection Tuesday for OPFM Inc., which he operated as Personal Financial Management ... and five subsidiaries including Image Masters Inc. OPFM attorney Dexter Case said Wednesday the company worked with Image Masters, its investment subsidiary, to refinance homeowners and invest proceeds.
Arrangements were made where homeowners would refinance their mortgages and give the equity to the mortgage broker promoting the investment program. The money was then to be invested, with the investment income to be applied to the loans to accomplish an early mortgage payoff. Reportedly, the money wasn't invested, according to the attorney for the promoter.

(The investment program sounds a little like the POS Metro Dream Homes / Metropolitan Grapevine investment program based in Laurel, Maryland.)

For more, see Mortgage firm goes bust (Homeowners trying to invest equity get stung) (if link expired, try here).

For story update, see:

Go here and go here for other posts and links to earlier media reports on the Pennsylvania Ponzi scheme involving Wesley Snyder, OPFM, Image Masters.

Sunday, September 23, 2007

Defunct Florida Title Insurance Agency Required Employees To Put In "Chinese Overtime"

The Saint Petersburg Times ran another story on the escrow scandal involving the now-defunct Gulf Coast Escrow and its owners, Cheryl L. Wehlau and her husband, John T. Wehlau. According to the story:
  • Loan closers worked 12-hour days, weeks on end without time off. Processors prepared loan packages, napped on cots, splashed water on their faces, then went back to work to meet the volume of loans. [The Wehlaus] even insisted employees do what they called "Chinese overtime" -- paid not at time-and-a-half, but at half-wage.

[...]

  • The Wehlaus had a secret reason for maintaining high productivity at Gulf Coast, according to state investigators: They were stealing millions from escrow accounts under their trust, laundering the cash through shell corporations and spending it on an extravagant lifestyle. The stolen funds were replaced by money coming in for new mortgage loans, investigators said, but if the flow of new money was interrupted, the scheme faced collapse.

[...]

  • An audit revealed an escrow account that should have held $9.4-million contained just $1.5-million. More than $7.9-million had vanished. [...] Each was charged with 25 felonies: theft from escrow accounts, grand theft and money laundering.

For more, see Title business boomed, but the cash vanished (Life was hard but lucrative at Gulf Coast, until the owners were charged with stealing millions).

For story update, see Search for title company's millions leads to employee (Much of $7.9-million looted from Gulf Coast Title remains missing) (St. Petersburg Times - 10-11-07).

Go here for other posts on this story.

Go here for other stories involving misappropriated or unaccounted for escrow funds.

Texas Apartment Building Foreclosure Forces Unexpected Tenant Move

Media stories from Arlington, Texas are reporting on a residential apartment building that has been foreclosed on by the mortgage lender and is kicking out all the tenants.

The Fort Worth Star-Telegram reports:

  • Residents at some central Arlington apartments are looking for new homes and answers this week after learning their complex was foreclosed and they must move out by the end of the month. [One tenant] said Thursday that she received a letter from management on Sept. 4 giving her 30 days to move out of the Grey Stoke Apartments on Rogers Street. She said she moved into the complex with her teen-age son three months ago and did not know the apartment was in financial trouble. Other residents ... said they never received a letter and that apartment managers are not giving tenants any information.
CBS11TV (Dallas - Fort Worth) reports:

  • CBS 11 News went to the complex where residents said they were angry, frustrated, and confused. They say they never knew the owner was having financial problems until they got eviction notices. [...] Problems began when property owner Stephen Gould, of New Hampshire, stopped making mortgage payments on the Greystoke Apartments. The complex went into foreclosure and the bank Aurora Loan Service took over and decided all residents must go.
For more, see:

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. unwittingly equity skimming beta

Dream Turning Into Nightmare For One New Homebuyer Couple

In Elk Grove, California, KCRA-TV Channrel 3 (Sacramento) reports:
  • Last May, Jason and Gina Rossow fulfilled their dream of buying their first home in a brand-new subdivision under construction in Elk Grove. "Yeah, we were super excited," said Gina Rossow. But now across the street are weeds. An entire field is empty with just debris. And around the corner there are unfinished homes. The Rossows' dream is slowly creeping toward nightmare. "We're just confused," Jason Rossow said. What's causing confusion, concern, and unwelcome news is a closed sign that's on the Dunmore Homes sales office door. All construction was halted last month, and contractors filed roughly $5 million in liens against Dunmore Homes.
For more, see Homebuilder's Closed Office Worries New Homeowners (Residents: Homebuilder Won't Return Our Calls).

Woman Facing Foreclosure Torches Home; Faces Arson Charge

In Gaines Township, Michigan, The Grand Rapids Press reports:
  • Sheryl Christman allegedly had a plan that would give her what her mortgage company wouldn't -- a way out. Four days shy of losing her 3-year-old home to foreclosure, Christman, 38, allegedly set the $150,000 residence on fire Sept. 1, Kent County sheriff's officials said. Authorities say Christman, who has no prior criminal record, torched the home ... as a way to gain insurance money, but fire investigators immediately were suspicious of a blaze that appeared to have quickly roared out of control.

[...]

  • Foreclosure arson is becoming an issue across the state and country, Grand Rapids fire investigator Pablo Martinez said. He recently attended a conference for fire investigators and nearly each person there had probed potential repossession fires.

For more, see Fire allegedly set to avoid foreclosure.

For story update, see Woman pleads no contest to arson of her own home.

For other stories on fires & foreclosures, go here and go here. foreclosure arson yak zebra

Man Facing Foreclosure Dies In House Fire

In Burien, Washington, KIRO-TV Channel 7 (Seattle) reports:
  • A reclusive Vietnam veteran who had recently received notice of foreclosure on his Burien house was found dead after a fire at his home of more than 20 years early Wednesday morning, firefighters and neighbors told KIRO 7 Eyewitness News.

[...]

  • The man, whose identity hasn't been released, died alone in a back room of the house, firefighters said. The cause of the fire is under investigation. King County fire investigators were seen sifting through the rubble and arson dogs were brought to the scene.

For more, see Investigators Gather Clues To Cause Of Fatal Fire, or watch the KIRO-TV Channel 7 video report. zebra

Another Vacant Foreclosure Goes Up In Flames; Arson Suspected

In Fall River, Massachusetts, SouthCoastToday.com reports:
  • Investigators are eyeing arson as the cause of a Wednesday morning blaze that gutted an abandoned house, police said. Officials have ruled out accidental causes as the reason for the fire, which caused about $200,000 in damages to a multifamily house ... just before 1 a.m., police spokesman Sgt. Thomas Mauretti said.

According to the story, the vacant home is either currently in foreclosure, or has already been foreclosed by Fannie Mae. For more, see Arson eyed in Fall River fire. zebra

Subprime Refinancing Leaving Some Homeowners Financially Strapped

The following links are to a collection of recent articles on homeowners who are now finding themselves in or near foreclosure as a result of signing mortgage refinance loan documents that they apparently didn't understand.

1) Jacksonville, Florida - A 70-year-old Atlantic Beach, Florida widow has retained the services of Jacksonville Area Legal Aid to fight the foreclosure of her home by Ameriquest, who refinanced her mortgage three times since 2001, promising to help her lower her interest rate and monthly payments. In fact, her original payment has more than doubled. She charges that Ameriquest took advantage of a sick widow who didn't finish high school and is unable to understand financial contracts. See Beaches woman caught in a foreclosure cycle (But her lawyer says Ameriquest took advantage of her).

2) San Francisco, California - A Bay Area man is nearing foreclosure as a result of an "Option Arm" refinance of his home mortgage through Countrywide, who allegedly told him that his payments would be cut by about half; the payments actually went up by about $300. Further, he charges that someone originating the loan inflated his stated income by double on the loan application, notwithstanding the fact that he only produced pay stub verification for half the amount. See Bay Area Complaints Pile Up Against Countrywide, or watch TV report, CBS 5 Investigates: The Mortgage Blues.

3) Marin County, California - A disabled Marin County woman has retained an attorney to fight a foreclosure of, what her attorney calls, "an outrageous subprime loan." All she wanted was some money to fix her home of 30 years, and now she's on the verge of losing it. She is currently suing lender New Century Financial and mortgage broker PrimeWest, among others, seeking damages for negligence and fraud. See Homeowners unwittingly face foreclosure.

4) Detroit, Michigan - The problem of subprime refinancing is illustrated by the story of one family who lost their home to foreclosure on a refinanced mortgage that they were reportedly told that the payments would start at $504 a month, and would rise no higher than $569. Despite the broker's reassurances, the family's house payments reached $900. See Risky loans rock area: Metro Detroit is No. 1 in subprime mortgages (High-interest loans tied to growing foreclosure rate).

5 - South Windsor, Connecticut - Another Ameriquest horror story. A couple who wanted some money to do kitchen renovations and pay down some debt say they ended up getting locked into a skyrocketing adjustable mortgage, in which their payment went from $1,600 per month to $2,200 in a little more than a year. See Family Struggles With Skyrocketing Mortgage (Nearly 2 Million Expected To Lose Homes To Foreclosure This Year), or watch WFSB-TV Channel 3 report.

6- Fort Worth, Texas - One more Ameriquest story; another refinance for some cash to do some home improvements. The homeowner reportedly wound up with a loan from Ameriquest that didn’t even give him enough money for the repair, but almost doubled his monthly payments over the next few years. The homeowner had sued Ameriquest for mortgage fraud. Currently, the homeowner is dead. His brother thinks that the worry over his bad loan with Ameriquest and its extremely serious consequences was a factor in his brother's demise. Apparently, the brother had overcome a serious drinking problem years before, but the problems he had with the loan and his house caused him to stumble again. He died about a year ago from cirrhosis of the liver, caused in part by excessive drinking. According to his brother, “He was a mess in his last few months of his life. This whole problem with his house physically drained him. It dragged on and on."

Reportedly, the case against Ameriquest is still pending, though it is in limbo, according to the attorney handling the case. The homeowner left no will and had no assets besides the house; the brother said he couldn’t afford the legal bills for court hearings that would be required for him to be appointed executor of the estate, so at this point there is no one to keep the case going. See Too Little, Too Late (Predatory lending action is helping some, but the worst may still be ahead).

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P.S. - Ameriquest has agreed pay out $325 million to borrowers across the country to settle class-action suits brought by attorneys general in 49 states and has gone out of business.

7) Suffolk County & Westchester County, New York - see The American Dream Foreclosed.

8) Metro Cincinnati, Ohio - see America's "most affordable" shows strain of tough times.

Go here for stories of other victims of subprime refinancing. victims subprime refinancing alpha

Saturday, September 22, 2007

Phil Hill Gets 28 Years In Metro Atlanta Straw Buyer, Flipping Scam

The Atlanta Journal Constitution reports:
  • On Friday, a federal judge in Atlanta sentenced [Phillip E.] Hill to 28 years in prison and ordered him to pay more than $41 million in restitution for running a conspiracy that involved loan officers and real estate appraisers and racked up $112 million in fraudulent loans, of which Hill himself pocketed a cool $14 million, said prosecutors. The sentencing came six months after a jury found Hill and nine others guilty of the scam. They used "straw purchasers" to obtain loans on properties where corrupt appraisers had inflated their values, a fraudulent transaction known as a "flip." The "straw purchasers" were then paid in kickbacks out of proceeds from the excess loans. Prosecutors said the scheme involved the sale of more than 50 homes and 250 condominiums in eight Atlanta-area condo complexes.

For more, see Broker sentenced to 28 years for mortgage fraud in Atlanta.

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

Anatomy Of A "Cash Back" Home Flip That Ended In Foreclosure

The Bakersfield Californian provides a detailed analysis of a property flip that ultimately ended in foreclosure that involved associates of the now defunct Crisp & Cole real estate company in Bakersfield, California. Included in the story are links to the actual recorded property records used in the transactions. For more, see How one flip unfolded.

Go here for other posts and links to stories on the David Crisp / Carl Cole alleged flipping operation.

California Cops Raid Mortgage Company; Records Confiscated

In Grass Valley, California, TheUnion.com reports:
  • Law enforcement agents seized documents Friday from the office of a Grass Valley mortgage company after an eight-month investigation identified suspicious real-estate loans and investments. Officials from the California Department of Justice, the Grass Valley Police Department and the Nevada County District Attorney's office removed documents from Loan Sense, a Grass Valley office owned by Tom Hastert, a lawyer who also owns a real estate company.

[...]

  • Grass Valley police, the D.A.'s office, state officials, the FBI, the California Department of Real Estate and the California Bar Association have been investigating Hastert since January. [...] "I feel he has committed fraud, larceny and embezzlement. He has used his position as an attorney to gain trust with people and encourage them to invest their money with him," [one investor] alleged.
Most of the investors were elderly people trying to invest their retirement money, according to a Grass Valley police spokesperson. For more, see Raid on mortgage company in fraud probe.

For story updates, see:

Title Insurance Underwriter To Cover Some - But Not All - Customer Losses In Florida Treasure Coast Escrow Scandal

In Vero Beach, Florida, TC Palm reports:
  • Insurance underwriters for a title company owned by Vero Beach attorney Ira C. Hatch Jr. will compensate customers that lost money with the now-defunct company, a spokeswoman for the Florida Department of Financial Services said Thursday. Lawyers Title Insurance Corp. and Attorneys' Title Insurance Fund said they would pay claims by businesses that used Coastal Title Services [a title insurance agency], said spokeswoman Nina Banister. The agreement does not apply to customers of Coastal Escrow Services [an escrow company], Banister said.

[...]

  • Banister said escrow companies are usually part of a title agency, real estate agency or a mortgage broker, but that a licensed attorney can separately operate an escrow business. The Florida Department of Financial Services launched an investigation into the title company after Hatch shut down it and Coastal Escrow. "My understanding is it (Coastal Escrow) should have been attached to a title company, and part of the investigation is why did he have them separate?" Banister said.

For more, see Insurance group to reimburse clients of Coastal Title Services.

For recent related stories, see:

Go here for other stories on misappropriated or unaccounted for escrow funds. sneaky slick escrow agents alpha

Ohio Man Sentenced In Mortgage Scam That Left Some Unwitting Straw Buyers In Foreclosure Or Bankruptcy

The Cincinnati, Ohio office of the FBI reports:
  • Nicholas St. Nichols, age 54, of Dayton, was sentenced in United States District Court here to one year and one day in federal prison for his role in a mortgage fraud scheme to sell homes at inflated prices to a buyer who believed she was merely selling him her credit. Nichols was also fined $4,000 and ordered to pay restitution to victims.

[...]

  • St. Nichols and Todd Armstrong, a 43 year old Bellbrook resident sentenced in July to twelve months and one day imprisonment, were originally indicted for the scheme in July 2005. Eventually, each entered guilty pleas to one count of mail fraud. The victims in both cases included financial institutions that were conned into making loans in excess of the true market value of the homes, along with individual buyers who were scammed into believing they were merely selling their credit for investment purposes rather than actually buying homes or taking out mortgages in their names.

[...]

  • Buyers were usually given $1,000 and led to believe they were merely selling their credit when, instead, they were unknowingly purchasing homes and left holding the bag on under-secured loans. Most of the buyers ended up in foreclosure actions ... . Armstrong acted as the mortgage broker in 14 fraudulent sales, according to the plea entered in his case.
For more, see FBI Press Release - Second Man Sentenced In Dayton Area Mortgage Fraud Scheme (Selling Personal Credit to Investment Brokers Results in Fraudulent Home Loans).

NJ Feds Convict Two In Mortgage Scam

In Northern New Jersey, The Star-Ledger reports:
  • Two women tied to a multi-million dollar mortgage scam involving luxury properties in several wealthy suburbs were found guilty [Thursday] on charges of bank fraud and conspiracy. A jury deliberated about two hours before returning guilty verdicts against Jamila Davis, 30, of Teaneck, and Brenda Rickard, 54, of Montclair in U.S. District Court in Newark. The two were charged with inflating the value of at least eight homes in exclusive neighborhoods in Alpine, Cresskill and Saddle River -- obtaining mortgages and secondary financing that far exceeded the value of houses that sold for $2 million or more.

For more, see Guilty verdict in luxury home mortgage scheme. For earlier reports on this story, see:

Friday, September 21, 2007

Sacramento-Area Mortgage Fraud Suspects Still Working In Lending Business, Despite State Cease & Desist Order

The KCRA 3 (Sacramento, California) mortgage fraud investigative reports involving over 20 homes - over $9 million of real estate - in Elk Grove continues as KCRA updates us on the whereabouts of Jim Martin and Gabriel Viramontes, two of the suspected ringleaders in an alleged scam that has left eight investors facing foreclosure on all the homes:

  • Despite a cease-and-desist order issued by the state, it appears two of the targets of our investigation are now operating through a loophole in the law that's allowing them to continue processing loans. [...] Although the state issued a cease-and-desist order, [Jim] Martin is still operating as a loan officer in Northern California. KCRA 3 found Martin online solciting loans and working for Set To Go Inc. Martin admits he never told that company he's under federal investigation. Despite that cease-and-desist order issued by the state, Martin isn't breaking the law because he is operating through a loophole that allows him to work under another company's license.

  • Martin's former business partner, Gabriel Viramontes, is also operating under that loophole and is working at Folsom Lake Mortgage. Viramontes is also under a cease-and-desist order.

Reportedly, a California state senator is ready to introduce legislation to close the loophole that the KCRA 3 investigation has amply illuminated. For more, see:

Go here for other posts on the KCRA 3 mortgage fraud investigation.

Third Defendant Cops Plea In Alleged $100M Minnesota Mortgage Fraud Investigation

The Minneapolis Star-Tribune reports:
  • A stay-at-home mom from Ohio admitted in federal court Thursday that she let participants in an alleged mortgage fraud conspiracy use her name and credit so they could buy 46 properties in some southern Twin Cities suburbs. Melissa D. Smith, 43, admitted that between 2004 and January of this year, she misled lenders who called to check on her income, never put any of her own money down on the properties, and allowed people working with a home builder to sign her name on real estate and loan documents. On occasion, individuals working for the home builder gave Smith checks with instructions to pay down her credit card debts so she could continue to borrow money, according to her plea agreement.

  • Court documents identify the home builder orchestrating the scheme only as "Company A." The Star Tribune confirmed through property records and sources that it is Parish Marketing and Development Corp. of Eagan. Investigators suspect Parish Marketing used straw buyers, including some relatives, to buy multiple homes at inflated prices. The scheme unraveled as the housing market slowed, new buyers could not be found and houses ended up in foreclosure.

Reportedly, lenders were duped into lending around $100 million in mortgages, resulting in losses estimated at around $50 million. Smith reportedly admitted to being paid $2,000 for each transaction that she participated in.

For more, see Ohio woman says she lent her name to fraud (Melissa D. Smith, the third to plead guilty in the case, admitted helping to buy $20 million in metro properties) (if link expired, try here).

Go here for other posts on home builder Parish Marketing and the ongoing investigation.

Florida Cops Arrest Alleged Ringleader In Mortgage Scam That Duped "Rent To Own" Tenants, Straw Buyers, Lenders

WBBH-TV Channel 2 (Fort Myers, Florida) reports:
  • One of the alleged ringleaders of a major mortgage fraud scheme has been arrested and denied bond. Eric Heckler faces 16 counts of mortgage fraud, ... 17 counts of defrauding a financial institution and one count of racketeering. In March 2006, ten people were charged in the alleged scheme that took advantage of the hot Southwest Florida real estate market (see Ten charged in alleged mortgage scam).

The alleged scam involved paying straw buyers with good credit a $5,000 fee to purchase homes at inflated prices in transactions in which the alleged scammers pulled cash out of the deal. The operators then rented the homes on a "lease with option to buy" basis to tenants with bad credit with the understanding that after reestablishing their credit, the tenants would be able to buy the homes. Those charged in the operation allegedly pocketed the rent and stiffed the lenders out of their mortgage payments, allowing the homes to go into foreclosure, and leaving the tenants, the straw buyers, and the mortgage lenders all holding the bag.

The total haul over the two years the scheme operated was about $3.8 million. For more, see Fugitive charged in mortgage fraud operation arrested.

Go here for other posts on "rent to own" scams.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. rent to own lease purchase option scams zebra unwittingly equity skimming beta

Minnesota Prosecutors Charge Developer, Mortgage Broker, & "Straw Buyer" Recruiter In Alleged Flipping Scam

Three people have been charged by Hennepin County prosecutors in a property flipping, mortgage fraud scam, according to media reports out of Minnesota.

The Minneapolis Star-Tribune reports:


  • Three people associated with a suburban developer have been charged with racketeering and theft in a case alleging mortgage fraud based on property-flipping. The Hennepin County attorney's office filed eight charges each against the three defendants: Scott R. Rosenlund of Chaska, president of 10Spring, a home building and development company; Celeste Skaar of Orono, owner of New Day Capital, a mortgage brokerage; and Shinon Lindberg of Greenwood, who allegedly recruited straw buyers for the flipped properties.

KARE-TV Channel 11 reports:

  • Prosecutors say the take was more than $2.5 million, and the scheme went on and on until one straw buyer from New Prague called foul after he put in $250,000 and got nothing in return. [...] The three have each been charged with one count of Racketeering and seven counts of Felony Theft by Swindle over $35,000.

The Pioneer Press reports that those who were recruited as the "straw men" in the real estate purchases were left owing millions of dollars.

For more, see:

Go here for other posts on this story.

Thursday, September 20, 2007

Foreclosure Rescue Sale Leaseback Deals Are Usurious Equitable Mortgages, Says Massachusetts AG's Civil Lawsuit

A motion was filed earlier this week by the office of Attorney General Martha Coakley to amend a complaint it filed accusing a foreclosure rescue group of engaging in equity stripping transactions that victimized 26 Massachusetts homeowners facing foreclosure.

In the proposed amended complaint, a Brockton, Massachusetts based attorney / foreclosure rescue operator is being accused, among other things, of engaging in transactions that constituted usurious equitable mortgages.

The lawsuit, which was filed in a Boston Federal Bankruptcy Court, accuses attorney Alec G Sohmer of arranging at least 26 foreclosure rescue transactions involving homeowners facing foreclosure and their homes which, based on their sales prices in the transactions, were valued at close to $10 million. The deals, which also involved the transfer of the homes into trusts, were allegedly consummated with the participation of four additional individuals:
  • Jennifer Sohmer, the wife of defendant Alec Sohmer,
  • Andrew P. Palmer, an attorney who allegedly served as the closing attorney on behalf of each lender in each of the Sohmer transactions at issue in this case,
  • Shaun M. Ellis, an attorney who on several occasions, allegedly referred his clients to Sohmer for foreclosure rescue assistance andreceived a referral fee from Sohmer on at least two occasions, and
  • Edward de la Flor, who acted as mortgage broker for eleven Sohmer transactions, while an employee of Carteret Mortgage Corporation.

Companies named as defendants were:

  • Carteret Mortgage Corporation, a mortgage company involved in originating loans in eleven of the transactions in question, and
  • Timeless Funding, Inc., an allegedly uncapitalized corporation that Sohmer used to offer foreclosure rescue "services" to financially distressed homeowners. According to the lawsuit, Timeless Funding was a sham invented by Sohmer to mislead consumers into believing that Sohmer had arranged financing for them from a mortgage lender.

The alleged home equity ripoff in the 26 transactions, as stated in the complaint, "ranged from $11,946 to $107,093 and averaged $43,973 per transaction, which on each occasion represented the homeowners' home equity "accessed," and then sapped, by Sohmer."

In addition to claims of equitable mortgage and usury, the lawsuit alleges the following:

  • Unfair and Deceptive Acts and Practices in Violation of G. L. c. 93A, Sec. 2 ,
  • Violations of the Massachusetts Consumer Credit Cost Disclosure Act, and Federal Truth-In-Lending Laws,
  • Violations of Massachusetts and Federal Law Applicable to High Cost Mortgage Loans, and
  • Fraud.

The 49 page proposed amended complaint sets forth in detail how the alleged scheme is said to have worked and how each defendant allegedly participated. For more, see:

Go here for earlier posts & any available updates on this case.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). equitable mortgage yak

More On Settlement Between Mass AG & Mortgage Lenders In Equity Stripping Deals

The Office of Massachusetts Attorney General Martha Coakley announced earlier this week that it reached a settlement with five mortgage lenders or servicing companies that provided financing in foreclosure rescue, equity stripping transactions involving Massachusetts attorney and foreclosure rescue operator Alec G. Sohmer. The settlement, along with a motion to approve the settlement, are currently pending in a Massachusetts Federal Bankruptcy Court.

For a copy of the motion, see Motion To Approve Settlement Agreement (15 pages).

To obtain a copy of the settlement agreement entered into by the five mortgage lenders with the Massachusetts AG's office, you can either:

Go here for the Massachusetts AG Press Release.

Go here for other posts on this case.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Florida Authorities Shut Down One Foreclosure Rescue Operator, Investigate Another

In two separate reports, Fox Channel 13 in Tampa, Florida reports that Florida authorities have shut down one upfront fee foreclosure rescue operator earlier this week and are investigating another.

According to one report:
  • State consumer services investigators Monday ordered a Clearwater-based company that promises to assist homeowners with foreclosures to close its doors. Agents said the outfit is unlicensed. Foreclosure Assistance Solutions is also at the center of several fraud investigations. According to court papers, clients claim the company takes a $1,200 to $2,000 fee but does nothing to help them settle their mortgage paperwork.

In another report:

  • Florida's Attorney General confirmed Tuesday it is investigating Mortgage Assistance Solutions. The company's owner, a California Attorney, said his company provides an affordable service. "It's not a fraud," said Michael Thomas Stoller [the company owner]. [An alleged ripoff victim] said Mortgage Assistance Solutions' sales pitch closely mirrors that of another Clearwater company, Foreclosure Assistance Solutions. State agents shut down Foreclosure Assistance Solutions on Monday, saying it was not licensed to do telemarketing.

Reportedly, both companies are located just two miles apart in Pinellas County, Florida, but they are not linked. For more, see:

Editorial Note

It sure looks like the Florida Attorney General's office got "caught with their pants down" on this story. Both of these companies have been doing business in Florida for quite some time, but it took lawsuits by the Attorneys General in Ohio, Illinois, and Texas against these foreclosure rescue operators in order to get Florida authorities to start doing something. It sounds like they used a technicality to shut down one company ("unlicensed telemarketing"), and have reportedly commenced an investigation on the other company.

The Florida AG had active investigations on both these companies at one time, but those investigations ended up being closed out without any mention in the AG's newsletters. Reportedly, they settled one case by making the company refund $80,000 to the homeowners. Compared to some other states, Florida authorities seem to be "a little late" when it comes to investigating and prosecuting (either by civil lawsuit or criminal prosecution) foreclosure rescue scams, especially considering that Florida ranks right near the top in the country in the number of new foreclosure filings. Hopefully, they will pay attention to what some of their colleagues are doing in other jurisdictions (ie. Ohio, Massachusetts, Illinois, Texas, Washington State, and Washington, D.C.) and then reevaluate the priority that they place on foreclsoure rescue scams.

California Cops Investigating Rash Of "Fractional Interest" Deed Transfers

In California, The San Jose Mercury News reports:
  • Fraud investigators are looking into what they say is "a recent rash of perplexing filings" of deeds for 1 percent interests in San Jose area homes. Investigators with the Santa Clara County District Attorney's Office searched the San Jose offices of Mariposa Mortgage, following up on a complaint from a home buyer who said her signature was forged on one such deed.

[...]

  • The case is one of several that are drawing the attention of investigators. A search warrant affidavit by an investigator for the district attorney, John Valenzuela, describes a recent discussion among fraud investigators of these kinds of filings involving the transfer of 1 percent interests in property. Many of the deeds involved properties in which a former agent for the San Jose real estate brokerage named Su Casa was involved, either as owner or agent.
For more, see County probes deed filings (One Percent Interests Recorded, Mariposa Mortgage Searched).