Thursday, October 25, 2007

Texas AG Slams Another Upfront Fee Foreclosure Rescue Consultant; Obtains TRO & Asset Freeze

From the Office of the Texas Attorney General:
  • Texas Attorney General Greg Abbott [yesterday] obtained a temporary restraining order and asset freeze against an unlawful Texas-based foreclosure rescue operation targeting struggling homeowners in the state and across the country. According to court documents, Southern Residential, LLC, and its director and manager, Edward Casey, fraudulently advertised that the company could save homeowners from imminent foreclosure. The enforcement action also names affiliated defendants National Homeowners Assistance, Stephanie Casey, Matthew Casey and Linda McCann. Under the temporary restraining order, the defendants must stop falsely soliciting distressed homeowners immediately. Although the order only applies in Texas, homeowners nationwide are protected by the asset freeze. [...] Last week, Attorney General Abbott secured a temporary injunction against Foreclosure Assistance Solutions, a Florida-based “foreclosure rescue” scheme that targeted Texans who fell behind on their mortgage payments.

For the rest of the Texas AG's press release, see Attorney General Abbott Takes Legal Action Against Foreclosure Rescue Firm's Unlawful Texas Operations (Clients of Southern Residential urged to call their lenders immediately).

For links to documents, etc. in this case, see:

Ringleader In Colorado Straw Buyer / Rent Skimming / "Rent To Own" Scam Convicted Of Racketeering

The Pueblo Chieftain reports:
  • A real estate mogul will trade his upscale lifestyle of luxury cars, fine dining and posh homes for a stretch in the big house. Maurice Goring, 41, was convicted Tuesday on two counts of racketeering under the Colorado Organized Crime Act. He faces up to 48 years in prison. [...] Prosecutors said Goring stole or fraudulently obtained mortgage loans totaling about $2 million.

  • Goring enlisted acquaintances he met at church to serve as the listed owners on distressed properties he purchased. Goring then pocketed the mortgage loan proceeds, often taking out a second mortgage immediately at closing. He let the houses lapse into foreclosure. In the process, he ruined the credit of the people who agreed to serve as the registered owners of the homes.

For more, see Goring guilty of racketeering (Former real estate professional faces up to 48 years in prison).

For story update, see Man gets 10 years in real-estate scam.

Go here for other posts on Maurice Goring.

Miami Mortgage Fraud Prosecutions Of Title Insurance Agents Expected To Increase

In Miami-Dade County, Florida, the South Florida Daily Business Review reports:
  • Title insurance agents, the last people most home buyers and sellers see before a deal closes, are increasingly among the first being prosecuted for mortgage fraud. That is raising questions among prosecutors and investigators about agents’ training, employee supervision and whether agents should play a bigger role in stopping fraud. “I’m seeing an increase in them being involved in the whole [fraudulent] transaction and with knowledge of how bad the situation is,” said Sgt. Richard Davis of the Miami-Dade Police economic crimes division. Davis, a member of the new multi-agency mortgage fraud task force in Miami-Dade County, said arrests of more title agents are imminent.

For more, see More title insurance agents being prosecuted for mortgage fraud (if link expired, try here).

South Florida Condo Speculators Filing Suits To Wiggle Out Of Purchase Contracts

In the Greater Fort Lauderdale area, the South Florida Sun Sentinel ran a story yesterday on the trend of real estate speculators who entered into contracts to purchase real estate in developments that were being constructed at the height of the real estate boom that are now looking to back out of the deals because the reversal in the real estate market is making it impossible for them to profitably flip their purchase contracts. Many are going to court seeking the court's blessing, as well as a court order directing the developer to return the contract deposits. Excerpts from the story:
  • Brad Hunter, director of the South Florida region for Metrostudy, a housing market research firm, said more lawsuits are being filed because "there is a lot of buyer's remorse out there. Naturally people will be looking for ways to get out."

  • About 40 percent to 60 percent of buyers are trying to wiggle out of their contracts, said Gary Poliakoff, a Fort Lauderdale attorney, referring to a dozen projects in South Florida that his firm represents, ... . "The claims and the suits are namely a means for an end for investor-buyers to get out of deals where they weren't able to realize the profits they expected, but it doesn't mean the reasons are legitimate," Poliakoff said. Developers are not budging, Poliakoff said, because they "built the buildings on the reliance that the buyers are ready, willing and able to close."

  • John Mike, chairman of the Realtors Association of the Palm Beaches, said those most upset are buyers who had no intention of living in their properties. "A lot of those condos, unfortunately, were bought by speculators with the same business plans — to flip their properties, and unfortunately that has created a glut of units. Now we are seeing a large number of people trying to get their money back by hiring lawyers."
For more, see Housing slump has South Florida condo investors heading for the exits (Suits mount as condo investors seek money back) (if link expired, try here).

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

Federal Court Takes Jurisdiction Of Alleged Mortgage Investment Scam Class Action Suit

In Philadelphia, Pennsylvania, the Lancaster Intelligencer Journal (Lancaster Online) reports:

  • Some homeowners who owe much more than they thought they did due to alleged mortgage broker fraud by OPFM Inc. lost one form of temporary relief Wednesday but gained another. A federal judge in Philadelphia Wednesday took charge of the case and tossed a temporary injunction that had shielded about 800 customers from mortgage debts discovered when OPFM filed for bankruptcy Sept. 18.

  • Instead, a new agreement allows mortgage customers to pay 75 percent of the higher mortgage payments, or the original payment, whichever is higher, and mortgage companies promised not to foreclose if the payments are made.

  • U.S. District Judge James T. Giles made the decision after taking jurisdiction of a class-action lawsuit filed Sept. 25 in Berks County court. The suit seeks to void mortgages of 25 lenders named in the suit. The mortgages were brokered by Personal Financial, allegedly without the knowledge of the customers, who thought they were signing on for lower mortgages.

For more, see Federal judge takes OPFM suit (Revises deal for homeowners who allege mortgage broker fraud).

See also, WGAL-TV Channel 8, which reports:
  • Wednesday morning a federal judge in Philadelphia threw out a ruling that had temporarily protected homeowners who had been affected by the sudden closure of Personal Financial Management, a local mortgage company. The judge then directed attorneys representing homeowners and the mortgage companies to come up with an agreement that can be overseen by the federal court. The judge's decision supersedes a Berks County judge's ruling two weeks ago that had temporarily protected homeowners from being forced to make higher payments.

For more, see Judge Tells Homeowners, New Mortgage Holders To Work Together.

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.

Wednesday, October 24, 2007

Michigan Man Gets 4 Months In Jail For Pocketing Proceeds Of Foreclosure Rescue Deal

In Grand Rapids, Michigan, WOOD-TV Channel 8 reports:
  • Tony O'Neal is in the Kent County Jail starting a four-month sentence for cashing a check belonging to a couple whose home was facing foreclosure. O'Neal brokered a deal in which Carl and Dreama Henderson sold their threatened home to a third party, who rented it back to them. In the process, the Hendersons were supposed to get some $30,000 back from the equity in their home. O'Neal offered to cash the check for them. He kept the money. [...] The Hendersons trusted O'Neal. He worked for a major national mortgage company at the time, and did foreclosure rescue deals on the side. Last fall the Hendersons asked Target 8 Investigators to look into the matter. They also contacted Grand Rapids police detectives. They caught up with O'Neal in December and got a warrant charging him with larceny by conversion.

O'Neal was sent to jail for four months, put on probation for four years and ordered to repay the Hendersons some $27,000. Aside from the proceeds of the cashed check illegally pocketed by O'Neal, no word on how much more the Hendersons got ripped off on the actual foreclosure rescue deal itself. For more, see Man jailed for 'foreclosure rescue' theft.

Go here to watch the WOOD-TV Channel 8 video report.

Editor's Note: In a prior post, a foreclosure rescue, sale leaseback transaction was described involving a homeowner facing foreclosure that took place in the same general area of Western Michigan as this story. In that case, the homeowner sued the foreclosure rescue operator and successfully voided the foreclosure rescue transaction. For more, see Foreclosure Rescue Operator Violates Federal Law, State Usury Law. Representing the homeowner in that case was attorney Phillip C. Rogers, of Grand Rapids, Michigan. Maybe the homeowners in this case should look into getting an attorney to pursue voiding the foreclosure rescue transaction altogether.

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.).

Texas AG Obtains Temporary Injunction Freezing Foreclosure Rescue Operator's Assets Indefinitely

An emergency restraining order obtained by Texas Attorney General Greg Abbott in September which froze the assets belonging to upfront fee foreclosure rescue operator Foreclosure Assistance Solutions of Clearwater, Florida was replaced last week by a temporary injunction issued by a Texas state court. Under the court order, Foreclosure Assistance Solutions, and its principal operators, Herb Zerden and Adolfo Quintero, as well as J.W.W. Services, Inc. of California and owner John Woodruff, are prohibited from targeting and deceiving Texans who fall behind on their mortgage payments. The temporary injunction issued last week extends the initial September order, securing approximately $750,000 in fees that the defendants charged more than 700 Texans who paid for its services. The monies will remain frozen pending further orders from the court. For more, see Texas AG Press release, Attorney General Abbott Halts Foreclosure Rescue Scam's Unlawful Texas Operations (Clients of Foreclosure Assistance Solutions urged to call their lenders immediately).

For related court documents filed against Foreclsoure Assistance Solutions, see:

Go here for other posts on Foreclosure Assistance Solutions.

FBI, NY AG's Office Attend Buffalo Tax Foreclosure Sale; Warn "No Flipping Allowed!"

In Buffalo, New York, The Buffalo News reports:
  • Buffalo’s annual foreclosure auction is attracting more than just buyers looking for bargains this year. The three-day sale of troubled properties also attracted the FBI and the state attorney general’s office. “We’re keeping track of who’s doing what,” said Kathleen Lynch, coordinator for the city’s Anti-Flipping Task Force. The task force, formed to combat the practice of real estate flipping, joined several law enforcement agencies Monday in monitoring the first day of the auction in the Buffalo Niagara Convention Center. [...] One of the tools the task force is using this year is an affidavit all buyers are required to sign. The document is designed to prohibit a buyer from selling his property for a profit of more than 20 percent during the first six months of ownership. The goal is to curtail flipping, the practice of buying low-priced housing and quickly selling it at inflated prices without making improvements to the property.

For more, see Foreclosure auction has a warning: No flipping (if link expired, try here).

See also, Flushing out flippers (WKBW-TV Channel 7, Buffalo, NY). Go here to watch WKBW-TV Channel 7 video report.

Frank Proposes Bill Targeting Institutions That Securitize Mortgages

Financial News Online reports:
  • A congressman has proposed a bill to punish any institution that securitizes mortgages as Washington renews its scrutiny of Wall Street before next year’s elections. Congresman Barney Frank, chairman of the House Financial Services Committee, has co-sponsored the bill, which would hold financial firms liable if they securitize loans that violate minimum lending standards. Borrowers could sue to recover the cost, if Frank’s bill passes. The bill would also cut out lending arrangements that many have blamed for this summer’s credit squeeze, including abolishing penalty charges for borrowers who make their payments early and penalizing brokers who push consumers toward high-cost loans. Frank said he hopes to push the bill through before the end of the current Congressional session.

The proposed legislation is contained in bill H.R. 3915 - The Mortgage Reform and Anti-Predatory Lending Act of 2007. For more, see Congress takes aim at securitizations ahead of elections.

Countrywide Proposes To Refinance Or Restructure Up To $16 Billion In Loans

Reuters reports:

  • Countrywide Financial Corp , the largest U.S. mortgage lender, on Tuesday offered to refinance or restructure up to $16 billion of adjustable-rate mortgages through the end of 2008. The lender said its program may help about 82,000 borrowers who face higher payments stay in their homes. It announced the program as pressure mounts on the mortgage industry from politicians and consumer groups worried about rising foreclosures to clean up lending excesses, and make only home loans that consumers can afford in the first place.

For more, see Countrywide to modify $16 billion mortgages.

Recent political pressure in the form of proposed bankruptcy law changes that would force lenders to accept loan modifications in connection with homeowners filing Chapter 13 bankruptcy (see More On Proposed "Forced Mortgage Modifications" In Chapter 13 Bankruptcy) may be having an influence on Countrywide's position. The recent Countrywide protests by consumer activists may also be having an effect (go here for Countrywide under attack). The proposed Federal class action lawsuit against Countrywide alleging race discrimination might also be contributing (or could it be that Countrywide is just posturing to take the heat off?). countrywide pressure zebra

Tuesday, October 23, 2007

Feds Confirm Raid Of Home Of Pennsylvania Mortgage Broker

Lancaster Online reports:
  • The U.S. Postal Inspection Service confirmed Monday that it has raided the home of Wesley A. Snyder, the president of a bankrupt mortgage-brokerage business that has saddled 800 homeowners with tens of thousands of dollars of additional, unexpected mortgage debt. Oriey Glenn, the acting inspector in charge of the Philadelphia Postal Inspection Service, said items were taken during an Oct. 12 raid involving Snyder's companies Personal Financial Management Inc. and Image Masters, which operated offices in Lancaster and Berks counties. [...] No fewer than five agencies — the postal inspectors, the Pennsylvania Securities Commission, the state Department of Banking, the state attorney general's office and the U.S. Attorney's office — are investigating Snyder's businesses.

For more, see Mortgage broker raided (Postal inspectors seize items from home of Wesley Snyder).

For story update, see Judge Tells Homeowners, New Mortgage Holders To Work Together (WGAL-TV Channel 8, 10-24-07).

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.

Twin Cities-Area Builder Charged With Mortgage Fraud Conspiracy

The Minneapolis Star Tribune reports:

  • An alleged mortgage fraud conspiracy that pocked some southern Twin Cities suburbs with foreclosures and led to an estimated $50 million in losses on nearly 200 houses has boiled down in criminal charges to a much smaller number: $114,465.60. That's the amount the government alleges that Parish Marketing and Development Corp., founder Michael Parish of Eagan and son-in-law Christopher Troup laundered from the conspiracy. [...] Michael Parish and his wife, Ardith, were charged quietly Thursday along with their company and Troup in an alleged mortgage fraud conspiracy that ran from 2003 through last May. [...] So what happened to the rest of the estimated $50 million in losses?

  • Government prosecutors aren't commenting yet. The defendants agreed to be charged directly by the U.S. attorney's office in lieu of an indictment. Additional information may emerge Nov. 2, when the defendants are scheduled to be arraigned and enter guilty pleas.

For more, see Developer Parish is charged (Longtime home builders Michael and Ardith Parish are expected to plead guilty in an alleged mortgage fraud conspiracy that has pocked some southern Twin Cities suburbs with foreclosures and led to an estimated $50 million in losses on nearly 200 houses).

See also, Developers expected to plead guilty in mortgage fraud case (KARE-TV Channel 11, The Associated Press).

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

Fla. Foreclosure Rescue Operator, Others Tagged With Federal Lawsuit; Allege RICO, Criminal Usury, Conspiracy, TILA Violation; Seek To Void Mortgages

The St. Petersburg Times reports:
  • Calvin Lewendowski, a 55-year-old Sarasota house remodeler, turned to the Safe Harbour Foundation last year after he was promised the nonprofit would save his home from foreclosure. Instead, Lewendowski found himself in the jaws of a loan shark. Safe Harbour referred Lewendowski to a second company, Silverstone Lending, which used illegal fees and usurious interest to take away the home, an action Lewendowski called cold-blooded.

  • On Friday [October 12], Lewendowski and other victims struck back, filing a $40-million federal lawsuit against 18 individuals and companies, including Safe Harbour, Silverstone Lending and Peter C. Porcelli, a Clearwater businessman who operated the lending business despite being banned by a federal judge in 2004 from offering such credit products to consumers.

  • The lawsuit, filed in Tampa by attorney Michael A. Wasylik, tracks a St. Petersburg Times investigation of the questionable loan operation published in May. The suit accuses Porcelli and his associates of engaging in racketeering by making false promises through the mail in order to obtain borrowers' homes through fraud.

  • The suit alleges that Porcelli and others arranged bailout loans with usurious rates as high as 500 percent, violated truth-in-lending laws and charged illegal brokerage or servicing fees.

  • The plaintiffs seek millions in actual and punitive damages, an injunction declaring usurious loan deals unenforceable and an order restoring ownership of homes to the original owners.
For more, see Victims strike back at shady lenders (The companies promised foreclosure protection only to wind up taking the homes themselves).

For a prior St. Petersburg Times story on Peter Porcelli, who currently awaits an October 29 felony sentencing on an unrelated scam, see Facing new fields of fraud (Guilty in one scam, an Oldsmar man is scrutinized in a high-risk loan scheme that preyed on those facing foreclosure) (5-20-07).

Editor's Note: The typical equity stripping, foreclosure rescue transaction generally involves a home sale by a financially hard-up homeowner, coupled with a leaseback of the home, and an option to repurchase it at a future date. According to the lawsuit (paragraphs 46 through 54) filed in this case, however:
  1. the money advanced by the foreclosure rescue operator actually took the form of a loan, and not a home sale with leaseback and repurchase option,
  2. while most homeowners needed only a few thousand dollars to avoid foreclosure, loans were arranged that incorporated finance charges, origination fees, and underwriting fees that doubled or tripled the size of the loan,
  3. the charges and fees were received by the operators and the others involved in the alleged conspiracy,
  4. in some cases, the loans arranged had effective annual interest rates of 500% or greater. In all cases, they exceeded the 45% threshold set in Fla. Stat. Chapter 687 for criminal usury,
  5. in addition to the criminally usurious interest rates, the loans incorporated a purchase option for the benefit of the lender, effective upon the default of the borrower; the option purchase price was calculated by subtracting the current equity in the home from the estimated value of the home, thereby allowing the purported option purchaser to obtain all the equity in the home by simply paying off any liens senior to its own, with little or no money going to the homeowner. Because of the criminal usury, the homeowners found it difficult or impossible to avoid default, thereby triggering the lender’s option and effectively forfeiting all of the homeowner’s equity. One member of the alleged conspiracy was an attorney who aided the operators in enforcing these purchase options by filing lawsuits for specific performance in state court against the financially strapped homeowners.

To view a copy of the lawsuit, see Heise, et al. vs. Porcelli, et al. (U.S. District Court, M.D. Fla.).

Representing the homeowners is Michael Alex Wasylik, Esq., with the law firm Ricardo & Wasylik PL, Dade City, Florida.

For story update, see Scam artist wants a break (Peter Porcelli says he deserves leniency for his cooperation).

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.).

Federal Court Order Freezing Assets In Pennsylvania Mortgage Investment Program

As reported in earlier media reports and posts, a Pennsylvania Federal Court has issued an order freezing the assets of Wesley A. Snyder, who operated a self-described Equity Slide/Wrap-Around-Mortgage program, in which he is alleged to have scammed 800 investors out of millions of dollars. Snyder operated through companies named Image Masters and OPFM, Inc., among others.

To view the Federal Court documents recently filed in this case, see:

The temporary restraining order freezing Snyder's assets expires on November 2, 2007. A hearing in which the U.S. Attorney's office seeks to replace the temporary restraining order with a preliminary injunction is scheduled for October 30, 2007, at 1:30 pm.

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.

Chase Manhattan Participated In Builder Fraud, Says Lawsuit

The Morning Call (Allentown, Pennsylvania) reports:
  • The Chase Manhattan Mortgage Corp. helped create and implement a promotional program for a Pocono home builder that fraudulently qualified hundreds of unwitting customers for mortgages they couldn't afford, according to new claims filed in federal court as part of a lawsuit.

  • Chase also paid a $6,000 kickback to Tannersville developer Gene Percudani for every mortgage it approved under the program, the new documents allege, amounting to a $1.8 million payoff. Filed Wednesday by attorneys representing nearly 100 plaintiffs, the documents were in response to a motion by Chase to dismiss the suit. Chase has previously maintained it was duped by Perdudani.

  • ''We have direct evidence that the home builder told Chase what it was doing, and Chase approved it,'' said Mark Cukor, one of several attorneys representing the plaintiffs.

For more, see Chase Manhattan aided fraud, suit says (Papers in 2002 action say lender was part of Pocono builder's scam).

Reading Fine Print A Must When Bidding At Auction

In Miami, Florida, CBS4 TV reports, among other things, the story of one winning bidder who reportedly got a great deal on a brand new condo which, along with 19 others, was being unloaded at a real estate auction by a local builder, only to find out that the builder exercised a clause in the fine print forcing the buyer to close within ten days or forfeit his deposit. Fortunately for the buyer, who had been planning on financing his purchase, he reportedly was able to close on the sale, but believed that he got such a good deal that the builder, by exercising the clause in the purchase documents, was trying get out of the sale and screw him out of a $32,000 deposit in the process. The buyer warns to read all the fine print if your're thinking of bidding at these auctions. For more, see Not All Foreclosure Auctions Are What They Seem.

Go here to watch the CBS4 TV report, Read Fine Print If Going To A Foreclosure Auction.

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

Monday, October 22, 2007

NYC Foreclosure Rescue Scammer Target Of Lawsuits; Can't Be Found, FBI Investigating

In New York City, The New York Daily News ran an investigative report on foreclosure rescue scams Sunday. Below, an excerpt:
  • Heartless scammers who call themselves "angels" are ripping off scores of desperate homeowners facing foreclosure, a Daily News investigation shows. Instead of rescuing them from the financial abyss, they steal their savings, their homes and their dignity. One self-declared "angel" is Maurice McDowall, who ran a string of companies in Brooklyn, Manhattan and Long Island. [...] The FBI is investigating McDowall, and he's the target of numerous lawsuits charging him with fraud. Lawyers looking for him say he has vanished.

McDowall's equity stripping operations bore names like "Lost & Found Recovery" and "Home Mergers," according to The News' investigation. Reportedly, lawyers for one alleged victim tried but failed to serve McDowall with papers at his latest base of operations, Home Savers Consulting Corp., another company that since has been accused of perpetrating foreclosure rescue schemes.

Jessica Attie, a lawyer with South Brooklyn Legal Services, says she sees more and more rescue scam victims coming to her office. For more, see 'Angels' hit desperate homeowners with foreclosure scam.

----------------

For story updates, 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.).

Go here for other posts on foreclosure rescue operator, Home Savers Consulting.

Another Court Recharacterizes A Sale Leaseback As An Equitable Mortgage

(originally posted 10-19-07)
Last week, a court decision from the Iowa Court of Appeals ruled that an arrangement involving the sale of a home to "an investor" coupled with a contemporaneously executed leaseback giving the homeowner an option to repurchase the home was, in substance, a mortgage and not a true sale. The effect of this decision was to void the sale to the investor and continue to treat the the homeowner as the true owner of the property, even though she actually signed over the deed purportedly transferring title to her home to the investor.

In the case (not technically a foreclosure rescue; the homeowner apparently owned her home free and clear of any liens), a homeowner ("Ms. Tullis") in need of money to pay a number of bills went to a local mortgage company for a loan to be secured by her lifelong home that she inherited from her deceased father. The mortgage company turned her down for a mortgage. The employee at the mortgage company ("Ms. Christy"), wanting to be ever so helpful, told Tullis that she would help her make other arrangements. Coincidentally, Ms. Christy had "a fiance" ("Weeks") who just so happened to be in the business of offering sale-leaseback arrangements to financially hard-up homeowners.

Tullis the homeowner ended up doing business with Weeks whereby she sold Weeks a $90,000 home for $40,000, and then rented back the home for two years. She ultimately fell behind on her rent, and Weeks claimed that her default on the lease voided the lease and repurchase agreement, thereby making Weeks the true owner of the home. Tullis sued Weeks.

Unfortunately for Tullis, the lower local court ruled that Weeks was, in fact, the true owner and that Tullis was out of luck. Had Tullis not pursued the matter further, she would have lost all her equity in her lifelong home. Fortunately for her, however, she was represented by legal counsel who no doubt felt that the court decision was clearly erroneous and accordingly, filed an appeal with the Iowa Court of Appeals.

In reversing the lower court (thereby ruling that Ms. Tullis continued to be the true owner, despite that the legal documents signed by her stated otherwise), the Iowa appeals court ruled that the equitable mortgage doctrine applied in this case. Among other things, the court stated:

  • In arriving at the intention of the parties courts look behind the form of the instruments to the real relationship between the parties. The instruments will be read in the light of the surrounding circumstances and the practical construction the parties themselves placed thereon.

For more on this case, including excepts from the Iowa appeals court decision, see Iowa Appellate Court Recharacterizes Sale Leaseback As A Mortgage on the companion blog to this blog.

For the actual case itself, see Tullis v. Weeks, Iowa Court of Appeals, October 12, 2007.

Representing the homeowner in this case was Laura Lockard, of Iowa Legal Aid, Des Moines, Iowa.

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.). foreclosure rescue

Congress Proposes Law To Clean Up Mortgage Servicing, Appraisal Practices

In an attempt to, among other things, (1) improve the mortgage servicing industry for consumers, (2) address unfair and deceptive practices in connection with real estate appraisals made in transactions involving the borrower's primary home, and (3) require the establishment of escrow accounts (for real estate taxes, insurance, etc.) for certain mortgage loans, the U.S. House of Representatives has introduced a proposed new law, H.R. 3837 - Escrow, Appraisal, and Mortgage Servicing Improvements Act.

In the context mortgage servicing, Congress is calling for a study into the following issues:
  • (A) A survey of the industry in order to examine the issue of the timely posting of payments by servicers, (B) The use of force-placed insurance, (C) The employment of daily interest when payments are made after a due date, (D) The charging of late fees on the entire outstanding principal, (E) The charging of interest on servicing fees, (F) The utilization of abusive collection practices, (G) The charging of prepayment penalties when not authorized by either the note or law, (H) The employment of unconscionable forbearance agreements, (I) Foreclosure abuses.

Whether the call for this study is a tacit acknowledgement by Congress that these servicing practices exist to such an extent that they need to be addressed through legislation, or whether Congress is simply trying the prod the industry into doing a better job of self-regulating, only time will tell.

For the proposed statute, in its current form (as of 10-16-07), see H.R. 3837 - Escrow, Appraisal, and Mortgage Servicing Improvements Act.

Townhouse Development Plagued With Foreclosures; Remaining Owners "On Verge Of Losing Everything"

In St. Paul, Minnesota, the Pioneer Press reports:
  • When he moved to Grey's Riverview Terrace three years ago, Christopher Rocco figured the town home association that runs the complex was in good enough shape. It had about $25,000 on hand, and most of the units had just been reroofed. He never envisioned the jam Riverview Terrace finds itself in today. The wave of foreclosures sweeping across the Twin Cities has hammered the little community on St. Paul's West Side.

  • Of the 21 town homes, nine are in foreclosure, according to Rocco, the association's 37-year-old president. The group can't fix Riverview's rotting siding because it has just $37 - plus $5,000 in debt it can't pay and a ledger filled with unpaid monthly dues and late fees totaling more than $35,000. "We are on the verge of losing everything," Rocco said. "It's a lot of stress." [...] Now, five of the nine units in foreclosure sit empty.

  • Complicating matters, the remaining owners can't foot the bill to replace the damaged siding, a type of engineered wood. To fix it, Rocco estimates, his association would have to levy a special assessment on remaining homeowners for $5,000 to $10,000 each. That's just too much, he said, given that pretty much everyone in the complex lives from paycheck to paycheck. [...] The eyesore siding compounds the challenge of selling the empty units in a market glutted with offerings.

For more, see Foreclosures 'like a cancer' for some communities (A West Side development struggles to stay afloat as town homes sit empty). (if link expired, try here).

Federal Judge Freezes Assets Of OPFM / Image Masters Principal

(originally posted 10-20-07)
The Associated Press reports:

  • A federal judge on Friday froze the assets of a mortgage broker that prosecutors suspect of defrauding hundreds of people out of millions of dollars. U.S. District Judge Yvette Kane issued the order late Friday afternoon against the assets and bank accounts belonging to Wesley A. Snyder. Snyder, 71, of Oley, filed for bankruptcy last month for six businesses and told about 800 customers in central Pennsylvania that he could no longer make mortgage payments on their behalf. Snyder has not been charged.

  • Government lawyers provided probable cause to believe Snyder is running a Ponzi mail fraud scheme that has affected the customers and "numerous" financial institutions, Kane said. Officials believe he is trying to sell or otherwise encumber his property and assets.

[...]

  • Federal prosecutors said his customers were primarily located in Lancaster, Lebanon, Cumberland, York, Berks and Schuylkill counties. The Lancaster Intelligencer Journal reported last week that the company's collapse also affected customers in at least six other states: Maryland, Delaware, Florida, North Carolina, Michigan and New York.

A civil lawsuit was filed late September alleging that Snyder and his companies have ripped off $40 million from 800 Pennsylvania residents in a so-called "wrap around mortgage" investment program.

For more, see Judge freezes assets of Pa. mortgage broker under investigation.

See also, Feds say mortgage scandal was fraud (In filing, U.S. Attorney's office makes accusation for first time) (Lancaster Online - 10-20-07).

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, October 21, 2007

Countrywide Financial Under Attack Again

In Boston, Massachusetts, the Jamaica Plain Gazette reports:
  • Over 150 activists with the JP-based Neighborhood Assistance Corporation of America (NACA) and the Massachusetts Coalition to Stop Predatory Lenders descended on Countrywide Financial’s Centre Street offices Thursday to declare a boycott against the national lender. Over 50 of the activists entered the 708 Centre St. office, where NACA Executive Director Bruce Marks announced the boycott through a bullhorn.
For more, see Rally kicks off boycott of lender.

See also, Neighborhood Assistance Corporation of America Press Release. countrywide pressure zebra

Code Problems In Building In Foreclosure Threaten Tenants With Loss Of Homes

In Albany, New York, the Albany Times Union reports:

  • As their foreclosed building awaits sale, the dozen or so residents of 180 Washington Ave. may be turned out of their apartments Monday because of lingering code violations. The seven-story brick-and-limestone building just below Lark Street has eight occupied units and has been the focus of legal action for inadequate smoke detectors and corridor lighting for about a year, according to Valerie Scott, division supervisor for the city Department of Building and Codes.

  • Six months ago, a foreclosure proceeding was brought against former owner Hatzlocha Realty. Tenants now pay rent to a designated trustee, lawyer Daniel Centi, but say that until a new owner is found, no one will make needed repairs to the building. [...] Sandy Levan, an advocate with United Tenants of Albany, faulted the city for not being more stringent in enforcing building codes. A law passed in 2006 gives municipal courts the power to mandate repairs, something not done in the case of 180 Washington Ave. [...] "We all pay our rent and we want to stay," said Shirley Castle, 74, a retiree who has lived in the building for 13 years.
For more, see Tenants threatened by code problems (Foreclosed Albany building could be declared uninhabitable).

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

Homeless Foreclosure Pets In San Diego

In San Diego, California, KNSD-TV Channel 7/39 reports:
  • The impact of high interest rates and home foreclosures is making its way into animal shelters, according to a local humane society. According to officials at the Escondido Humane Society, they are receiving 20 to 30 calls a day, from people who need to give up their pets because they're losing their homes in foreclosure. People moving from houses to apartments often can't take their dogs or cats with them, so many are ending up at local shelters.

For more, see Foreclosures Leaving Pets Homeless. Go here to watch KNSD-TV video report, Foreclosures Separating Families, Pets.

Go here for more on pets and foreclosures.

Massachusetts Foreclosures Hammering Tenants

The Boston Globe reports:
  • The foreclosure crisis increasingly is claiming the homes of people who never made the mistake of taking out an unaffordable mortgage: renters. Hundreds of tenants in foreclosed buildings have been evicted or are facing eviction by mortgage companies that do not want to be landlords. [...] Through mid-August this year, 1,376 multifamily properties in Massachusetts had been foreclosed, according to new research by the Federal Reserve Bank of Boston. There were 750 multifamily foreclosures in Massachusetts in 2006. The one-two punch of foreclosure and eviction often thrusts three or more families into a sudden housing search.

  • Tomorrow, US Representative Barney Frank said he plans to introduce federal legislation on foreclosures that includes a provision that tenant leases remain in effect after foreclosure, and that tenants without leases must receive 90 days notice before eviction. "Banks will no longer be able to put their convenience ahead of people's ability to live," said Frank, who chairs the House Committee on Financial Services. "We have asked lenders, saying, 'You really shouldn't do this.' Now the next step is to make it mandatory."

For more, see Default crisis is evicting renters (Tenants forced out by foreclosures) (if link expired, try here).

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

Wall Street Journal Reports On The Growing National Copper Theft Problem

A September, 2006 article in The Wall Street Journal on the surge in copper thefts throughout the country seemed to be a relevant story to mention, given the high levels of home foreclosures that are resulting in homes being left vacant, and thus, vulnerable to copper thieves. While the article is over a year old, the guts of the story remain consistent with my recent posts on copper thefts (as well as other metals). Some of the highlights from the story:
  • The high price of copper is hitting home -- literally. The metal's skyrocketing scrap value is inspiring criminals to hit houses, making off with copper coils in air-conditioning units, copper wires, even the copper pipes used for plumbing, leaving some perplexed residents without running water.

  • Police have reported everything from copper vases swiped from gravesites to more serious thefts, such as the copper wire stolen recently from a power substation in Oklahoma City that utility officials say caused a six-hour power outage for 4,000 customers.

  • Copper isn't the only metal sought by thieves. Products made from aluminum and steel are also being targeted -- everything from beer kegs to aluminum luggage carts. But thefts of copper -- which commands a higher price -- are especially onerous for homeowners and builders [Editor's note: not to mention mortgage lenders stuck holding repossessed homes] , as the metal is used throughout modern homes, including the inner coil of central air-conditioning units, electrical systems, gutters and water pipes.

Reportedly, the copper insides of a condensing unit -- the portion of a central-air system that sits outside -- can fetch $50 to $150 at a scrapyard, while replacing an entire unit that's been destroyed in the course of the theft can cost upwards of $2,000. One victimized homeowner commented that the theives who ripped off the copper from his air conditioner probably "didn't even get the market value for it. I would have preferred if they had just knocked on my door and asked for $100."

For more, see Copper and Robbers:Homeowners' Latest Worry (Thieves Target Wires, Pipes, Air Conditioners As Price of Hot Commodity Soars).

Go here for other posts on copper and other metal thefts. copper metal theft zebra

Recent Copper Theft Stories

The following list of links are to recent stories of thieves helping themselves to the copper building components in vacant homes, at construction sites, and from other sources (some links no longer available online).

(Some links no longer available online).

For more stories on stolen copper, see Copper Thefts I and Copper Thefts II. copper metal theft zebra

Metro Phoenix Foreclosures Hammering Tenants

In Metro Phoenix, Arizona, the East Valley Tribune reports:
  • The rising number of foreclosures in the Valley isn’t just hurting property owners — it’s also pinching hundreds of renters who are being forced out when the properties go back to the bank. Ken Volk, president and founder of Arizona Tenants Advocates in Tempe, said he’s getting dozens of calls from renters asking if it’s illegal for landlords to break a lease because of foreclosure. No exact number of displaced tenants were available, but Volk estimated it might be thousands of people across the Valley.

For more, see Increase in foreclosures taking toll on renters.

See also, Record foreclosures hurt Valley apartment renters.

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

Editor's Note: As the tenants are forced out, the foreclosing lenders must be vigilant in keeping the squatters, drug dealers, and copper thieves from moving in. equity skimming unwittingly delta

"Bear The Cat" Added To List Of Abandoned Foreclosure Pets

In Joliet, Illinois, the Joliet Herald News reports:
  • A 9-year-old black cat with big green eyes is in desperate need of a home. His name is Bear and his people had no choice but to leave him behind. He had lived with Sandra Fairbairn and her grown son, Brian Watson, until they became homeless. [...] Bear became homeless when his owners lost their home to foreclosure.

For more, see Homeless Cat Needs Place To Call Home.

Go here for more on pets and foreclosures.

Indiana Couple Facing Foreclosure Involved In Murder-Suicide

In Jasper, Indiana, WRTV Channel 6 (Indainapolis) reports:
  • A house foreclosure may have led to a homicide-suicide of a husband and wife in southern Indiana. Police said [the homeowners] were found dead in their home Monday night of gunshot wounds. Investigators said they think [the wife] shot her husband and then turned the gun on herself. A Dubois Circuit Court judgment and decree of foreclosure on the couple's house was filed earlier this year and was recently placed on their front door.

Source: Foreclosure May Have Led To Homicide-Suicide (Couple Found Dead In Home Monday).

See also, Slayings astonish small town (Neighbor describes couple as friendly).

Go here for other posts on foreclosures and suicide. suicide homeowner foreclosure zeta

Saturday, October 20, 2007

More Subprime Refinance Homeowners Facing Foreclosure

In Philadelphia, Pennsylvania, Philadelphia City Paper reports, among other things, two stories of local residents who are threatened with the loss of their homes as a result of subprime mortgage refinancings of their homes, in which they reportedly ended up signing for mortgages the terms of which were different than what was orally represented to them.

In one case, a 30 year old legally blind woman suffering from kidney failure, diabetes and congestive heart failure, living in a home she inherited from her father was sold on a mortgage in which the payments were considerably more than waht was promised to her. Because of her impaired vision, she depended on others to explain the mortgage. She ultimately defaulted and the home is in foreclosure. Naturally, neither the mortgage brokerage owner nor the attorney present at the closing, have any recollection of the woman's mortgage. The woman apparently is not going down without a fight, however, as her case has been picked up by the non-profit law firm, Community Legal Services of Philadelphia, which hope to prove that she was the victim of predatory lending, the practice of deceiving a borrower into accepting a high-cost loan or a loan they can't afford (legally or illegally), and stave off her foreclosure.

In another case, the apparent victim of deception in a subprime refinancing is a 69 year old grandmother who relied on the representations of her cousin who was the mortgage broker she went to for her loan. At the moment, she is working with ACORN and Legal Aid, hoping to reach an agreement with her mortgage company. She hasn't confronted her cousin yet, and she can't believe that he would have purposefully deceived her.

For more, see Betting the House (How bad is the subprime crisis in Philly?) (if link expired, try here).

Water Shut Off, Unsafe Conditions In Building In Foreclosure Force Tenants Out

In Central Falls, Rhode Island, The Pawtucket Times recently ran a story on a landlord milking the rent from an apartment house without paying for building maintenance, the mortgage payment, or utilities that local code enforcement was required to force the tenants to move, despite that they all had paid receipts for their October rent. There was also enough evidence of four seriously neglected dogs belonging to the landlord that the local animal control agency had to take custody of them, with three being placed in the custody of the Providence Animal Rescue League; one had to be euthanized due to its ill health.

Reportedly, water service to the building has been shut off, the building is going into foreclosure, and the conditions at the building were quite gruesome. Doors were boarded up by authorities, and signs were put up indicating that the building was unsafe. The displaced tenants were told they could stay at a facility run by Crossroads Rhode Island in Providence temporarily.

For more, see Hold your nose, bar the door (if link expired, try here).

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

Go here for more on pets and foreclosures. equity skimming unwittingly delta

Illinois City Takes Action To Avoid Utility Bill Stiffing On Foreclosed Homes

In Geneva, Illinois, the Daily Herald reports:
  • As more customers in Geneva lose their homes to foreclosure, the city of Geneva wants to make sure it isn't stuck with unpaid utility bills for those properties. It's starting to ask foreclosing lenders for a $100 deposit to transfer service, and it is also presenting utility bills to them at real-estate closings if it can't get a deposit. [...] Typically, lenders want electrical service to continue to the homes, even if they are empty, so that lights can be turned on for visitors and furnaces run. [...] "It's just a way for us to control our bad debt," said Don Weis, the city's finance director.
For more, see City wants utilities paid on foreclosed homes.

Friday, October 19, 2007

More On Alleged $40 Million Fleecing Of 800 Pennsylvania Residents In Mortgage Investment Program

Lancaster Online (Lancaster County, Pennsylvania) reports:
  • A central hub and help center to assist families facing possible foreclosure due to the collapse of mortgage broker OPFM Inc. will open at Lancaster Farm & Home Center. Also, a rally is planned in Harrisburg next week to prod state officials into doing more to assist those families. State Sen. Michael Brubaker helped arrange a group of attorneys, accountants, banking officials and other professionals who will donate their time to help the 800 families left deeper in debt by the bankruptcy of OPFM, which did business as Personal Financial Management Inc.

For more, see More help for OPFM victims.

Earlier in the week, Lancaster Online reported:

  • About 500 people forced into a financial quagmire by the collapse of OPFM Inc. commiserated Tuesday at Highland Presbyterian Church about the mortgage broker's alleged duplicity. Some were desperate, many were sad, a few cried, others yelled, and most were angry. But everyone showed up looking for direction. Direction on how to deal with monthly mortgages that have ballooned by as much as 50 percent after Wesley A. Snyder, the company founder and president, allegedly left 800 customers with a $40 million tab when he filed Chapter 7 bankruptcy a month ago.

For more, see Mortgage holders vent frustrations.

For other recent media reports on the alleged OPFM / Image Masters scam, see:

NYC Mortgage Fraud / I.D. Theft Investigation Picking Up Steam

In the New York City metropolitan area, the mortgage fraud, identity theft case against Jacob Milton, 41, of Port Washington, New York appears to be expanding, according to a story in Newsday. He currently is charged with scamming another man's identity, buying two homes in his name and leaving him more than $1 million in debt. Suspected victims are reportedly coming out of the woodwork, as they are emerging both in Queens and Nassau counties claiming that their identities were stolen and used to make credit card purchases at chain stores there. An excerpt from the story:

  • The investigation, which started in July, is expected to uncover dozens - maybe hundreds - of victims, police sources said, and is likely to involve millions of dollars in identity theft and mortgage fraud. Detectives still have reams of documents to sort through, but there is already evidence of widespread fraud, sources said, with names and addresses cut out of some documents then pasted onto others.
A woman arrested with Milton on Monday was initially identified as Nira Niru and described as his sister. Authorities now say her name is Shamsun Nira, 38, and that her relationship to Milton is not clear. She is being held on $500,000 bail. Milton is being held without bail on felony charges of grand larceny, identity theft and scheme to defraud, among others. For more, see Mortgage fraud case gathers momentum.

For earlier media reports, see:

Go here for other posts on Jacob Milton.

For an earlier alleged mortgage fraud scam with connections to the New York City Bangladeshi community and another mortgage broker operating out of Jackson Heights, Queens, see:

Ringleader In Atlanta $15M Straw Buyer, Flipping Scam Cops Federal Plea

In Atlanta, Georgia, the Atlanta Business Journal reports:
  • A Georgia man pleaded guilty late Wednesday to running a $15 million mortgage fraud ring in Atlanta's West End. Kevin G. Wiggins, 41, of Ellenwood, Ga., pleaded guilty in federal district court to charges related to a large-scale mortgage fraud scheme that targeted West End neighborhoods in Atlanta in 2001 and 2002. Wiggins contracted to buy more than 80 distressed properties primarily in Atlanta West End neighborhoods at their true value which ranged from $24,000 to $80,000. Then, before he actually bought the property, he deeded the properties to unqualified straw borrowers, some of whom were his relatives. Using false information about the unqualified straw borrowers, he arranged for financing for them and got more than $15 million in mortgage loans. [...] Wiggins pleaded guilty to one count of conspiracy and two counts of wire fraud.

For more, see Ellenwood man guilty in Atlanta mortgage fraud case.

Illinois Regulators Revoke Mortgage Licenses Of 3 For Fraud; Criminal Charges May Be On Horizon

In DuPage County, Illinois, The Herald News reports:
  • Criminal charges could be filed in DuPage County Circuit Court in Wheaton against the operators of a Plainfield-based mortgage company accused of encouraging an area couple to falsify a loan application. State authorities on Tuesday revoked the license of Investor's Choice Mortgage Corp. of Plainfield; its owner, Kelli Wilson; and loan originator Amber Seng, according to a release from Gov. Rod Blagojevich's office. The corporation also was fined $20,000.

  • The state's Mortgage Fraud Task Force and Department of Financial and Professional Regulation probed Investor's Choice with assistance from the DuPage County sheriff's office, the release indicated. State and local agents searched the company's offices Tuesday, gathering evidence that could lead to the filing of criminal charges, the release stated.
For more, see Plainfield mortgage lender may face criminal charges.

For State of Illinois Press release, see Mortgage Fraud Task Force has shut down mortgage company in DuPage fraud ring.

Go here for State of Illinois revocation orders: Investor’s Choice Revocation, Investor's Choice Fine, Kelli Wilson, loan originator revocation, and Amber Seng, loan originator revocation.

700 Unit Planned Condo Construction In Foreclosure; No Word As To Status Of Buyer Deposits

In Bradenton, Florida, the Herald Tribune reports:
  • One of the region's largest condominium projects is the target of a foreclosure suit by one of the nation's biggest banks. If Wells Fargo's suit against the 700-unit Riviera Southshore is successful, Riviera Southshore will be the most prominent Southwest Florida project to date to succumb to the pressures of a sagging real estate market. [... Developer Frank] Maggio defaulted on a $22.3 million loan from the bank, according to the suit filed earlier this month by Wells Fargo.

No word as to the status of any contract deposits put down by the developer's prospective buyers. For more, see Foreclosure suit imperils condo development on Manatee River.

Arizona Foreclosure Sale Voided For Failure To Properly Serve Lawsuit Papers On Homeowner

The Arizona Republic reports:

  • A homeowners association can't foreclose on someone's house for not paying assessments if it can't prove the owner was served with the lawsuit, the state Court of Appeals has ruled. Without dissent, the court threw out a judgment obtained by Olive Green Vistas Homes Association against Santos Cruz. The judges said that without proof of service, the foreclosure, and everything else that happened subsequently, is legally void.

  • The judges also said that the fact that Cruz was aware of what was happening after the initial default judgment was entered against him is irrelevant.
For more, see (no longer available online) HOA loses appeal, foreclosure case is thrown out (Lawsuit wasn't served properly, court determines).

See also, Olive Green Villas vs. Cruz (10-2-07; available online courtesy of the Arizona Court of Appeals).


Editorial Note

This case serves as a reminder to attorneys who are brought in to represent homeowners in a foreclosure action that is either in progress or that has already progressed to a final judgment that (at least in states requiring a judicial foreclosure or other states requiring service of papers by a process server or sheriff's deputy), always first review the "affidavits of service" filed by the process server or deputy before addressing the merits of a case. I can speak from first hand knowledge that process servers and deputies screw up more often than anyone can imagine when serving (or purportedly serving) papers on a defendant in a lawsuit. Why foreclosing lienholders can get away with these errors being made is simple: either a homeowner in foreclosure can't afford an attorney to represent them, or if they have an attorney, the attorney often just doesn't think to review the file to see that the process serving requirements have been properly complied with (often, the attorney is simply unfamiliar with the process serving requirements - state statutes set forth the precise requirements and generally require strict compliance therewith; failure to strictly comply will result in a subsequently obtained judgment in the case being either "voidable" - at a minimum - or completely null and void, as in this case).

Go here and go here for other posts on foreclosures involving faulty notifications to property owners.

Go here for other posts on process server screw ups. ScrewUpProcessServing foreclosure faulty notice