Junk Mortgages 101

A Fortune Magazine article (appearing on CNNMoney.com) provides a pretty detailed breakdown of how one particular mortgage pool containing $494 million of junk residential second mortgages has fared. This pool of mortgages was put together by the Wall Street investment banking firm, Goldman Sachs, who then sold interests in this pool to investors (certificate holders). The article begins with the following excerpt:

• It's getting hard to wrap your brain around subprime mortgages, Wall Street's fancy name for junk home loans. There's so much subprime stuff floating around - more than $1.5 trillion of loans, maybe $200 billion of losses, thousands of families facing foreclosure, umpteen politicians yapping - that it's like the federal budget: It's just too big to be understandable.

• So let's reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm - and this one's pretty bad.

This story may not be for everyone. But if you're curious to know how, up until recently, it could be that practically every breathing human being capable of signing their name could qualify for a home mortgage, irrespective of bad credit, lack of cash, etc., see Junk mortgages under the microscope (A close-up of one deal shows how subprime mortgages went bad, says Fortune's Allan Sloan) (if link expires, try here).

Connecticut Attorney A Target In Mortgage Fraud Lawsuits

A recent story in The New York Times features Connecticut attorney Maurizio D. Lancia who, along with his Trumbull-based mortgage brokerage firm, Royal Financial Services L.L.C., is currently embroiled in a number of civil lawsuits alleging that he played a part in a mortgage fraud scam that duped unwitting straw buyers into buying homes that they couldn't afford using subprime mortgage financing that ultimately ended up in foreclosure.

In one case, brought by the State of Connecticut, state Attorney General Richard Blumenthal said of them and their co-defendants:

• “The defendants misled consumers and mortgage lenders into property purchases that financially destroyed dozens of homebuyers, while benefiting only the defendants, their associates and family members.”

In this case, the state of Connecticut is seeking civil penalties for violations of the Unfair Trade Practices Act and financial relief for those harmed. The co-defendants in this case include Elisabeth Athan Real Estate, L.L.C., of Shelton, CT and Jose Guzman of Waterford, CT, a former employee of Royal Financial who was recently charged with mail fraud and wire fraud by Federal investigators and prosecutors. For more, see Promises Left Buyers Destitute, Suit Says.

Go here for other posts on this mortgage fraud investigation.

Homeowners Using 401(k) Funds To Avoid Foreclosure?

The Chicago Tribune reports:

• Despite potential tax and investment problems, more investors have been borrowing from their 401(k) plans or taking hardship withdrawals in recent months, some retirement plan providers say. [...] Indicative of some of the stress, the amount of calls to Principal Financial Group Inc. about hardship withdrawals, while small, has jumped significantly in recent months, company officials said. Not all 401(k) plans permit hardship withdrawals, but the IRS allows them for, among other things, medical or funeral expenses, purchasing a primary residence, or avoiding eviction from or foreclosure on a primary residence.

• The number of calls asking about withdrawals to prevent a potential foreclosure or eviction doubled in August over July, said Janet Fossell, director of individual investor services for Principal. There were fewer calls in September than August, but still more than in July.

• [One industry executive] warns people not to use their 401(k) savings if they're going to end up in bankruptcy. That's because in most plans, the 401(k) assets are protected in bankruptcy."The real issue is, what are people facing foreclosure going to do?" he said. "You don't want to tap the plan just to buy time because then you lose your home and your retirement."

For more, see Cash-strapped Americans raiding their 401(k)s.

Homeowner In Foreclosure Charged For Trashing House Days Before Public Auction

In Athens, Georgia, the Athens Banner-Herald reports:

• The former Athens businessman at the center of a massive mortgage fraud investigation was arrested Wednesday for allegedly trashing his house in west Athens just days before the bank was to auction it off. Brian Christopher Dupree, 36, was arrested in Athens-Clarke Magistrate Court after a warrant hearing and soon was released on a $4,000 bond. Dupree was charged with three misdemeanor counts of endangering a "security interest" for removing appliances, cabinets, lighting fixtures, door knobs and other items with an estimated value of more than $25,000 from a foreclosed house on Meadowview Road. The Bank of Georgia, which foreclosed on Dupree's house, held a security interest in the stolen items, according to the arrest warrant application.

Dupree is currently also facing more serious mortgage fraud charges in an earlier, unrelated arrest in which he and nearly two dozen others were charged in an alleged $7 million mortgage fraud scheme.

For more, see Fraud suspect arrested (Damage to house).

Go here for other posts on foreclosure fixture stripping. foreclosure fixture stripping apple

Metro Dream Homes Official Locked Up For Contempt Of Court

(original post - 10-13-07)
The ongoing saga of the Laurel, Maryland-based company Metropolitan Grapevine continues. The Free Lance-Star reports:

• The Maryland attorney general's office issued an emergency court order Monday to freeze temporarily the assets of a company that promised investors mortgage-free living. But no one was at Metropolitan Grapevine's locked Maryland offices three days later when an investigator and a receiver arrived to inspect financial records, said Raquel Guillory, the attorney general's spokeswoman. A representative from the Laurel, Md.-based company later explained that the employees didn't show up to let them in because they'd heard the assets had been frozen, she said.

A judge found that the company failed to comply with a court order allowing state officials to inspect company records and, therefore held a company official in contempt of court. The official, whose identity was not available yesterday, was handcuffed and sent to jail, according to the spokeswoman.

For more, see Dream Homes official is jailed (The Maryland Attorney General's office has frozen Metropolitan Grapevine's assets and put one of its officers in jail for contempt of court).

Go here for other posts & links to other stories on Metropolitan Grapevine / POS Metro Dream Homes.

Foreclosure Rescue Scam Leads To Civil Lawsuits, Federal Criminal Investigation; "Pilot-Straw Buyers" Left In Hot Water & Financially Ruined

The Minneapolis Star Tribune reports:

• Some Northwest Airlines pilots were looking for ways to make up for the steep pay cuts they were facing in 2005 when they learned of a "foreclosure rescue" plan promising them extra cash while helping struggling people hang onto their homes. Two years later, the pilots' credit ratings and their finances are in ruin. Several have been sued by some of the homeowners they tried to help.

• All told, the six pilots and one flight attendant sank more than $1.5 million into two real estate ventures, some of them taking out second mortgages on their own homes and raiding their savings for the cash. Their attorneys say they are another set of victims in the string of mortgage fraud and equity stripping cases that investigators continue to uncover in Minnesota in the housing bubble's aftermath.

• The foreclosure venture and related real estate investments are the subject of a federal criminal investigation, and total losses could exceed $2 million.

The foreclosure rescue operators involved were Timothy Beliveau, 39, of Mound, Minnesota and his wife, Shelley Beliveau, 36, a real estate agent. Reportedly, they could not be reached for comment for the Star Tribune story, and have invoked their Fifth Amendment rights against self-incrimination in some recent civil suits, declining to testify on the advice of their attorney.

• Court records show that the investigation is being led by the U.S. Postal Inspection Service and the Internal Revenue Service's Criminal Investigative Division. The probe spun off from an alleged equity skimming conspiracy involving Michael Fiorito, 39, of Prior Lake. Fiorito, who recently pleaded guilty in federal court, used to work with the Beliveaus, according to a source with knowledge of the case.

For more, see NWA pilots say they were misled in foreclosure venture (A Minnesota couple's investment and real-estate programs are under federal investigation) (if link expired, try here).

For story update (12-23-08), see Elderly Victim Of Equity Stripping Deal Wins Hollow Victory (Court Ruling Comes Too Late To Allow Recovery Of Home; Scammers Claim To Be Broke).

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.).

California DA Dropping Ball On Mortgage Fraud?

In Bakersfield, California, KGET-TV Channel 17 reports:

• The fight over real estate fraud spilled onto the editorial pages and airwaves of local talk radio shows Friday. On Thursday, local appraiser Gary Crabtree wrote an opinion piece in the Bakersfield Californian newspaper accusing District Attorney Ed Jagels of dropping the ball on mortgage fraud. Crabtree said he presented a major case of mortgage fraud to Jagels a year ago, but Jagels never followed through. So, in an opinion article published Thursday, Crabtree said he had to turn to the FBI for help. [...] Meantime, bloggers have speculated for weeks about Jagels' motives for declining to take on the case. On Friday, Jagels confirmed he is friends with one of the people the FBI is investigating for mortgage fraud. Agents raided the office of Mark Newton of San Joaquin Appraisals as part of their investigation into local real estate agents David Crisp and Carl Cole.

For more, see DA accused of dropping ball on mortgage fraud; or go here to watch the KGET-TV Channel 17 report.

For a contrary opinion, see Ed Jagels is right: Fraud unit not needed (The Bakersfield Californian - 10-12-07).

For a related post, see California DA Denies Need For Fraud Unit.

For a story update, see County creates trust fund to crack down on real estate fraud (Concerned that the continuing rise of foreclosures in Kern County could be fraud related, Supervisors unanimously adopted a resolution establishing a trust fund to investigate and prosecute real estate fraud).

Go here for other posts on this story.

Builder Dumps 34 New Homes At Auction; Winning Bidders Ecstatic - Existing Homeowners Angry

The San Jose Mercury News reports on a sale last Saturday of 34 brand new homes in Manteca, California owned and built by Anderson Homes that it couldn't unload no matter how many free upgrades it offered. The auction at the Hilton Hotel in Pleasanton was one of the first in Northern California offering a whole section of new subdivision. The homes sold for way below what the builder's current asking prices are, creating many ecstatic new homeowners. That sentiment, however, is not shared by the existing homeowners in the subdivision. One homeowner estimates that the auction devalued his neighbors' homes by roughly $200,000 each compared with what many of them paid a year ago. He commented, "I lost a quarter million dollars in value. I'm screwed." For more, see Big winners, losers at auction of new Manteca homes (Those Who Got Houses Are Ecstatic, Paying Far Less Than Current Owners).

For a related story on ABC News' Good Morning America, see:

• You Paid What for That House? (Developers Lower Home Prices, While Existing Residents Fume),


• Watch ABC News' report, Sold! Auctioneers Help Unload Homes (Home sellers are finding creative ways to sell houses during the mortgage crisis).

Hedge Fund Entrance Into Mortgage Servicing Business Alarms Both Consumers & Investors

(originally posted 10-12-07)
An article by The Associated Press reports:

• Hedge funds and private equity investors are gaining a foothold in the business of mortgage loan servicing as some of the country's biggest mortgage lenders crash into bankruptcy. Their arrival on the scene has alarmed consumers and investors alike. Over the last few months several failed mortgage lenders -- including ResMae Mortgage Co., Aegis Mortgage Corp., and New Century Financial Corp. -- have sold their loan-servicing businesses to hedge funds or private-equity firms.

[...]

• Their acquisition of loan-servicing rights, as a result, has inflamed the anxieties of many homeowners who have reported loan-servicing disruptions recently. "From a consumer perspective, it's an improvement to have these loans in a mainstream bank," said John Taylor, chief executive of the National Community Reinvestment Coalition, a collection of community groups. "It's not an improvement for them to end up in the hands of Wall Street. There isn't the conversation or the accountability." When it comes to consumer-protection regulations, Taylor said, "Wall Street has a moat around it."

For more, see Hedge Funds Enter Mortgage Arena. questionable mortgage servicing practices tactics yak MortgageServicingIssuesAlpha

Closing Attorney Admits Guilt In Flipping Scam; Cooperates With Georgia Feds

Law.com reports:

• A Marietta, Ga., closing attorney, who has admitted he was a member of a mortgage fraud ring that federal prosecutors say included more than a dozen people, is cooperating with the government in a trial that began [last] week in U.S. District Court. On Tuesday, federal prosecutors identified real estate closing attorney James F. Stovall III ... as the lawyer who finalized as many as 50 fraudulent home sales. The sales were part of a scheme that bilked banks out of at least $20 million in 2000 and 2001, prosecutors said.

• Stovall is the most recent Georgia attorney caught using his law practice to perpetuate mortgage fraud, ... . As a warning to other real estate lawyers, U.S. District Judge Thomas W. Thrash Jr. in 2005 sentenced disbarred DeKalb County attorney Chalana C. McFarland to 30 years in prison for her role in a mortgage fraud scheme that cost lenders more than $11.5 million ...

For more, see Lawyer to Testify in Mortgage Fraud Trial (Stovall admits involvement with ring that bilked banks in loan scheme).

Foreclosures Hammering Providence Neighborhoods

In Providence, Rhode Island, a recent story in The Providence Journal describes the toll being taken by some of its neighborhoods as a result of the run up in prices caused by the speculators and the subprime mortgage lenders that were lending money to anyone who could breathe, followed by the crash in prices that has resulted in foreclosures, vacant homes, and vandalism. The story begins:

• The new property owners in some neighborhoods here mark their turf with padlocks, plywood and messages such as the one scrawled on a front door in Olneyville: “Copper Gone.”
• Vacant houses have always been easy prey for vandals, no less so when the owners are giant banks, companies representing Wall Street investors.
• Block by city block, foreclosures are scarring the landscape in neighborhoods such as Olneyville, Elmwood and the West End, raising fears that the deteriorating real-estate market could hurt property values and undermine years of urban redevelopment efforts.

The story features the recent history of one area home:

• "In January 2004, the listing for 25 Steere Ave. read: “BEAUTIFUL HOME WITH VINYL SIDED AND PRIVATE YARD. FINISHED BASEMENT WITH SEPARATE ENTRANCE. THIS IS A MUST SEE.”"

After being sold for $150,000; then resold for $240,000 a year an a half later, the home ended up in foreclosure, abandoned, ransacked by vandals, boarded up, and the public records now list Deutsche Bank as the owner of record (presumably as trustee for certificate holders in a mortgage pool who actually own the home and who, like the neighborhood, are also getting hammered). The home is currently listed for sale at $134,900.

• "The broker listing now reads: “This property has a lot of potential. Priced to sell AS IS condition. Copper missing. Other work needed … Will need rehab loan, private financing or cash.”"

Reportedly, the home was twice broken into, thieves smashing windows and ripping out the copper pipes. After the second break-in, the real estate agent (no doubt to dissuade any further break-ins) scribbled “Copper gone” on the door. For more, see Foreclosures threaten Providence neighborhoods’ vitality.

In related stories, see:

• Plywood, padlocks replace homeowners in Providence ("As more padlocks and plywood dot the landscape of neighborhoods ..., local residents and elected officials fear the foreclosure crisis could undo years of urban redevelopment efforts.") (Boston Herald - 10-15-07)

• Neighborhoods at risk (The Providence Journal - 10-15-07).

For a prior Providence post, see "Plywood Board" Gains In Popularity As "Window Treatment" In One Rhode Island Neighborhood.

San Jose Squatters Making Themselves At Home In Vacant Foreclosures

In San Jose, California, KPIX-TV Channel 5 reports:

• [W]e visited a San Jose home that had recently been foreclosed on. After residents moved out, gangs moved in, taking over the vacant property. [...] Graffiti covers one side of the house, and around the corner, bullet holes. [...] And at another foreclosed home we found more evidence of squatters-- two blankets. A window to a bedroom was shattered. Both homes are in east San Jose. That's the area with the most homes in various stages of foreclosure in the city. [...] Real estate agent Mark Detar of Intero thinks the squatter problem is only beginning. "With an increase in foreclosures, you're going to see things like this," Detar said. "With a house being vacant, certain elements come into play."

For more, see Squatters Settle Into Foreclosed SJ Homes, or watch the Channel 5 video report, Foreclosure Squatters.

For another foreclosure squatter story, see Squatter Causes Anxiety For Neighbors (Bank Has Not Evicted The Resident). (KCRA 3, Sacramento, CA), or watch the KCRA 3 video report.

Go here for other posts on foreclosures and squatters.zebra

Watch Out For 'Rent To Own' & 'Lease Option' Scams

In an article appearing in the January, 2006 issue of Realty Times, a number of tactics that scammers use in the context of so-called "rent to own" and "lease option" real estate deals were described.

• Problems with lease options arise when investors intentionally target consumers who are relatively unsophisticated about real estate or contract law, and who have little real likelihood of ever qualifying to purchase the property. In those cases, the promoters are essentially in the rental business and convince unsuspecting tenants to pay them fees and premium rents, plus pick up most routine property maintenance costs.

• In Florida, consumers complained to the attorney general that the lease-option promoter included clauses in rental contracts that permitted them to be evicted -- and their option fees forfeited -- for the most minor problems, such as missing a rent payment deadline by one day or failing to keep the house broom clean.

• Other problems surfaced in Texas, where promoters allegedly offered lease-options to lower income tenants on properties with serious title issues. In some cases, ..., promoters 'acquired' houses from owners facing imminent foreclosure by taking over their payments to lenders [and subsequently offered 'rent to own' deals to unsuspecting tenants without first addressing the legal issues with the existing mortgage lender],

• The victims "were almost always first-time buyers who had no idea that the contract and lease they signed contained clauses that made it almost impossible for them to actually exercise the option" and acquire legal title to the house [according to one housing law expert].

For more, see "Lease Option" Real Estate Draws Scrutiny.

For more on "Rent To Own" and Lease / Option real estate scams, see "Rent To Own" Scams I. rent to own lease purchase option scams zebra; equity skimming unwittingly delta

Tenant Clipped For $17K In 'Rent To Own' Scam That Ended In Foreclosure

CBS 13 in Sacramento, California recently ran a story on a local woman who paid $17,000 to enter into a "lease to own" arrangement on an area home. Less than three months after moving into the home with her kids and making all her monthly payments, she was stunned to find an eviction notice stuck to her door telling her she had 15 days to get out of the house. Unbeknownst to her, the property owner was stiffing the mortgage lender out of its mortgage payments and allowed the home to go into foreclosure. Ultimately, the home sold at a public auction. She and her kids were forced to move, and she was out her money.

She reportedly told CBS 13 that the FBI is interested in her case and asked her to come in for an interview. In addition, the California Department of Insurance says it's investigating a number of cases involving undisclosed foreclosures across the state, according to the story.

For more, see Call Kurtis: Foreclosed Rental.

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 delta

Tenant In Foreclosed Home Gets Evicted, Then Gets Reprieve; Lender To Work Out Rental Agreement

In Hazelwood, Pennsylvania, KDKA-TV Channel 2 (Pittsburgh) reports on a woman with four children who found out from the local sheriff's office with only one day advance notice that they were being evicted from their rented home, inspite of being up-to-date on their rent. It turns out that the landlord was pocketing her rent money without paying the house note or the taxes and allowed the home go into foreclosure. After the sheriff's office executed the eviction of the family, the lender reportedly called the sheriff’s office later in the day to say that the family can go back into the house and work out a new rental agreement with them. For more, see Foreclosure Crisis Effects Renters Too; or go here to watch the KDKA Channel 2 report.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here.

Go here for other posts on Police stories involving homes in foreclosures. SheriffDeputiesForeclosureAlpha equity skimming unwittingly delta

Foreclosure Forces Tenant Move; Ex-Landlord Continues Trying To Collect Rent

In San Jose, California, KGO-TV Channel 7 reports:

• Mary Ellen Murillo has been clearing out her house in recent days. She's also begun to pack her and her five grandchildren's belongings. She's waiting for the knock on her door that will tell her she's now being evicted. [...] Murillo and her five grandchildren have lived in the house for the past six months. Last month, there was a note left on her front door. [...] She was told by a realtor last month that the house had gone through foreclosure and sold at auction. It no longer belonged to the woman who had rented it to her. Even after that foreclosure sale, that woman still came to collect the rent. When Murillo confronted her one-time landlord, she offered an excuse. "She said 'don't worry about it' - keep on giving her the payment. She's taking care of it. She says 'I've got to pay a late charge of $2,000,'" said Murillo. So far, Murillo has refused the woman's demands to pay October's rent. Now her dilemma is finding a new place. She says she is on disability and is worried she'll lose custody of her five grandkids if she doesn't get at least a three bedroom house -- a house she may not be able to afford.

For more, see Subprime Crisis Affecting Those Without Mortgages (Foreclosure Forces Renters To Move).

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

Beauty Pageant Contestant, Family, Victims Of Subprime Foreclosure Eviction

In Pawtucket, Rhode Island, The Providence Journal reports:

• Less than a month before she’s to represent Rhode Island in the Miss American Sweetheart beauty pageant in Orlando, Fla., 8-year-old Imani Vazquez and her family are facing eviction from their apartment on Quality Hill. Imani, who won the Miss New England Sweetheart title at a regional pageant in Framingham, Mass., is handling the situation with the aplomb of a beauty queen. [...] Imani and her family are being evicted even though they have a lease and their $900-a-month rent has been paid regularly.
  The lease is up in November, however, and in August, their landlord ... lost [the home] in a foreclosure proceeding brought by Option One Mortgage Corp., the company, owned by H&R Block Inc., that gave him a $292,500 subprime mortgage. [...] She’s ... hoping that her former landlord will return the $900 security deposit she gave him a year ago, ...

For more, see Pawtucket family faces eviction.

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

Condemned Apartment Building In Foreclosure Forcing Tenants Out

In Suffern, New York, The Journal News reports:

• A state appeals court has rejected a request to delay evictions from the Tall Oaks Apartments. [...] Suffern moved on Aug. 14 to condemn most of the complex ... after its engineers and the county Department of Health found unsafe conditions, including structural and electrical defects. An electrical fire on Aug. 8 led the village to board up entrances and windows to several apartments. [...] Electrical service was terminated to some apartments after the fire, and others were closed when the structural defects were discovered. About 20 of 40 apartments were affected. [...] The complex is to be sold at auction in about two months. The owner of the complex ... was delinquent on its mortgage and sought bankruptcy protection after the state Supreme Court in Rockland ordered foreclosure proceedings.

Representing the tenants in the eviction matter is the Legal Aid Society of Rockland County.

For more, see Suffern tenants lose appeal over evictions.

For story update, see Suffern shuts 25 units, completes closure of Tall Oaks Apartments.

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

Ex-Con Facing Foreclosure Accused Of Torching Home; Rejects Plea Deal

In Suffield, Connecticut, the Journal Enquirer reports:

• With more than two dozen felony convictions under his belt, Michael Paul Schook isn't unfamiliar with the criminal justice system. Yet, despite a Hartford Superior Court judge's warnings that he could face more than 20 years in prison if he's convicted of setting fire to his house to collect insurance money, Schook rejected a prosecutor's offer to serve just a fraction of that: eight years behind bars, and 10 years' special parole. Schook, 45, told Judge David P. Gold ... that he wants a trial. [...] A credit check of Schook showed the house was in foreclosure, his car repossessed, and he owed thousands to credit card companies, police say.

For more, see Longtime felon rejects plea offer in Suffield arson. yak

Foreclosures Keeping Animal Protective Services Agency Busy

Cleveland, Ohio television station Fox 8 reports:

• Family pets are fast becoming helpless victims of the foreclosure crisis in Northeast Ohio. The Portage Animal Protective League in Ravenna answers calls almost daily for pets left locked up in foreclosed homes. "I know our number of calls has increased," P.A.P.L. Director Sheila Vandergriff said. "We're now receiving calls from realtors, construction companies going in to work on homes where people have been evicted, calls from the sheriffs office."

For more, see Foreclosure Crisis Causing More Abandoned Pets.

Go here for more on pets and foreclosures.

Two Michigan Men Arrested For Passing Rubber Checks To Rent / Buy Property

In Clayton Township, Michigan, The Flint Journal reports:

• A Lansing man was being held on $900,000 in bonds for allegedly passing bogus checks at a local real estate office. Michael P. Klein, 31, was arraigned Wednesday on three felony counts of uttering and publishing. The judge set a $300,000 cash bond for each count. Township Police Chief Chuck Melki said Klein and a second suspect - a Flint man, 71 - were arrested Monday afternoon after passing three checks totaling more than $6,000 to rent or buy property. Police found more than $1 million in forged checks in their possession, along with a half-dozen credit cards under various names and multiple Social Security numbers, Melki said.

The men were arrested by local cops on Monday afternoon. The Flint man has yet to be charged. The FBI has been notified, and detectives have contacted Immigration and Customs Enforcement to determine whether Klein, a native of Germany and who has faced charges in at least two other states, is legally in the United States. For more, see Police arrest man on check charges.

10 Sentenced In Oklahoma Cash Back Mortgage Scam

In Oklahoma City, The Oklahoman reports:

• The remaining people convicted in a mortgage fraud involving homes in Edmond's upscale Oak Tree neighborhood — and prominent Realtor Ann Campbell — were sentenced to prison this week in U.S. District Court in Oklahoma City. [...] Campbell, 66, of Edmond, pleaded guilty in December to conspiracy to commit wire fraud and agreed to assist prosecutors.

According to the U.S. Attorney's Office, the following were sentenced this week after being found guilty after a 12-day jury trial in April:

• Brandon L. Baum, 32, of Joplin, Mo., (87 months in federal prison, 3 years supervised release, pay restitution - $511,735.23),
• Gayle L. Caldwell, 39, of Edmond, Ok., (18 months in federal prison, 2 years supervised release),
• Charles E. Caldwell Jr., 41, of Edmond, Ok., 18 months in federal prison, 2 years supervised release, pay restitution - $185,740.60),
• Joseph Conrad Therrien, 29, of Oklahoma City, (1 year and 1 day in federal prison, 2 years supervised release, pay restitution - $59,771.48),
• Teresa M. Therrien, 32, of Edmond, (1 month in federal prison, 90 days home detention while serving 2 years supervised release, pay restitution - $82,710.58),
• Rusty Real Therrien, 33, of Edmond, (18 months in federal prison, 2 years supervised release, pay restitution - $82,710.58).

The following defendants pleaded guilty in separate related cases, and testified in the trial against the above six defendants:

• Timothy J. McDaniel, 45, of Edmond, (6 months in federal prison, 2 years supervised release, pay restitution - $57,641.34),
• Anthony Jew, 38, of Edmond, (1 year in federal prison, 3 years of supervised release, perform 104 hours of community service, pay restitution - $13,700),
• Dalton Joe Alford, 35, of Oklahoma City, (8 months in federal prison, 2 years of supervised release, perform 104 hours of community service, pay restitution - $172,489.24),
• Toney Charles Mykel, 40, of Edmond, (pleaded guilty to misprision of a felony; 6 months in federal prison, 1 year of supervised release, perform 104 hours of community service, pay restitution - $263,489).

For a description of how the scam went down, see 10 sentenced in Oak Tree mortgage fraud.

Homeowners' Association Battles Resident Over Property Improvement

The Union Democrat (Sonora, California) reports:

• The Copper Cove and Lake Tulloch Owners' Association may have invited new legal action Wednesday by announcing it is imposing fines on a handicapped man who made a county-approved addition to his home in order to gain street-level access to his bedroom. Ken Gutman, 61, target of the fines, says he fears the association actually intends to use the levies as an excuse to take his home away or make him tear it down.

[...]

• The association stirred up a nationwide hornets' nest among homeowners in 2003 when it seized the Copperopolis home of Thomas and Anita Radcliff and sold it at public auction because the Radcliffs failed to pay $120 in homeowners fees. Ultimately, the Radcliffs bought their house back in 2005 and settled their differences with the association out of court. The California Alliance for Retired Americans has called nonjudicial foreclosures "a predatory business practice" used by some homeowner associations to collect tiny amounts of money.

For more, see Homeowner fined in Copper flap.

Connecticut Feds Charge Loan Officer With Mail, Wire Fraud In Alleged Mortgage Scam

In Waterford, Connecticut, TheDay.com reports:

• Jose Guzman, who is being sued by the Connecticut Attorney General’s office for mortgage fraud, was arrested late Thursday night at his Waterford home and charged with mail and wire fraud. U.S. Magistrate Judge Thomas P. Smith today scheduled a detention hearing for Oct. 17 and a probable cause hearing for Oct. 24. The U.S. Attorney’s Office has 30 days to file an indictment. The U.S. Attorney's Office considers Guzman a threat to flee. The Day first reported in May how dozens of individuals, many of them Hispanic, had faced foreclosure and ruined credit after they were approved for home loans based on false information.

For more, see:

• Waterford Man is Being Held On Fraud Complaint (Jose Guzman Detained In Connection With Alleged Real-Estate Scam),
• Waterford Man Faces Charges in Predatory Lending Scheme.

For story updates, see:

• Hearing on Loan Officer Canceled (A probable cause hearing, which likely would have revealed further details regarding the government’s case against former New London loan officer Jose Guzman, was canceled after Guzman waived his right to the hearing.) (The Day.com - 10-25-07),
• Detained Loan Officer Is Released From Prison (Guzman, Accused Of Fraud, Released To Wife's Care After Family Helps Him Make Bond). (The Day.com - 10-18-07)

For a related story on this case, see Promises Left Buyers Destitute, Suit Says.

Go here for other posts and links to media reports on, what the Connecticut Attorney General calls, "an extensive predatory lending scheme" led by mortgage broker Jose Guzman.

M&T Bank Foreclosing On Active Duty Servicemember In Apparent Disregard Of Federal Law

A recent opinion column in The New York Daily News describes a Brooklyn, New York homeowner with 20 years of service in the Army Reserve who reportedly fell behind on her mortgage payments after she got called in for active duty. Five months after being discharged, she was twice called back. M&T Bank currently has a foreclosure action pending against her. An excerpt from the column:

• All told, Foy was home for less than 15 months from October 2001 to December 2006 and, during that time, she lost two tenants. So, lacking rental income, she fell behind on payments again. M&T didn't want to hear about it. The bank piled on penalties - nearly $23,000 in fees - and initiated foreclosure proceedings. Foy remains at risk of losing her home. That's not how it's supposed to work. State and federal law specify that members of the armed forces are entitled to relief from civilian debts - not forgiveness, but a bit of understanding - when they run into trouble because of their military service.

For more, see A lousy way to treat a veteran.

Go here for other posts on the Servicemembers Civil Relief Act, the Federal law that provides protection for active duty servicemembers with financial difficulties arising out of their active duty. If they haven't already, servicemembers in this position should contact the U.S. military's legal officer who is assigned to their unit for consultation.

Countrywide Financial Boycott Goes National

The Boston Herald reports:

• Mortgage activist Bruce Marks yesterday unleashed a “national boycott” targeting Countrywide Financial, a campaign that comes as the giant mortgage company teeters financially. Marks, chief executive of Neighborhood Assistance Corp. of America, led dozens of protesters, many of them Countrywide borrowers facing foreclosure on high-interest, subprime loans, on protests outside three company offices in Boston. [...] “The reason we are going after Countrywide is that they are the biggest, the most aggressive and the most resistant to restructuring loans,” Marks said.

For more, see Activist group moves to push national Countrywide boycott.

See also, Countrywide Is Assailed in Protest of Policies (New York Times - 10-12-07), - "Thursday’s protest was the second this week organized by a borrower advocacy group and aimed at Countrywide. On Tuesday, ACORN, the Association of Community Organizations for Reform Now, organized a protest in eight cities."

(The community activist group ACORN demonstrated outside Countrywide's San Bruno, California office earlier ths week - see Bay Area Activists Protest Outside Countrywide Financial (Say Company Not Helping Enough)). countrywide pressure zebra

Minnesota Feds Bag 4th Conviction In Straw Buyer Scam Investigation Centered On Homebuilder; Appraiser Cops Plea

In another story on the New Prague, Minnesota mortgage fraud investigation centered around homebuilder Parish Marketing and Development, the Minneapolis Star Tribune reports:

• A real estate appraiser from Montgomery, Minn., admitted Thursday to inflating values on 74 homes in the southern Twin Cities suburbs in an alleged mortgage fraud scheme that authorities say bilked lenders out of $50 million. [...] Donald Todd Yeager testified that he inflated his appraisals by $50,000 to $100,000 each. Yeager said that he was paid only his standard $400 fee for each appraisal but that he went along with the alleged scheme to keep the business. [...] Yeager pleaded guilty Thursday to depriving lenders of his "honest services" as a certified appraiser, a felony.

The U.S. Attorney's office estimates the losses attributable to Yeager are between $2.5 million and $7 million and that there are between 10 and 50 victims. Parish Marketing is headed by Michael and Ardith Parish, according to public records. Neither has been charged. For more, see Montgomery, Minn., appraiser admits hyping values (Donald Todd Yeager testified that he inflated value of homes by $50,000 to $100,000 each).

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

Lawsuit Filed Alleging $40 Million Fleecing Of 800 PA Residents In Wrap Around Mortgage Scam; Class Action Status Sought

(originally posted 10-11-07)
Lancaster Online (Lancaster County, Pennsylvania) reports:

• A couple who say they were stung by a mortgage "Ponzi Corporation" is suing the lenders that bankrolled Personal Financial Management Inc.'s alleged $40 million fleecing of 800 customers. The lawsuit, filed [three weeks ago] in Berks County court, seeks to void 800 mortgage loans that skyrocketed for customers when Personal Finance Management and five subsidiary companies filed for bankruptcy last week. [... Wesley A.] Snyder owns Personal Financial Management, also known as OPFM Inc. and Image Masters, which had offices in Berks and Lancaster counties. [...] The defendants include big-name financiers such as Wells Fargo, GMAC, Countrywide, Citicorp, HSBC, Chase Home, Wachovia and Sovereign Bank.

The investment program that the Pennsylvania residents thought they were investing in was nothing but a "Ponzi scheme," according to the lawsuit. In a classic Ponzi, or pyramid, scheme, money from new investors is used to pay off earlier investors, usually at high rates of interest.

The suit claims that the mortgage lenders either knew or should have known that the program they participated in was a Ponzi scheme. It asks the court to rule that the lenders' conduct was unlawful or negligent and seeks that all mortgage notes held by the defendants are to be voided.

Representing the plaintiffs in this case is the law firm, O'Keefe & Sher, P.C., Kutztown, Pennsylvania.

For more, see Suit seeks to void 800 'Ponzi' mortgages.

See also, Judge Halts Higher Pa. Mortgage Bills (A judge has temporarily blocked higher mortgage bills facing more than 800 homeowners following last month's bankruptcy filing by a Berks County mortgage broker and its five subsidiaries; 10-11-07).

Go here for WGAL-TV Channel 8 News coverage.

For related documents from this case, see:

• OPFM / Wesley Snyder's 9-14-07 Letter To Participants in the Equity Slide/Wrap-Around-Mortgage program.
• Copy of Lawsuit - Jones vs. ABN Amro, et al.,
• Letter from O'Keefe & Sher, P.C., Attorneys at Law - to all potential victims,
• Copy of Preliminary Injunction, (Plaintiff's Emergency Motion & Court's 10-10-07 Order Granting Motion),
• MSFraud.org message board on this case,
• OPFM / Image Masters victims website.

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.

Illinois Prosecutor's Office Racking Up Real Estate Forfeitures

In Champaign County, Illinois, The News-Gazette reports:

• Since June, the Champaign County state's attorney's office has succeeded in taking from their owners three homes where drug dealing was going on. The homes are now the property of the Illinois State Police and will be sold, with the proceeds divided among law enforcement. [...] It's a way to send a message to those who use and distribute illegal drugs," said Champaign County State's Attorney Julia Rietz of her office's plan to seize the assets of criminals.

When the confiscated homes are ultimately sold, mortgages and other liens on the real estate are paid first. Anything left over is divided up amongst police agencies and prosecutors' offices, according to the story.

Reportedly, the prosecutor's office had its sights on a fourth home - of a man accused of juvenile pimping, because he was allegedly using the house in the commission of a crime. They promptly scrapped the idea, however, when they learned that the house was worth less than the outstanding liens. The bank foreclosed and got stuck with the house, instead. For more, see If you sell drugs out of your home, you could lose it.

North Carolina Regulators Investigate Broker's Ties To Builder; $Millions Paid In Undisclosed Bonuses?

The Charlotte Observer reports:

• The North Carolina Real Estate Commission has opened an investigation into Charlotte-area agency Realty Place, the commission's lead investigator said Wednesday. The moves were in response to an Observer investigation of Realty Place, which received millions of dollars in bonuses from home builders in exchange for finding buyers for their homes. Company records show - and former employees affirm - that Realty Place maintained a close relationship with home builders after vowing to protect clients from those builders. The company funneled buyers into low-priced starter-home developments, many of which are now plagued by foreclosure.

For more, see Commission investigating Realty Place agency (Also examined: If customers informed of bonuses).

For earlier article on The Observer's investigation, see Homebuyers in the dark? (N.C. rules may leave customers unaware of bonuses received by their agents).

Short Sales: A Pain In The Neck?

Mortgage News Daily describes the anectdotes being thrown around out in the field about the difficulties some are reporting in approaching and consummating a short sale. The problems all seem to focus on the slow turn-around time when dealing with the employees of the mortgage lender or loan servicer. For more, see What is happening out there?

Escrow Agent Gets 2 Years For Swiping $600,000+ In Company Checks

From the Maryland U.S. Attorney's Office:

• U.S. District Judge Deborah K. Chasanow sentenced Rebecca Biglow, age 35, of Upper Marlboro, Maryland, [October 1] to 24 months in prison followed by 5 years of supervised release for bank fraud, announced United States Attorney for the District of Maryland Rod J. Rosenstein. According to her guilty plea, Biglow used her employment as a loan funder at a settlement company in Greenbelt from June 2005 to May 2006 to gain access to settlement files and find checks payable to the creditors of the company’s clients that had not been negotiated or cleared. She would then void the checks, and reissue new checks in the same amounts drawn on a company account and made payable to herself or her creditors.

For more, see U.S. Attorney Press Release - Former Settlement Company Employee Sentenced to Two Years for Bank Fraud (Issued Over $600,000 in Company Checks to Pay Off Her Mortgage and Personal Expenses), and Upper Marlboro woman sentenced to two years for bank fraud (The Gazette).

For an escrow agent perspective on this story, see who the heck is watching the money????

Go here for more stories on "sticky fingered" escrow agents.sneaky slick escrow agents beta

San Diego DA Charges 2 In Alleged Felony Rent Scam Claiming Multiple Victims

In San Diego, California, KGTV Channel 10 reports:

• Anthony Zocoolillo, 30, pleaded not guilty to nine felony charges, including robbery, conspiracy to commit a crime, grand theft of personal property and accessing a computer to defraud. The charges against are in connection with a rental scam prosecutors said Zoccolillo ran with Robert Ramus. "They met with victims at the house and accepted money pretending they could rent houses. So far, we have information that they've taken $9,400 in cash," said Deputy District Attorney Jim Waters. [...] The group used computers at a Kinko's to access the Multiple Listing Service database used by real estate agents, documents stated. The men used an access code from a friend and got the lock box code numbers for two homes, including the Pacific Beach home. [...] Ramus pleaded not guilty to charges last Friday.

For more, see Alleged Rental Scam Ringleader Pleads Not Guilty.

For earlier Channel 10 stories on this case, see:

• October 5, 2007: Man Faces Felony Charges In Connection To Rental Scam,
• August 27, 2007: 10News Viewers Help I-Team Expose Man Behind Alleged Scam,
• August 24, 2007: 10News Investigates Craigslist Home Rental Scam.

See Tenant Victims Of Rent Scams I for other rent scam stories. unwitting tenant rent scam zebra

Albany, NY Feds Announce Guilty Pleas Of Two In "Straw Buyer" Mortgage Fraud Scam

In Albany, New York, EmpireStateNews.net reports:

• Federal authorities in Albany Tuesday announced that Anthony Anderson and his wife, Laura Anderson, both of Florence, Massachusetts, pled guilty Tuesday ... in Albany to felony charges in connection with their roles in a 2001-02 mortgage fraud scheme. Anthony Andersen, 53, pled guilty to submitting false statements to a federally insured financial institution for the purpose of influencing its action on loan applications and to money laundering involving causing monetary transactions over $10,000 to be conducted in funds derived from such specified unlawful activity. [...] Laura Andersen, 49, also pled guilty today to one count of making false statements to law enforcement and in connection with her participation in her husband's scheme.

For more, see Massachusetts couple pleads guilty to mortgage fraud in New York.

Go here for other posts on this mortgage fraud scheme.

Wisconsin State Lawmakers Propose Foreclosure Rescue Statute

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:

• "Instead of a lifeline, they're tying a noose around homeowners," Rep. Jon Richards (D-Milwaukee) said. "We mean to stop them." Richards commented at a Milwaukee news conference, as he and Sen. Jim Sullivan (D-Wauwatosa) introduced the "Homeowner Protection Act," a legislative proposal that would make it a crime to obtain title to a property by deceit or lies. At issue are agreements commonly called foreclosure reconveyance contracts. Such contracts transfer the title from the homeowner to the "rescuer," generally along with a way for the debtor to recover the house. But often, the terms of the deal are insurmountable for the homeowner, such as high monthly payments or supposed violations of the condition of the property.

For more, see Bill seeks to halt foreclosure scams (Plan targets home 'rescuer' deals).

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.).

Family Victimized By Metropolitan Money Store Loses Home, Awaits Eviction

The Washington Post reports on the story of a Prince George's County, Maryland family who recently lost their home to a bank in a foreclsoure sale as a result of an alleged refinancing scam involving now-defunct foreclosure rescue operator Metropolitan Money Store. Reportedly, the homeowners weren't even in foreclosure when they went to the company to refinance their home to pay some debts and pay for some home repairs after seeing a spot on the Black Entertainment cable television station. According to the story:

• The couple said they didn't realize that they were signing over the deed of their home to the investor. Nor did they know they were signing away more than $100,000 in equity. The straw buyer hasn't made any mortgage payments on the [couple's] house, they said.

• And now, said the [couple's] attorney, Phillip Robinson, the house has been foreclosed on and was recently sold to a bank at auction. "They could be kicked out any day," Robinson said. "We've asked the judge to hold off until this other case [the class-action suit] is handled." Robinson said he has been working on a case-by-case basis to keep his clients from being evicted. He has asked Maryland's attorney general to order that no one involved in the lawsuit be evicted while the case is pending.

For more, see Trying to Hold Onto Home (Metropolitan Money Store Put Their House at Risk, Md. Couple Say).

Go here for other posts on Metropolitan Money Store.

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.). joy jackson

Countrywide Locks Its Doors As Housing Activists Protest Outside Its Offices

KGO-TV Channel 7 (San Francisco, California) reports:

• Bay Area homeowners barely hanging on because of the mortgage crisis, turned-up on the doorstep of one of the country's biggest lenders on Tuesday. They claim that with interest rates soaring Countrywide Financial is doing very little to help them keep their homes. The community activist group ACORN demonstrated outside Countrywide's San Bruno office. Countrywide responded by locking its doors. [...] Late on Tuesday Countrywide sent a response to ABC7 by saying: "Its concerned with the rising levels of delinquencies and foreclosures." They also said they are not only responding to customers, they are also reaching out to borrowers in distress. But lenders often have no authority to rework a loan by themselves. Most mortgages today are packaged and sold to investors on Wall Street in a process called securitization.

For more, see Bay Area Activists Protest Outside Countrywide Financial (Say Company Not Helping Enough). countrywide pressure zebra

Towns Taking A Beating From Foreclosure Boom

The following links are to recent stories on towns that are taking a beating as a result of the real estate bust / foreclosure boom:

• Suburban Phoenix, Arizona (Queens Creek): Boom, Bust in Area Beset by Foreclosures (The Associated Press - 10-6-07),

• Lawrence, Massachusetts: As foreclosures widen, a neighborhood erodes (Crisis tests many in north Lawrence) (The Boston Globe - 10-7-07),

• Cleveland, Ohio (Slavic Village): The Shadow of Debt (Slavic Village Is Fast Becoming a Ghost Town. It's Not Alone) (The Washington Post - 9-30-07) (if link expired, try here).

• New York City (Far Rockaway, Queens): Risky Loans Help Build Ghost Town of New Homes (The New York Times - 9-24-07) (if link expired, try here).

• Stockton, California: "Strange And Sad And Worrying" (CBS News Blog - 10-8-07) ("Houses that sold briskly as recently as a year ago for $400,000 to $600,000 now sit empty and abandoned. And there are lots of them.")

• Providence, Rhode Island: Foreclosures threaten Providence neighborhoods’ vitality (The Providence Journal - 10-14-07).

New York City Property Manager Cops Plea In Theft Of Co Op Funds

In Corona, New York, the Times Ledger reports:

• A former property manager for a Corona cooperative apartment building pleaded guilty to stealing $163,000 in co-op funds. He is slated to be sentenced Oct. 23. Michael Burak, 63, of Manhattan was charged with grand larceny, criminal possession of a forged instrument and falsifying business records, the Queens district attorney said. He entered his plea on June 26 and faces a maximum of 15 years in prison, according to the DA.

For more, see Corona co-op owner guilty of fraud.

Georgia Feds Indict State Magistrate Judge For Lying To Grand Jury, FBI

In Clinch County, Georgia, Daily Report reports:

• A magistrate judge from rural Clinch County has been charged with perjury in an indictment that says she lied to a federal grand jury investigating judicial corruption.
  Magistrate Judge Linda C. Peterson lied to grand jurors June 13 when she denied, under oath, ever suggesting to criminal defendants that they could use her own father as a bail bondsman, according to the indictment. The indictment says Peterson, after setting a $50,000 bond last year for a man arrested on marijuana charges, told the defendant that her father, Herman Corbitt, could act as his bail bondsman for a fee. The indictment says Peterson told the defendant, James E. Tucker, and other people "that she needed the fee that her father would charge for home remodeling." [The U.S Attorney's office] declined to comment on whether Peterson's indictment was related to a federal investigation of Superior Court Judge Brooks E. Blitch III, whose Clinch County office was searched by FBI agents in June.

For more, see South Ga. judge indicted on federal perjury charge. naughty judges