Another Ohio Federal Judge Demands Docs In 27 More Foreclosure Cases; Warns Attorney "Don't Do It Again!"

(original post 11-17-07)
The New York Times reports:

• After the recent dismissal of 14 foreclosure cases by a federal judge in Cleveland, another federal judge in Ohio has given lenders 30 days to prove that they own the properties they intend to seize from troubled homeowners in 27 other cases. The second judge, Thomas M. Rose of Federal District Court, in Dayton, ruled Thursday that while the lawyer filing 26 of the cases had claimed his clients owned the properties at the time the foreclosures began, he had not submitted the necessary proof to the court.

• “Failure in the future by this attorney to comply with the filing requirements,” Judge Rose said, “may only be considered to be willful.” [ie. Do it again and I'll scorch you!].

***

• A recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law. Judge Rose cited Ms. Porter’s study in his ruling.

For more, see Judge Demands Documentation in Foreclosures.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha

More On "Hijacking" Of Foreclosure Process By Mortgage Lenders

(original post 11-17-07)
Cuyahoga County, Ohio (Cleveland and surrounding municipalities) is one area that is reportedly taking a tremendous beating when it comes to its residents losing their homes to foreclosure. So when word got out that Federal Judge Christopher Boyko slammed Deutsche Bank National Trust Co. in a court ruling recently for attempting to foreclose on Cleveland-area homes without being able to provide the legal documentation demonstrating that it actually owned the mortgages, the Cleveland Plain Dealer chimed in with several pieces that ran in its publication. For those interested, see:

• Federal judge accuses mortgage lenders of hijacking foreclosure system for profits (Criticism joins wave of dismissed cases ),
• Judge's order trips up banks trying to foreclose (Judge insists on key document),
• Excerpts from Judge Boyko's comments on mortgage lenders,
• Judges are right to make lenders follow the rules before foreclosing on peoples' homes (an editorial) (Cleveland federal judge's ruling puts lenders on notice that the rules apply to them as well as to borrowers).

Some of the highlights from the Plain Dealer coverage:

• Boyko's colleague, Judge Kathleen O'Malley ... , threw out 32 foreclosure cases this week for the same reason.

• Stephen Bucha, chief magistrate of Cuyahoga County Common Pleas Court, has dismissed hundreds of foreclosure cases for not having paperwork. He said it can be time-consuming and expensive for lenders to produce and record the documents, adding, "They wait until they have to do it." Bucha said judges in his court, which has about 10,000 pending foreclosure cases, are studying ways to adopt the federal court's rule.

• In an interview Friday, U.S. District Judge Dan Polster said he expected more foreclosure cases dismissed in federal court, including from his own docket. [...] Polster said the court has become more vigilant in foreclosure cases because they are too one-sided. Many homeowners do not contest the foreclosure, so the lenders face no defense lawyers in court proceedings. "It's up to us to supervise it," said Polster. "When you're taking people's homes, it falls to the integrity of the court."

• It's true, even now, that the banks are free to refile the cases. But the symbolism of Boyko's well-reasoned and well-written ruling is huge. It puts investment banks on notice that although many of them suspended careful lending practices and other rules in the rush to buy and pool subprime loans into junky bonds and drive up profits at almost any cost, the courts won't be taking such holidays from their rules.

• In the frenzy to underwrite and sell these bonds, lenders got sloppy. It's inevitable that some won't be able to hand over the proper documentation showing which mortgages they legally hold. That means thousands of foreclosure suits stand a good chance of getting tossed out or at least delayed.

Go here to view Judge Boyko's Court ruling.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha

Federal Court Dismisses 14 Foreclosure Cases; Deutsche Bank Fails To Provide Proof Of Mortgage Note Ownership

(original post 11-16-07)
In Cleveland, Ohio, The New York Times reports:

• A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools. Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

***

• [T]he Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners.

***

• Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”

***

• Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case. Borrower advocates cheered Judge Boyko’s ruling.

• The plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.” The cases could be filed again in state court, however.

The court made clear that Deutsch Bank can refile these foreclosure cases with the appropriate documentation establishing proof of ownership of the mortgages and mortgage notes they are attempting to foreclose (assuming, of course, that they can actually find the physical paperwork - ie. the actual mortgage notes, assignments, affidavits, etc.; no photocopies).

For more, see Foreclosures Hit a Snag for Lenders (may need subscription; if no subscription, try here).

See also, Court Challenges Trust on Foreclosures (Federal Judge Tells Trust to Show Clear Mortgage Documentation in Foreclosures) (if link expires, try Federal judge tells trust to show clear mortgage documentation in foreclosures - same story, different headline).

Go here to view the Federal Court ruling.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha

Home In Foreclosure Goes Up In Flames; Purchased With 100% Financing Less Than Year Ago

In Lathrop, California, News 10 reports:

• Less than a year ago, the house at 16671 Ore Claim Trail in Lathrop sold for $650,000, but neighbors say they never saw anyone move in. Three weeks ago, the lender filed a notice of default against the owner. And on Monday night, an unusually violent fire blew out the windows of the home before the first firefighters arrived. Inside, they found the body of an unidentified man. [...] Property records show the house is owned by Emmanuel Sibug, who owes about $100,000 more than the home is worth.

***

• The fire appears to be the second bit of misfortune to strike the same family in the same neighborhood this year. On January 12, federal drug agents raided an indoor marijuana growing operation at 700 Pioneer Avenue, less than a half mile away. The former pot house is owned by Jesus Sibug. It remains vacant and still shows signs of the raid ten months ago. Both houses were purchased at about the same time using the same lender with 100 percent financing. News10 tried contacting members of the Sibug family. A woman who answered the phone at a Sibug listing in Mountain View said Emmanuel and Jesus are brothers.

For the story, see Lathrop Foreclosure Fire Leads to Homicide Investigation; go here for News 10 video (no longer available online).

See also, Answers sought on fire, dead body (Man discovered during blaze at foreclosed Lathrop home) ("Like many of the homes on the block, the home was empty and in the foreclosure process.")

For more on fires & foreclosures, go here and go here. foreclosure arson yak

Compensation For Those Ripped Off By NJ Attorneys May Go Up To $400K

According to a story in the publication New Jersey Lawyer, the New Jersey Lawyers' Fund for Client Protection is sitting on a record $18 million surplus. The fund represents money that is available to victims who have been ripped off by a New Jersey attorney. The fund is financed by clipping the estmated 50,000 New Jersey attorneys $50 per year in assessments. Reportedly, the New Jersey State Bar Association for years has pressed unsuccessfully to eliminate the annual assesment of its members. According to the story:

• Since 1996, the fund's payouts to clients ripped off by unscrupulous lawyers have been limited to $250,000 per victim and a total $1 million per lawyer. Currently, the New Jersey Supreme Court, at the fund's request, is considering increasing the caps to $400,000 and $2 million.

***

• "As long as the fund is telling people who've been hurt by a lawyer that they can't get all their money back, the notion of removing the assessment is simply misguided," [Kenneth J. Bossong, the fund's director] said.

For more, see Fat surplus but no break for lawyers.

For those ripped off by New York attorneys, see The Lawyers Fund for Client Protection of the State of New York.

For other states, see:

• Directory Of Lawyers' Funds For Client Protection (American Bar Association - July, 2007); or
• try here (for a "Google search").

Atlanta, GA; Elk Grove, CA Neighborhoods Among Many Dealing With Crime, Public Safety Concerns That Follow Foreclosures

The Associated Press reports:

• Eighty-five bungalows dot the cul-de-sac that joins West Ontario Avenue and East Ontario Avenue in Atlanta. Twenty-two are vacant, victims of mortgage fraud and foreclosure. Now house fires, prostitution, vandals and burglaries terrorize the residents left in this historic neighborhood called Westview Village. [...] "They've seen a lot of prostitution in the area, vagrants wandering in and out of the empty houses and drug activity," said Officer Dakarta Richardson of the Atlanta Police Department. "Some people that I talked to are afraid to walk out of their homes at night."

***

• In the Franklin Reserve neighborhood of Elk Grove, Calif., full of subdivisions with half-million dollar homes, homeowners are fighting inner-city problems like gangs, drugs, theft and graffiti. During the boom, the suburb just south of Sacramento sprouted 10,000 homes in four years, attracting investors from the San Francisco area. Now many houses stand empty, weeds overtaking lawns, signs lining the street: "Bank Repo," "For Rent," "No trespassing -- bank owned property." A typical home's value has dropped from about $570,000 to the low $400,000s.

***

• The homeowners sometimes have no options but to accept any renters they can get, said Norm Schriever, a local real estate and loan agent. "You get some bad renters in there and the weeds start growing and a few windows are broken and it starts descending into a feeling of chaos," he said.

• Thieves also have looted some empty homes, stripping them of electrical appliances or valuable copper wiring and pipes that can be sold as scrap, he said. Banks aren't watching foreclosed properties closely, said Modesto, Calif., Police Chief Roy Wasden. "As it gets colder, (squatters) will start building fires in these structures and it's quite dangerous," he said.

• Franklin Reserve resident Susan McDonald said two of the homes on her block were turned into indoor marijuana farms. Both caught fire last summer after the pot growers tapped into the city's electric grid with faulty wiring.

For more, see Empty Houses Home to Crime As Loans Fail (Neighborhoods Suffer As Crime Follows Foreclosures Into Vacant Houses).

Go here for posts on vacant homes, foreclosures and squatters. squatter foreclosure zebra pot grow ops alpha

Foreclosures Squeezing Tenants, Cops, City Governments

In Minneapolis, Minnesota, The Associated Press reports:

• Homeowners who can't keep up with their mortgages aren't the only ones being hit by the foreclosure crisis. City governments and city officials are losing time and money to the problem, too. [...] A bright orange notice on the front door [of one tenant] warns that the water will be shut off unless the landlord pays a bill of $117. The duplex is also in foreclosure, so either way [the tenant] has to find new housing.

Among the enumerated consequences of foreclosed homes for municipalities are:

1. Unoccupied houses don't use utilities such as water, sewer and garbage service, meaning the costs have to be spread among fewer people citywide,
2. Cops spend more time chasing people out of foreclosed properties,
3. Inspectors spend more time citing properties for uncut grass or unshoveled snow,
4. Government property appraisers have a tougher time calculating fair market value of homes for tax assessment purposes.

In nearby New Prague, the city has to decide whether or not to foot the bill for electricity to keep sump pumps running to a pocket of foreclosed homes in one subdivision. If they don't, the risk of possible water damage to the homes will make them tougher to sell and keep them off tax rolls longer. For more, see Cities, tenants also feel foreclosure effects.

Go here for other municipalities getting squeezed by foreclosures. delinquent tax problem

850+ FHA Loans Originated In Alleged Scam End Up In Foreclsoure; Six indicted

The San Bernadino County Sun reports:

• Four San Bernardino County residents and two other people have been indicted in a mortgage fraud scheme that federal officials said cost the government and private lenders more than $10 million.

• John Richard Varner, 54, of Hesperia; Stephen Ray Harper, 50, of Ontario; Katherine Ann Kilmer, 52, of Hesperia; Ricardo Bonilla, 46, of Fontana; Abraham Julian Rezex, 59, of Downey; and Richard Elroy Giddens, 67, of Riverside face federal charges of conspiracy, bank fraud and tax violations, according to a news release issued by the Department of Justice.

• Investigators with the Department of Justice said that from 1997 to 2002, all six ran a scheme out of the Mortgage One Corporation, formerly based in Hesperia, and M-1 Capital Corporation, formerly based in Riverside and Rancho Cucamonga. The companies had been in the business of approving, funding and then selling home mortgage loans, Assistant U.S. Attorney Sheri Pym said. Many of those loans were insured through the Federal Housing Administration, an agency within Housing and Urban Development.

***

• HUD has since identified more than 850 FHA-insured loans approved by Mortgage One and M-1 Capital that went into foreclosure and made insurance claims to HUD. The estimated losses suffered by the government and the private lenders are at least $10 million, officials said.

For more, see 6 indicted in mortgage fraud (Officials say scheme cost government, lenders $10M).

See also, U.S. Attorney Press Release.

Bond Revoked For Foreclosure Rescue Operator Facing Criminal Charges; Allegedly Engaged In More Equity Stripping Scams While Awaiting Trial

After being released on bond and awaiting trial (originally scheduled for November 13, 2007) on criminal charges relating to an alleged foreclosure rescue, equity stripping scam that allegedly victimized more than 100 homeowners by stripping them of at least $12 million in home equity, Southern California foreclosure rescue operator Maria Juarez (aka Maria G. Juarez), has been charged again for allegedly engaging in additional equity stripping scams of homeowners facing foreclosure.

She was initially charged back in 2006 by being added as a defendant in a grand jury indictment that was originally handed up in 2005. She was facing charges along with the following four confederates (all from California): Martha Rodriguez, of Downey, Edward Seung Ok, of Torrance, Cynthia Valenzuela, of Downey, Vladimir Stefanovic, of Lancaster. By the summer of this year, her four confederates had agreed to plea guilty and were awaiting sentencing, pending Juarez' November 13 trial (presumably, they were all cooperating with prosecutors and prepared to testify against her).

A superceding indictment adding additional equity stripping charges against Juarez involving transactions occurring after she was released on bond was filed on November 1. Needless to say, she is now in the custody of the U.S. Marshal and is being held with no bail; her November 13 trial has also been postponed. Go here for earlier posts with links to media reports & FBI press releases relating to the initial charges.

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.).

Metropolitan Grapevine / POS Metro Dream Homes Receivership Website

(original post - 11-15-07)
A website has been established by Invotex, Inc., the company who has been appointed by a Maryland state court as the Temporary Receiver to communicate information to the public regarding the Metropolitan Grapevine / POS Dream Homes fiasco. Go here for the POS DH LLC et al in Receivership website.

If you are an investor who has been screwed out of money, you can go here to file an Investor Proof of Claim. Go here for the Instructions for the Proof of Claim.

The receiver is currently attempting to recover the vehicles owned by POS Dream Homes. Anyone with information on the whereabouts of the vehicles owned by POS Dream Homes and used by the individuals associated with it and the related companies is being asked to contact the POS Receiver (this link includes the list of the POS Dream Homes vehicles being sought - includes description, make, model, tag and VIN numbers, and last known location).

Go here for a copy of the latest court Order Freezing Assets And Appointing A Temporary Receiver (11-14-2007). For a list of all the entities covered by the receivership, go to Exhibit A on pages 7-8 of this Order. The list of real property and bank accounts frozen by this order is also in Exhibit A, on page 9.

For earlier court orders and related documents, as well as any and all information currently being made available to the public by the POS Receiver, visit the POS Receiver website.

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

Florida Attorney Disbarred For Swiping $110K From Dead Client; Criminal Charges Pending

In Florida, the St. Petersburg Times reports:

• The Florida Supreme Court recently disbarred attorney Angelo Cappelli, 37, a former Republican state House candidate from St. Petersburg who is facing charges of grand theft and perjury. Cappelli was one of eight attorneys disbarred statewide by the court, according to the Florida Bar. [...] Cappelli, a wealth and investment adviser at SunTrust Bank, was considered a hot political newcomer.

***

• St. Petersburg police arrested Cappelli in August, alleging that he stole $110,500 from the trust account of a deceased SunTrust client. Cappelli's attorney Frank Louderback recently said SunTrust has been reimbursed.

For more, see High court disbars former candidate.

See Theft Of Escrow Funds I and Theft Of Escrow Funds II for other stories of trust account / escrow account theft of funds. sneaky slick escrow agents beta

Iranian National Sentenced In Texas Home Flipping Scam

The Austin American-Statesman reports that Firooz Deljavan, the leader of a sprawling Austin-area real estate scheme that prosecutors say defrauded banks of millions of dollars, was sentenced in a Texas Federal Court Tuesday to five years in prison for conspiracy to commit money laundering and conspiracy to commit bank, wire and mail fraud. According to the story:

• Deljavan, 56, was the lead defendant among 25 real estate professionals and buyers indicted in 2004. They were accused of submitting fraudulent documents in buying dozens of homes in the Austin area, misrepresenting the value with bogus appraisals and then selling the houses to associates who had secured about $15 million in mortgages. [...] Deljavan's lawyer, Gerardo Montalvo of Houston, said that his client's plea saved the government money in avoiding a trial.

***

• Deljavan, an Iranian citizen, fled Austin with his wife, Rosemary Rios, and his brother after the FBI and IRS began investigating them in 2004. Deljavan and Rios were extradited to Austin last year after they were arrested at a border crossing between Turkey and Iran. Turkish authorities refused to extradite Deljavan's brother, a Turkish citizen. Rios pleaded guilty this year to making a false statement to obtain a real estate loan and was sentenced to time served. In addition to Deljavan's brother, one other defendant in the case is a fugitive. One defendant committed suicide after he was indicted, and charges against another were dismissed.

Of the 21 others involved, all were previously sentenced; the two longest sentences assessed were for two years.

For more, see Austin real estate exec gets 5 years in house-flipping scheme (Sentencing guidelines had suggested minimum of 21-plus years).

Oregon Cops Charge Phony Landlord In Rent Scam; Used Craigslist to Lure Victims

In Portland, Oregon, KGW-TV Channel 8 reports:

• Portland Police arrested a woman for scamming people out of rent or real estate money in a Craigslist scam. Detectives charged 33-year-old Lynne Sisto Tuesday for theft and aggravated theft. She had previously faced similar charges. Investigators said Sisto would contact people looking for places to live through the Web site, and pass herself off as the property owner. Then police said she would get deposit or rent money before the victims realized what had happened.

According to the television report, police estimate that victims were scammed out of over $100,000. Go here to view KGW-TV Channel 8 video report.

To read online report, see Woman accused of elaborate Craigslist house sale scam.

See also, Woman Posing As Landlord Arrested Again (KPTV Channel 12).

Go here for other stories on prospective tenants being scammed out of rent money when looking to rent a home. unwitting tenant rent scam zebra

$20M+ Escrow / Check Kiting Scam Lands NY Attorney Ten Year Prison Sentence

In Westchester County, New York, The Journal News reports:

• Anthony Bellettieri thought he could make the numbers add up. The Harrison real estate lawyer played the float between his firm's two accounts, writing checks in an amount that gave the appearance that the more than $20 million he stole was still there. He gambled he could beat the system. But there was one number Bellettieri didn't take into account in the scheme: 60. That's how many victims have come forward to say they lost the money they entrusted to Bellettieri, money that turned up gone when the scheme went belly up.

***

• One of Bellettieri's victims sat with more than 20 friends and family members during the sentencing. Another victim, 81-year-old Michael Williams of Harrison, also was in court. He lost $200,000 he was supposed to get when he refinanced his home to help his grandson buy a house. His daughter, Deborah Annunziata, told [Federal District Court Judge Charles] Brieant the theft has had a terrible impact on her family. "We're just devastated by all this," she said.

***

• Bellettieri took advantage of a printing mistake on checks issued to the firm for two accounts, one of which was a funding account, the other an escrow account. Money was supposed to be released from the escrow account to the funding account for closings. As one account was credited, the other was supposed to be debited, making for a zero-sum transaction. But the printing mistake caused a two-day hiccup in the debiting, giving the appearance that the accounts were flush when they were actually empty. Bellettieri wrote $15 million to $18 million worth of checks daily to keep up that appearance, according to the suit.

For more, see White Plains real estate lawyer gets 10 years for $22 million fraud.

See also, Real estate lawyer gets 10 years for fraud (Mid-Hudson News).

For other posts on theft of escrow money, go here and go here. sneaky slick escrow agents beta

"Wild West" Lending Practices Blamed For Cleveland-Area Foreclosure Problems

In Cleveland / Cuyahoga County, Ohio, CNNMoney reports:

• As the Treasurer of Cuyahoga County in Ohio, Jim Rokakis spends a lot of his time trying to deal with Cleveland's foreclosure crisis. When asked recently just how bad it is, Rokakis unfurled a six-foot by four-foot Cleveland city plot map. Each lot was covered with dots of red ink where foreclosed homes filled the plots. From a few feet away, the map looked heavily freckled, while some neighborhoods nearly melted together in crimson masses.

***

• According to Rokakis, Cleveland got hammered because lax governmental oversight from the state allowed Wild-West lending. "No one was watching," he said. "There was no sheriff in town. The state legislature was dominated by banking interests."

For more, see Where Cleveland went wrong (It's too easy to blame the city's housing collapse on Rust-belt economics. How bad government and greed made it one of the nation's foreclosure capitals) (if link expires, try here).

See also, Mortgage fraud task force opens command center in Cleveland ("Federal, state and Cuyahoga County agencies will fill the office with seven full-time and six part-time staff, county Prosecutor Bill Mason said. Investigators will collaborate on cases that may number in the thousands and involve hundreds of millions of dollars. [...] Mason's office already has charged more than 140 people in cases involving more than 200 properties and $37.5 million in loans.").

Wisconsin Legislature Hears Testimony On Proposed Foreclosure Rescue Statute

The Associated Press reports:

• Some Wisconsin homeowners desperate to keep their houses have fallen prey to scam artists who falsely promise to help them avoid foreclosure, [Wisconsin] lawmakers said Tuesday. The salesmen use deceptive practices to convince homeowners to transfer ownership of their properties, which they refinance and sell for a profit, lawmakers and victims' advocates said. They testified during a public hearing in favor of a bill that would create new regulations governing so-called foreclosure rescues.

• Typically, those transactions involve a homeowner facing foreclosure transferring the property to an investor in exchange for assurances he can continue to live there under a rent-to-own agreement. The investor pays off the amount owed in foreclosure.

***

• In written testimony, Louise Kirk said she faced foreclosure on her Milwaukee home after her husband had open heart surgery and lung cancer. She responded to a flier from a woman who promised help selling the home. The woman insisted she be granted power of attorney and Kirk agreed. The woman then sold the house without telling Kirk and made tens of thousands of dollars in profit, said Kirk, whose husband died around the same time. "My nerves were shattered with the death of my husband, but the fact that there was money taken from me, took me over the edge," Kirk wrote.

• Backed by the Legal Aid Society of Milwaukee, Kirk sued the woman last month in Milwaukee County Circuit Court for fraud. Legal Aid Society lawyer Catherine Doyle said another one of her clients agreed to a transaction in which she would rent her home from an investor for one year and then buy it. She still could not afford the home after one year because of high fees and rent charged by the investor, who sold it at a $50,000 profit.

• "She got nothing," Doyle said. Of her clients, she said: "When they find out how much money these people have taken from them, it is a devastating moment."

For more, see Wisconsin lawmakers say desperate homeowners are being swindled.

Go here for other posts on the Legal Aid Society of Milwaukee.

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.).

Secret Service Investigating Central Florida Foreclosure Rescue Operator; Resident Loses Home To Scam

In Osceola County, Florida, Central Florida News 13 (Orlando) reports:

• The Secret Service is now investigating a possible case of mortgage fraud that possibly includes hundreds of local homeowners. Teodoro Flores lost his home in Poinciana Wednesday. It all surrounds a company called 4 Solutions. It's accused of attracting families in Central Florida and throughout the state posing as a foreclosure prevention company and running away with people's money.

According to the television report, Flores unwittingly signed over title to the home in a transaction orchestrated by the Tampa-based 4 Solutions in a sale-leaseback scam. After coming home from work recently, he found all of his belongings out on the street, a result of a foreclosure eviction. In addition to the Tampa office of the U.S. Secret Service, the local Tampa cops are also investigating 4 Solutions.

Go here to watch television coverage on this story.

To read the online story, see Home Lost In Foreclosure Scheme.

Go here for 4 Solutions website (no longer online).

Go here for other posts on 4Solutions.

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.).

North Jersey House Flipping Operator Cops Plea To Federal Conspiracy Charge

In Newark, New Jersey, the Herald News reports:

• A Bergen County real estate magnate who for years exploited unsuspecting Paterson homebuyers while bribing low-level city employees, pleaded guilty Wednesday to conspiracy to commit money laundering. Michael Eliasof, of Mahwah, agreed to a plea deal with federal prosecutors in U.S. District Court for overseeing a wide-ranging, house-flipping scheme between 2002 and 2005 that undermined an already shaky Paterson housing market. Eliasof, who at one time was a major operator in Paterson's Section 8 program, was charged with taking between $1 million and $2.5 million in illegal proceeds from the sale of overvalued properties to buyers not qualified to purchase them.

• The circle of professionals Eliasof worked with included Garfield Municipal Judge William C. Colacino Jr., who was the closing attorney for dozens of deals Eliasof lined up with inexperienced buyers. Colacino was not in court Wednesday and has not been indicted. He declined to comment Wednesday.

• Eliasof and 10 co-conspirators, including mortgage brokers, loan officers and appraisers, artificially inflated the values of properties throughout Paterson. They then falsified loan applications and income levels for those buyers whom Eliasof lured in with "no money-down" deals, according to the federal charges.

For more, see Magnate guilty in housing scheme.

See also:

• Corruption trial kicks off (Herald News - 12-5-07),
• Agent 'made us poorer' (Herald News - 11-1-07),
• Property scam retold to court (Architect of scheme admits money launder) (The Star Ledger - 11-15-07).

Go here for other posts on this ongoing investigation.

Miami Condo The Poster Child For Cash Back Mortgage Fraud Scams

In Miami, Florida, Reuters reports:

• At first glance, the 43-story building in Miami's international banking district seems little different from other high-rise condominiums overlooking the turquoise waters of Biscayne Bay. But the 643-unit condo known as the Club at Brickell is a leader in mortgage foreclosures and it appears also to stand at ground zero in a blizzard of fraud that may lie behind many of the failed loans threatening to bury the U.S. property market.

***

• The Club at Brickell has the highest current number of foreclosure proceedings involving any single south Florida property. [...] Doug Dewitt, a real estate broker contracted to work with several lenders on the valuation and disposal of foreclosed properties, said nearly 70 percent of the sales or closings at the Club over the last 18 months were questionable. That works out to more than 200 possibly shady deals in a single building, he said. The dubious transactions all fit a pattern that [Glenn Theobald, head of a mortgage fraud task force formed in south Florida's Miami-Dade County ] said should trigger "bells and whistles" for law enforcement anywhere -- time and time again properties that failed to sell for months when listed at around $450,000 were pulled from the market and then suddenly sold for more than $800,000.

For more, see Miami condo at ground zero in mortgage fraud.

See also, Buying In Brickell? Proceed At Own Risk (Report Says Brickell Condo Ground Zero For Mortgage Fraud, Foreclosures).

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

Erie, Pennsylvania Mortgage Fraud Scam Alleged In Both Criminal & Civil Proceedings

In Erie, Pennsylvania, the Erie Times-News reports that last Friday, mortgage broker Frank Conti, who used to head the local office of Regal Financial Services, was at the center of a series of claims that one of his customers -- Eloise Woodsbey, made in a civil case filed in Erie Federal Court. Woodsbey claims that she was defrauded when she bought her home in 2004.

Earlier on Friday, Regal Financial Services was mentioned in court documents outlining a federal criminal case against Erie home redeveloper Robert L. Dodsworth, who is accused of helping to run a mortgage fraud scheme. Conti has not been charged in the criminal case, and he has said he did nothing wrong in the civil case. According to the story:

• Court filings in the Dodsworth and Woodsbey cases claim Conti or Regal Financial, which also has an office in Pittsburgh, participated in mortgage transactions that have led to allegations of fraud. Both cases will unfold in U.S. District Court in Erie in the coming weeks. Dodsworth, 60, the owner of RLD Enterprises, is scheduled to appear at a plea hearing on Nov. 19, and court records indicate he plans to plead guilty to the felonies of money laundering and conspiracy to commit mail fraud, wire fraud and bank fraud.

***

• Woodsbey's house ... was one of nearly 200 properties that became the focus of the FBI and Internal Revenue Service as agents investigated the suspected fraud scheme. And Woodsbey's civil suit makes claims similar to the allegations the U.S. Attorney's Office in Erie is making against Dodsworth.

• In the criminal case, the government is alleging Dodsworth and other "unnamed co-conspirators" manipulated financial records to make prospective homeowners, many of them unsophisticated and poor, eligible for mortgages they otherwise would have been unable to afford between January 2003 and March 2006. The criminal information filed against Dodsworth alleges he and the others artificially inflated customers' bank accounts.

Representing Woodsbey in her civil case is Margaret Schuetz, of the nonprofit Community Justice Project in Pittsburgh.

For more, see Suit names mortgage broker (Man headed office also mentioned in criminal housing fraud case).

For story update, see:

• Erie businessman pleads guilty in mortgage-fraud case (Erie Times-News - 11-19-07)
• Plea expected in fraud case (Erie Times-News - 11-19-07).

Go here for other posts related to this story.

Six Indicted In Alleged $14M Mortgage Fraud Scam

The Kansas City Star reports:

• A federal grand jury in Kansas has charged six Kansas City area individuals in a $14 million mortgage fraud that preyed on low-income homebuyers. The indictment described a scheme that relied on false real estate appraisals that inflated the value of homes, so banks would lend more money than property was worth. The indictment said the additional funds ended up in defendants’ accounts.

• The indictment names Wildor Washington Jr., 37, of Leawood; Maurice Ragland, 33, of Lee’s Summit; Victoria Bennett, 34, of Leawood; Kara E. Robinson-Franks, 37, of Grandview; Scott Alexander, 69, of Merriam; and Terrence Cole, 41, of Kansas City, Kan.

***

• The defendants owned or worked for several businesses involved in the alleged scheme: Heritage Financial Investments, Legacy Enterprises, B&L Custom Development, Liberty Escrow, TERM Appraisers, the Real Estate Group, JTF Enterprises and Atlantic Mortgage.

• The fraud’s targets were homebuyers with low incomes or little knowledge about real estate, according to the indictment. It said these homebuyers were unaware of the fraudulent information in the loan applications.

***

• The group validated the fraud by stealing the identities of legitimate real estate appraisers, according to the charges. They found appraisers’ license numbers on the Internet and forged signatures, or in some cases “cut and paste” legitimate signatures onto false appraisals, the indictment said. The fraud also relied on nonexistent appraisers whose identities the group created.

For more, see Six area individuals charged in $14 million mortgage fraud scheme.

Inside Edition Investigates Florida Upfront Fee Foreclosure Rescue Operator

Tonight, the syndicated television show Inside Edition will run an investigative report on a Clearwater, Florida foreclosure rescue operator that is accused of shortchanging customers. The show alleges Foreclosure Assistance Solutions, or F.A.S, charged homeowners more than $1,000 apiece but failed in some cases to salvage homes from foreclosure. F.A.S. disputes the allegations and points to its many satisfied customers. Go here to watch the promo for tonight's show (no longer available online).

Go here to find out where Inside Edition is showing in your area (no longer available online).

Go here for a partial transcript of the Inside Edition investigative report (no longer available online).

Use Caution When Tapping Into 401(k) To Make Mortgage Payments

The Baltimore Sun reports:

• Some companies that manage 401(k)s for employers report an increase in loans or hardship withdrawals from plans this year. Principal Financial, for instance, says hardship withdrawals to stave off eviction or foreclosure doubled in August from July. Baltimore's T. Rowe Price Associates reports a 9 percent increase in loans over a year ago. And Hewitt Associates has seen a "marginal uptick' in loans in recent months. With loans - unlike hardship withdrawals - workers don't have to say why they want the money. So it's hard to say how many desperate homeowners are using their savings this way. But David Wray, president of the Profit Sharing/401(k) Council of America, has no doubt that the uptick in loans is tied to the mortgage mess. Workers are just starting to deal with rate resets on mortgages and home equity loans, Wray says.

***

• But dipping into retirement accounts should be the last resort. Even then, do it only if you're sure that your housing troubles are short-term. If they're not, you could end up losing your house and your retirement.

***

• When loans are permitted, you can borrow up to half the balance but no more than $50,000. You generally get five years to repay through payroll deductions. [...] Leave or lose your job before the loan is repaid, and you might have to repay it immediately. If you can't, the loan is considered a distribution. You will owe regular income tax on the money and possibly a 10 percent penalty for early withdrawal. (The penalty usually applies if you take money out before age 59 1/2 , but the age limit is 55 if you're leaving your employer.)

For more, see Using 401(k) for mortgage payment can worsen plight (if link expires, try here).

See also:

• Don't get caught losing your home and retirement fund (Chicago Tribune) and
• 401(k) Loans: At Your Own Risk (Borrowing Rises a Bit Despite Long-Term Danger) (Wall Street Journal - 10-6-07; may need subscription).

Pennsylvania Feds Charge Erie Man With Fraud Conspiracy, Money Laundering Regarding Fraudulently Obtained Home Mortgages

In Erie, Pennsylvania, the Erie Times-News reports on the legal trouble of local businessman Robert L. Dodsworth and R.L.D. Enterprises. According to the story:

• Dodsworth, 60, is the president of RLD Enterprises, [a] home-redevelopment firm in Erie. He was charged Friday with felony conspiracy and money laundering in relation to an ongoing federal investigation into suspected mortgage fraud. Dodsworth is the first person charged in the probe, which includes a grand jury. [...] Court records indicate Dodsworth -- one of the probe's main figures -- intends to plead guilty at a hearing scheduled for U.S. District Court in Erie on Nov. 19. The government alleges Dodsworth worked with "unnamed co-conspirators," indicating others could be charged.

***

• The FBI, Internal Revenue Service and other agencies since the summer of 2004 have been probing whether the sale of nearly 200 city of Erie properties involved inflated appraisals or other fraudulent information that led buyers to pay far more than market value for their homes. Many of the homebuyers have either lost their homes to foreclosure or have fallen behind on payments, according to documents and interviews.

Said one of Dodsworth's alleged victims, "I know it sounds vindictive, but I hope he goes to jail. I'm still upset with everything I had to go through, but I'm glad that finally something's being done about all this. The FBI didn't forget about us."

For more, see 'I hope he goes to jail' (Homebuyers say dealings with businessman charged in mortgage fraud probe seemed 'fishy').

For an earlier story, see Fraud case: Plea close (Erie businessman faces charges in three-year federal probe of suspected mortgage scams).

Go here for other posts related to this story.

More On NY AG Suit Alleging Puffed Up Appraisals

Syndicated columnist Kenneth Harney recently wrote a piece on the lawsuit brought by New York Attorney General Andrew M. Cuomo against First American Corp. and its appraisal management subsidiary, eAppraiseIT, alleging the practice of illegally inflated real estate appraisals. Highlights from the column:

• Cuomo's suit, which rattled mortgage lenders, appraisers and settlement service companies nationwide, accused First American and eAppraiseIT of knuckling under to illegal pressure from Washington Mutual, the giant Seattle lender, to hit the numbers needed to close loan deals.

***

• Washington Mutual was not named as a defendant in the complaint because, as a federally regulated bank, it is buffered from certain state legal attacks. In a statement, Washington Mutual said it was both "surprised and disappointed by the allegations," and has suspended business with eAppraiseIT pending its own investigation of the matter.

***

• Frank Gregoire, chairman of the Florida Real Estate Appraisal Board and a St. Petersburg appraiser, said "every appraiser deals with this stuff every day," routinely confronting threats of nonpayment and blacklisting if he or she refuses to play the game. Perry "Pat" Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that "it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street," where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors. "And they all think they're never going to get caught," said Turner.

For more, see Banks bullying appraisers to boost values bad news (San Francisco Chronicle).

To view the New York AG's lawsuit, see Cuomo vs. First American Corporation and First American eAppraiseIT.

Go here to view E-Mail Excerpts in eAppraiseIT Case.

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT. Cuomo OFHEO Fannie Mae Freddie Mac

Court Hammers Contractor In Dispute With Homeowners; Results In Free Home Improvements & More

The following is based on a report written by the late Bob Bruss, real estate author, broker, and attorney, on California state law regulating home improvement contractors:

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Two homeowners hired a home improvement contractor to do remodeling work at their residence. They paid him approximately $27,000. Later, the contractor sued them for an additional $11,000. The homeowners countersued for fraud, claiming that the contractor underreported his payroll to his workers' compensation insurer which resulted in an automatic suspension of his California state contractor's license, according to state law.

Because his ostensibly valid contractor's license was treated as having automatically lapsed because he underreported his payroll to his workers' comp insurer, the contractor was legally considered to be unlicensed at the time he performed the improvements on his customers' home. Accordingly, the court decided that not only was he not entitled to the $11,000 he sued for, he was also not entitled to the $27,000 that the homeowners had already paid him and was ordered to refund it to them. In addition, the contractor was also ordered to pay the homeowners $10,000 in punitive damages, plus $90,000 for the homeowners' attorney fees and $7,000 in court costs.

According to the judge:

• "The importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties."

To view the Bob Bruss report, see Unlicensed remodeler makes costly mistake.

To view the California appeals court decision, see Wright v. Issak, 58 Cal.Rptr. 3d 1 (Cal. App. Ct., 6th Dist., March 20, 2007) (Court decision available online courtesy of Findlaw.com).

Postscript:

The text of the actual court decision describes the nature of the payroll underreporting resulting in the temporary invalidation of the home improvement contractor's license as follows:

• "[the contractor] reported, under penalty of perjury, a payroll of $312 while having an actual payroll of $135,000. [State Compensation Insurance Fund records] show that [the contractor] reported zero or next to zero payroll for every payroll period between his initial application for workers' compensation insurance in May 2002 and the end of 2004. [The contractor's] underreporting was not inadvertent. It was his pattern and practice from the first moment he applied for workers' compensation insurance."

By bringing a lawsuit against the homeowner inspite of his self-created "achilles' heel" of illegally (and grossly) underreporting his payroll to his workers' comp insurer, the contractor in this case also appears to have violated the long-standing cautionary advisory, "Be careful who you pick a fight with." I wonder how many other "licensed" contractors have a similar "achilles' heel."

NY AG's Lawsuit May Shed Light Into Consumer Ripoffs When Obtaining Home Mortgages

A recently filed civil lawsuit by the New York State Attorney General's Office against First American Corporation and its real estate appraisal subsidiary, eAppraiseIt, charges them with allegedly allowing national mortgage lender Washington Mutual Inc. into strong-arming them into knowingly issuing inflated residential real estate appraisals in connection with home mortgage loans.

The following excerpt from the lawsuit may shed light for some into how so many consumers looking for home financing to either purchase or refinance a home were blatantly ripped off by the bad actors in the home mortgage and related industries.

• Most people interested in purchasing or refinancing a home (“borrowers”) seek a financial institution (a “lender”) to lend them money on the most favorable repayment terms available. Traditionally the lender, as part of agreeing to loan the funds, wanted to ensure that the borrower was able to repay the loan and that the loan was adequately collateralized in case the borrower defaulted. The borrower and the lender had a common interest in accurately valuing the underlying collateral because both wanted to be sure the borrower was not paying too much for the property and would be able to meet the repayment terms, or that – in the event of default and foreclosure – the property value could support the loan.

• Today, the landscape of the mortgage industry is quite different from this traditional model. Rather than holding the mortgage loans, lenders now regularly sell these mortgages in the financial markets, either directly or to investment banks or Government Sponsored Enterprises (“GSEs”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The loans are then pooled together, securitized, and sold to the general public as mortgage backed securities. The money that the lender receives for the sale of the mortgage loans or bonds is then used to finance new mortgages, increasing the lender’s profits and aiding its stock price. Today, the vast majority of mortgage loans are sold to investment banks or GSEs, leaving the original lender holding far fewer mortgages in its portfolio.

• This reconfiguration of the way that mortgages are held has transformed the incentives in the industry. Specifically, it has the effect of making the lender less vigilant against risky loans since any risk is quickly transferred to the purchasers of the loans. Moreover, as the lender does not hold many of its loans in its portfolio, the lender’s interest in ensuring the accuracy of the appraisal backing the loan is severely diminished. Even worse, because lenders’ profits are determined by the quantity of loans they successfully close, and not the quality of those loans, there is an incentive for a lender to pressure appraisers to reach values that will allow the loan to close, whether or not the appraisal accurately reflects the home value.

• Further jeopardizing the process, mortgage brokers and the lenders’ loan production staff (also known as “loan origination staff”) are almost always paid on commission. Thus, the income of these individuals depends on whether a loan closes and on the size of the loan. Accordingly, brokers and loan production staff have strong personal incentives to pressure appraisers to value a home at the maximum possible amount, so that loans will close and generate maximum commissions. For these reasons, mortgage brokers and lenders frequently subject real estate appraisers to intense pressure to change values in appraisal reports.

• The investment banks and GSEs also have an interest in inflating (or at least in not questioning) the value of the pooled loans. The values of these loans serve as a basis for the value of their securities. As such, the higher the value of the loans closed, the greater the value for which the securities are sold on the secondary market.

• Thus, the only parties under the current system who want an accurate appraisal are the borrowers and the investors in the asset-backed securities market. Neither of these parties, however, has any contact with, or control over, the appraisal process.

(from the New York AG's lawsuit, Cuomo vs. First American Corporation and First American eAppraiseIT, paragraphs 12-17).

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As has been observed by others, it appears that the current foreclosure mess revolves around the fact that the home lending business, which was once dominated by "bankers" (with a focus on "loan quality") appears to be now dominated by "salespeople" (with little concern about anything other than "loan quantity").

For a recent story on inflated appraisals, see Banks bullying appraisers to boost values bad news (Kenneth Harney syndicated article). Cuomo OFHEO Fannie Mae Freddie Mac

Alleged Pennsylvania Ponzi Scheme Head Pleads Guilty Of Swindling 800+ Victims Out Of Millions

(original post -11-10-07; last modified 11-16-07)
In Harrisburg, Pennsylvania, Lancaster Online reports:

• Wesley A. Snyder pleaded guilty in U.S. District Court in Harrisburg Friday to a mail-fraud scheme that defrauded more than 800 mortgage customers, including about 300 in Lancaster County. An evidentiary hearing was canceled Thursday because Snyder's lawyer worked out a plea agreement with the U.S. Attorney for the Middle District of Pennsylvania. The agreement requires Snyder to make restitution to his victims, which the court stipulates to be somewhere between $15 million and $32 million.

***

• Authorities said that since 1988 Snyder took in more than $65 million from 811 purchasers of his "wraparound" mortgages but forwarded only $39 million to the banks and other institutions that provided the financing. [...] Snyder's wraparound mortgages were essentially second contracts tied to larger mortgages he brokered in their names with outside banks.

For more, see Snyder pleads guilty to mail fraud (Owner of bankrupt mortgage business admits to fraud involving more than 800 customers and faces paying up to $32 million in restitution).

Go here for an illustration of how the refi / wraparound mortgage scam works.

See also:

• Bear gets 23 co-sponsors for bill (Tough mortgage laws) (Lancaster Online - 11-20-07),
• Truth or consequences (Confessed mortgage scammer faces even stiffer penalties — if he fails to admit everything) (Lancaster Online - 11-15-07),
• Broker ‘not a scam artist’ (No fraudulent intent, says Snyder’s lawyer) (Lancaster Online - 11-15-07),
• Scam victims: guilty plea a 'shallow victory' (Mortgage lender admits mail fraud, pledges to cooperate in probe) (Lancaster Online),
• Pa. mortgage firm head to plead guilty (The Associated Press) (if link expires, try here),
• Broker pleads guilty to mail fraud (Feds said Berks County mortgage business was mere pyramid scheme) (The Allentown Morning Call),
• Firms’ owner to plead guilty (The Republican & Herald) ("Snyder concealed documents from Pennsylvania Banking Department auditors and told his workers not to tell the examiners about the wraparound program, according to the charging documents filed Friday.").

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.

Charles Head Nationwide Foreclosure Rescue Scam Nicks Arizona

The Arizona Republic reports:

• Seven Arizona properties are part of a "foreclosure rescue" mortgage scam that snared hundreds of victims in 27 states, according to an Internal Revenue Service warrant. An IRS search warrant obtained by the Asbury Park Press of New Jersey lists 256 affected properties stretching from Maine to Hawaii. The warrant identified 106 homeowners as victims, so luckily Arizona wasn't this scam's main focus. The FBI has sent letters to homeowners and investors about the scam. Those letters identify Charles Head, who ran FundingForeclosure.com, as the focus of the investigation.Three of the Valley properties named as part of the investigation are in Phoenix. Two of the homes are in Mesa. One is in Cave Creek, and the other is in Litchfield Park.

From: The Arizona Republic - Foreclosure Scam (2nd story from top).

Go here for other posts on foreclosure rescue operator Charles Head, Head Financial, Funding Foreclosure and related companies.

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.).

South Florida Condo Converters Unable To Unload Unsold Inventory; Units Reverting Back To Rentals

Regarding condo buyers who not too long ago thought investing in a unit in a converted rental building might be a good idea, the South Florida Sun Sentinel reports:

• Stephen Mahaffee became one of those new buyers. He had been renting a one-bedroom apartment ... for about 10 years when he got word the building was being converted to condos. So in January he made his move and paid $199,900 for a two-bedroom unit. Less than a year later, he's one of only 18 owners in the 164-unit complex that Bankers Holding Group reluctantly decided to turn back into a mostly rental property. The emerging trend of going from rentals to condos and — when the units don't sell — back to rentals again is what South Florida real estate experts are calling "conversion reversions." Since 2006, about 6,059 units that were once for sale in Broward and Palm Beach counties have been switched back to rentals, according to Jack McCabe, a Deerfield Beach real estate analyst. "The condo-conversions sales market has absolutely fallen off the table," said McCabe.

For more, see Slow housing market spurs condo 'conversion reversions' (With no buyers, market forced to change units back to rentals) (story also available here).

Credit Card Skimming On The Rise

Some straw buyer, mortgage fraud scams have incorporated identity theft into the mix, whereby straw buyers who are in on the scam from the get-go use stolen identities to illegally obtain mortgage loans.

One technique for stealing identities which appears to be on the rise is credit card skimming. An entry in Wikipedia (as of 11-12-07) contains the following description of credit card skimming:

• Skimming is the theft of credit card information used in an otherwise legitimate transaction. It is typically an "inside job" by a dishonest employee of a legitimate merchant, and can be as simple as photocopying of receipts. More imaginative routes are possible; an episode of The Sopranos showed how a compromised magnetic stripe reader could store account information for later use. Common scenarios for skimming are restaurants or bars where the skimmer has possession of the victim's credit card out of their immediate view. The skimmer will typically use a small keypad to unobtrusively transcribe the 3 or 4 digit Card Security Code which is not present on the magnetic strip. Many instances of skimming have been reported where the perpetrator has put a device over the card slot of a public cash machine (Automated teller machine), which reads the magnetic strip as the user unknowingly passes their card through it. These devices are often used in conjunction with a pinhole camera to read the user's PIN at the same time.

WTVJ-TV Channel 6 in Miami, Florida recently ran a credit card skimming story reporting that "what started at restaurants, police records show, is now being found in fast food outlets, hotels, and grocery store ATM machines." The story describes one recent case in which an 18 year old drive-through cashier at a McDonald's was arrested in September for skimming 100 credit cards, police say, before he was stopped. Police say he admitted he did it.

To watch the report and see how easy it is for an employee of a local merchant to literally "swipe" an unsuspecting customer's I.D. information off the magnetic strip from a credit card, see Who's Swiping Your Card? (NBC 6 Investigates Credit Card Skimming).

Go here for additional footage of NBC 6 reporter Jeff Burnside talking about his investigation, "Who's Swiping Your Card?"

Go here to read the online story.

For another story on credit card skimming, see:

• Authorities indicted 13 in alleged identity theft ring - Alleged New York City I.D theft ring accused of hiring waiters and waitresses to steal credit card info from restaurant customers by use of small skimming devices; ring accused of making millions of dollars of credit card charges, over 1000 victims identified.