Wednesday, December 12, 2007

Another Ohio Judge Halts Home Foreclosure; Lender Lacked Proof Of Ownership

In Hamilton County, Ohio, The Enquirer (Cincinnati) reports:

  • [A] Hamilton County Common Pleas Court judge ruled that Wells Fargo Bank couldn't foreclose on [ a couple's] North College Hill home because its lawyers didn't prove that Wells Fargo was the legal owner of the mortgage.

  • The judge said the foreclosure lawsuit was filed before Wells Fargo owned the mortgage - thus, the suit was premature. The ruling - the first of its kind by a state court judge in Ohio since the subprime mortgage crisis erupted this year - could have profound implications on how foreclosures are handled in Ohio, which leads the nation in the percentage of mortgages in foreclosure. The local ruling comes as three federal court judges - in Cleveland, Dayton and Columbus - have issued similar opinions in foreclosure cases in the last month.

***

  • The [legal] issue [involved] is known as the "real party in interest" rule, which says that a plaintiff must prove that it has a stake in a lawsuit in order to file it. As millions of subprime mortgages are sold and resold on Wall Street, the real "party in interest" isn't always obvious. Often, the holder of the mortgage note - the legal document that gives a lender the right to take someone's home for not making loan payments - is different from the servicing company, or the bank that takes the mortgage payments.

***

  • "It is troubling that the plaintiff has filed this case before it had any interest in it," Hamilton County Common Pleas Judge Steven E. Martin said in a letter to Wells Fargo's lawyer. Martin then took the unusual step of ordering that the bank's law firm must file proof that its clients actually own the mortgages before filing any new foreclosure actions in Hamilton County. That firm, The Law Offices of John D. Clunk, based in Hudson, Ohio - is the third-largest filer of foreclosure actions in Hamilton County, with 48 properties scheduled for foreclosure sales in the next six weeks.

For more, see Judge halts foreclosures (Says banks must prove they hold mortgages) (if link expires, try here).

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.

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Question for Attorneys:

Assume that there have already been foreclosure sales that have taken place (in which homeowners have already lost their homes) where the party initiating the foreclosure was not the "real party in interest" and the judge didn't catch the error.

  1. Wouldn't the fact that the wrong party brought the foreclosure action make the final judgment in the case "void?"
  2. If the judgment is void, doesn't that make everything that happened in the case after the judgment (including the actual foreclosure sale) void as well?
  3. If the foreclosure sale in a situation like this is void, doesn't that mean that the purchaser at the foreclosure sale (and any subsequent purchaser - even a so-called "bona fide purchaser for value") acquired no title whatsoever, and that title to the home is technically still with the financially strapped homeowner (even though he or she may not realize it - yet)?
  4. If the answer to all of the above is "Yes," isn't there a significant problem with the real estate titles involving all these foreclosed homes in which the wrong party (one other than the "real party in interest") brought the foreclosure action?

If any attorney wants to substantively chime in on these questions (especially consumer and real estate attorneys, as well as attorneys with or representing title insurance companies), please feel free to drop me a line at HomeEquityTheft@yahoo.com. I would love to hear the observations. missing mortgage foreclosure docs alpha

Early Involvement Critical In Avoiding Financial Elder Abuse

The third in a series of editorials by the Contra Costa Times (Northern California) on elder financial abuse focuses on the importance of staying involved when the care of a loved one is turned over to a caretaker and being proactive when detecting signs of caretaker abuse. The following excerpts summarize the events, detailed in the editorial, that occurred when one woman hired what turned out to be the wrong caretaker for her 83 year old uncle:
  • CARMEN PAREDES SEEMED like such a sweet, friendly person. "You just never would have suspected it," said Kathleen Whittaker, who hired the Peruvian native in 1998 to help take care of her 83-year-old uncle, William Fowler. The "it" is one of the worst cases of elder financial abuse in Contra Costa County history. During 2 1/2 years, the $10-an-hour caretaker siphoned more than $600,000 away from the El Cerrito widower. Paredes, 59, pleaded no contest to felony elder abuse and tax evasion in March 2004. She was sentenced to three years' probation. She got no prison time, although the judge could have given her as many as nine years. Her two adult sons and a daughter also were implicated in the scheme. They were convicted of misdemeanors. Obviously, the law in this area is far from robust.

***

  • Whittaker says her greatest regret is that she didn't get more aggressively involved. "My purpose now," she said, "is to publicize what happened to my uncle as a warning to others."

For more, see Theft of Elder Nation: An editorial series: (Getting involved early is critical).

For links to the other editorials in this series, see Elder Financial Abuse Flying Under The Radar?

Go here for all posts on this Contra Costa Times editorial series on elder financial abuse.

Go here , go here , and go here for other posts on elder financial abuse. xero

Ex-Bank Manager's Alleged $1M+ Theft From 90+ Year Old Customer & Attempted Bank Coverup Results In Federal Indictment

In Hawaii, according to various reports:

Hawaii’s U.S. Attorney Ed Kubo recently announced the indictment of Marilyn DeMotta, 41, a former operations manager at American Savings Bank accused by a bank security manager in 2004 of stealing more than $1 million from 90+ year old bank customer Ada Lim. The alleged ripoff, which included the proceeds from the sale of the victim's investment property, reportedly left the victim penniless.

Upon discovering the theft, bank security manager Bert Corniel pushed for the bank’s senior management to aggressively pursue an investigation into DeMotta and to reimburse Lim the full amount that was stolen. Instead, the bank's management told Corniel to keep his mouth shut, and subsequently engaged in a coverup to make it look like the stolen money was really a loan from the 90+ year old victim to DeMotta.

One report describes what ocurred next:
  • DeMotta picked up three bank employees from the legal and human resources departments and took them to meet with Lim. Bank general counsel Stanley Chong, who suggested the meeting, went along in hopes that Lim would sign a statement saying she had in fact lent DeMotta the money. With big smiles, and candy and flowers in hand, the four bank employees arrived at Lim’s home with the release. She signed it.

  • [Bank security manager] Corniel filed a complaint with the FBI in 2005 saying DeMotta alleged stole more than $1 million from Lim between 2003 and 2005. It was his report that triggered a federal investigation by four federal agencies. Corniel was fired from the bank in June 2006. Corniel filed a lawsuit on Aug. 2, 2006, ..., alleging that he was fired in retaliation for blowing the whistle on the cover-up of DeMotta’s theft by the bank’s top senior officials.
On the same day Corniel filed his civil lawsuit against the bank, the 90+ year old victim filed her own civil lawsuit against American Savings for the theft of the money. While initially denying the allegations in both civil lawsuits, American Savings ultimately settled both cases, reportedly for more than $1 million each. The bank executives who played some part in the alleged scheme have since left American Savings.

The criminal indictment, handed up on Nov. 15, 2007, was kept under seal until DeMotta could be located and apprehended in Las Vegas, Nevada, where she has a home.

The 90+ year old victim still owes nearly $500,000 in back taxes and penalties for the sale of the investment property that DeMotta was supposed to have paid out of the sale proceeds, and at this point, has no way to pay the government. Federal officials would not comment on whether other bank officials will be charged in this case, and would only say the investigation involving four federal agencies is ongoing.

For more, see:

Investigator Fired For Pushing Probe Into Bogus Loans & Refusing To Participate In Bank Coverup, Says Lawsuit

In North Carolina, The Charlotte Observer reports:
  • BB&T, North Carolina's third-largest bank, vigorously denied charges Friday that a former internal investigator for the company was fired for refusing to participate in the coverup of a $20 million loan fraud. Amy Stroupe, who filed a lawsuit against the company [last] week, said she was fired for pursuing an investigation of more than 120 fraudulent real estate loans. The loans were connected to a failed development in Western North Carolina known as the Village of Penland that left investors owing banks about $120 million.
***
  • Stroupe, a former sheriff's detective who was hired in 2005, was fired June 20. She alleged in her suit that she pushed her investigation of Penland because many of the loan applications used the same loan officer, appraiser, attorney and picture of what appeared to be the same mountain lot. The lots were often appraised for more than market value and sold to people who had never visited the site or met the loan officer, the suit said.

For more, see BB&T denies unfair firing (if link expires, try here).

Representing Amy Stroupe in her lawsuit is attorney John Yanchunis, with the law firm James, Hoyer, Newcomer & Smiljanich PA., Tampa, Florida. (According to their website, the firm has a nationwide practice handling whistleblower cases, and consumer cases, - including mortgage servicing problem cases - among other cases.)

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The lawsuit referred to in this story is the second reported within a month alleging BB&T Bank's involvement in a sophisticated fraud in connection with the Village of Penland project. For the earlier story, see 2 N.C. banks accused in fraud suit (Investors owe millions of dollars on N.C. mountain property worth much less) (The Charlotte Observer).

For background information on the souring of the Village of Penland project that left investors holding the bag, see The Wall Street Journal article, 'I Feel Like an Idiot' (Land Project Gone Wrong Shows How Even Well-Off Lured By Go-Go Climate) (May be a free article; if not, try here).

Go here for other posts on the Village of Penland.

Go here for other posts on whistleblower suits involving alleged fraudulent mortgage lending practices. Tony Porter

World Savings, Wachovia Sued Again For TILA Violations; Class Action Status Sought

In Charleston, South Carolina, The Charelston Post and Courier recently reported:

  • A Berkeley County homeowner is suing her mortgage lender in federal court, claiming she was sold a risky loan with a low teaser interest rate but was not told how the payments would increase over time or how the loan actually worked. Bonnie Mincey of Hanahan said in court papers that in May she refinanced her home and entered into an adjustable rate mortgage called an "Option ARM."
***
  • The suit was filed Nov. 16 in U.S. District Court in Charleston and names as defendants World Savings Bank FSB of Oakland, Calif., and Golden West Financial Corp. and Wachovia Corp., both of Charlotte. [...] Her attorney, Daniel O. Myers, said Tuesday he believes his client is not alone. He is looking to expand the case to other Option ARM borrowers by seeking class-action status.

***

  • The lawsuit alleges the defendants violated the federal Truth in Lending Act ["TILA"] by failing to "clearly or accurately disclose the terms of the Option ARM loan" and provided conflicting interest rates when describing the costs of the loan.

Representing the homeowner is attorney Daniel O. Myers with the law firm Richardson, Patrick, Westbrook & Brickman LLC, with offices in Mount Pleasant, Charleston, and Barnwell, South Carolina.

For more, see Mortgage lender named in lawsuit.

To read the lawsuit, see Complaint - Mincey v. World Savings Bank, et al.; or go here for direct link to the lawsuit on the PACER system (21 pages @ $.08/page; PACER registration required),

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For a story on another Federal lawsuit filed by a homeowner against Wachovia and World Savings in a California Federal Court, see Homeowner Files Suit Against Wachovia, World Savings For Deceptive "Option ARMs"; Seeks Class Action Status.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo bad loans. undo mortgage loans TILA alpha

Tuesday, December 11, 2007

Former Self-Proclaimed "Law & Order" NY Judge Gets 33 Months For Laundering Mob Money

On Long Island, New York, The New York Law Journal recently reported:
  • A former Nassau County judge who admitted to laundering money for mobsters and dealing in "stolen" diamonds was sentenced [last month] to 33 months in prison. David A. Gross, who was elected a district judge in 1999, billed himself as a "law and order" judge and showed no visible emotion as Eastern District of New York [Federal] Judge Arthur D. Spatt handed down the sentence and admonished the disgraced judge for abusing the public's trust.

For more, see Ex-Judge Sentenced to 33 Months for Money Laundering Scheme.

Go here for other posts on judges and their "judicial misjudgments". naughty judges

Pennsylvania Contractor Cops Plea; Admits Taking Customers' Cash, Not Completing Work

In Lehigh County, Pennsylvania, The Allentown Morning Call recently reported:
  • A Nazareth contractor who defrauded nine customers of almost $119,000 through construction companies that he ran pleaded guilty [last month] to two felony counts of fraudulent or deceptive business practices. Robert P. Westwood, 38, who operated Quality Construction and R&C Contracting in Nazareth, admitting taking money from customers and not starting or completing projects.

For more, see Home repair fraud is admitted (Allentown woman lost most, among Nazareth contractor's 9 victims).

Exotic Dancer "Strips" Lenders Of $4.9M In Twin Cities Straw Buyer Scam

In Minneapolis, Minnesota, the Pioneer Press reports on Monday's announcement of the 25-count complaint of racketeering and theft by swindle against Universal Mortgage Inc. of Brooklyn Park, company president Donald Walthall, loan officers Marlon Pratt, Rahmeen Underwood and Andre Bellfield, and Cleveland Fields:
  • The stripper was buying houses like crazy. On Jan. 13, 2006, Irene Thomas, then a 22-year-old exotic dancer in St. Cloud, bought a $275,000 three-bedroom home in the Willard-Hay neighborhood in Minneapolis. Over the next three months, she went on a home-buying spree, picking up nine more houses - including one in St. Paul - at sale prices totaling more than $2.1 million.

For more, see Mortgage scheme stripped lenders of $4.9 million (Brooklyn Park firm, employees charged in mortgage fraud).

Go here for other posts on the alleged Universal Mortgage straw buyer, home flipping scams.

25 Count Criminal Complaint Announced In Alleged Twin Cities Mortgage Fraud

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:
  • Five people have been charged in a $4.9 million mortgage fraud case involving at least 24 homes in Minneapolis and Golden Valley. Hennepin County Attorney Michael Freeman announced on Monday the 25-count complaint of racketeering and theft by swindle against Universal Mortgage Inc. of Brooklyn Park. Also facing those charges are Universal President Donald Walthall, loan officers Marlon Pratt, Rahmeen Underwood and Andre Bellfield, and Cleveland Fields, an alleged recruiter of straw buyers.

***

  • All but one of the properties involved are located in Minneapolis; the other is in Golden Valley. All but one wound up in foreclosure, he said. The other was given back to the bank. Freeman said that Universal came to the attention of his investigators last summer when the Star Tribune detailed the experiences of straw buyers who purchased homes through Universal. He said he doesn't plan to prosecute the straw buyers, calling them naive customers who were duped into buying properties for far more than they were worth.

For more, see 5 charged in $4.9 million mortgage fraud (The defendants, connected to Universal Mortgage Inc. of Brooklyn Park, are accused in a scheme involving 24 homes).

For other reports of the announcement by authorities of this mortgage fraud prosecution, see:

Go here for other posts on the alleged Universal Mortgage straw buyer, home flipping scams.

Minnesota AG Files Suit Against Upfront Fee Foreclosure Rescue Operators

Upfont fee foreclosure rescue operators Foreclosure Assistance Solutions, LLC of Florida and American Housing Authority, Inc. are being targeted it again. This time, its the Minnesota Attorney General's office on the attack, filing separtate civil lawsuits against each. Excerpts from the Minnesota AG Press Release announcing the suits:
  • Minnesota Attorney General Lori Swanson [last Thursday] filed two separate lawsuits in Hennepin County District Court against two out-of-state companies that charged homeowners in foreclosure up to $1,395 to save their homes but failed to provide the promised assistance in helping the borrowers to retain home ownership.

***

  • The first suit is against Foreclosure Assistance Solutions, LLC of Florida, which has also done business under the names FAS and Mortgage Second Chance. The second suit is against American Housing Authority, Inc. and American Housing Financial, Inc. of Nevada.

For more, see Minnesota AG Press Release - Swanson Sues Two Out-Of-State Mortgage "Foreclosure Consultants" For Charging Fees But Not Delivering Promised Services (Suit Alleges Violation of 2004 Law that Prohibits Foreclosure Consultants From Charging Fees Before Services are Performed ).

Go here for more problems for Foreclosure Assistance Solutions ; and here for more problems for American Housing Authority.

Foreclosure Rescue Operators Alive & Well In Tennessee

A recent article in The Tennessean shows that the State of Tennessee is not immune to foreclosure rescue schemes. The Legal Aid Society of Middle Tennessee and the Cumberlands reports that it gets about five to 10 calls a week from financially strapped homeowners relating to foreclosure rescue programs. The article recounts the experience of one homeowner facing foreclosure with Nashville-area foreclosure rescue operator Mark Haining. For more, see Foreclosures inspire surge in home-rescue scams (if link expires, try here).

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.).

Monday, December 10, 2007

Lincoln Contractor Pleas "No Contest" On Charges Of Stiffing Homeowners

In Lincoln, Nebraska, the Lincoln Journal Star recently reported:
  • A local contractor pleaded no contest ... to felony counts of theft by deception arising from allegations he charged homeowners for work he either failed to do or to complete. Scott A. Davis, 37, could be ordered to serve a maximum of 30 years in prison at his sentencing hearing Dec. 13 in Lancaster County District Court. Davis pleaded no contest to two counts of felony theft by deception and, in a separate case, he admitted to violating the conditions of his probation in an earlier prosecution. As a result of the violation, Davis will also be sentenced on a theft by deception charge arising from the earlier case.

For more, see Contractor pleads no contest to theft.

Editor's Note: At one time not all that long ago, many cops would take the position that, as long as the contractor started the work he/she was hired for before skipping out on a homeowner, such a circumstance was only a civil matter, not a criminal matter, and would refuse to even take a complaint. More recently, however, it appears that it is becoming more common for police agencies to use a criminal charge of theft by deception to prosecute cases - even where work was actually commenced by the contractor but not completed.

Boneheaded Judge Booted Off Bench After Jailing 46 People In Cell Phone Incident

In upstate New York, The Associated Press recently reported on an incident that occurred in the courtroom of now ex-Niagara Falls City Court Judge Robert Restaino:
  • A judge who jailed 46 people who were in his courtroom when a cell phone call interrupted proceedings was removed from the bench [last month] by a state commission. [...] A phone rang while Restaino was hearing the cases of domestic violence offenders who had been ordered to appear weekly to update the judge on the progress of their counseling. A sign in the courthouse warns that cell phones and pagers must be turned off.

  • "Everyone is going to jail," Restaino said. "Every single person is going to jail in this courtroom unless I get that instrument now. If anybody believes I'm kidding, ask some of the folks that have been here for a while. You are all going." When no one came forward, Restaino ordered the group into custody, and they were taken to jail, where they were searched and packed into crowded cells. Fourteen people who could not post bail were shackled and bused to another jail.

For more, see Judge Removed Over Cell Phone Jailing (NY Judge Bounced From Bench for Jailing 46 People Over Ringing Cell Phone).

Go here for other stories on knuckleheaded judges. naughty judges

New Hampshire Woman Cops Plea To Swiping Sale Proceeds Of Mother's Home

In Moultonborough, New Hampshire, The Union Leader reported last week:
  • A woman who stole $75,000 from her mother, who was being cared for at a Laconia nursing home, has been sentenced to nine months in jail. Attorney General Kelly Ayotte said Candy Latour, 38, of Moultonborough, was sentenced by a Belknap County Superior Court judge [Wednesday] in a case that was prosecuted by the New Hampshire Department of Justice's Medicaid Fraud Unit. [...] An investigation revealed that the defendant had control over proceeds from the sale of the victim's house, as well as access to the victim's bank account, and had diverted the funds to her own use.

For more, see Woman sentenced for bilking mother.

See also, Moultonborough woman sentenced in thefts from mother (Laconia Citizen).

Borrowers Often Unaware Of Long Term Implications Of Getting A Reverse Mortgage

Considerations that need addressing when getting a reverse mortgage were recently covered in an article in The Age. An excerpt from the story:

  • Many older people find themselves asset rich but cash poor and releasing some of that home equity can be appealing. However, a recent Australian Securities and Investments Commission study of consumers' experiences with reverse mortgages found that the upfront benefits are obvious but borrowers were often unaware of the longer-term implications of their loans.
For more on these implications, see ASIC warns on reverse mortgages.

Go here for more on Reverse Mortgage Issues / Problems. zebra

Elder Financial Abuse Flying Under The Radar?

Elder financial abuse is the subject of an editorial series in the Contra Costa Times (Northern California). The first column in the series discusses the problems that vulnerable senior citizens face as a result of shameless predators seeking them out, many times actually befriending them, for the purpose of fleecing them of their homes and money. The following excerpts include two of the anectdotes cited in the column as examples of the types of cases that may be widespread but not getting needed attention from lawmakers, law enforcement, or the press:

  • An ex-convict who works at an Antioch car wash "befriends" an 82-year-old customer with dementia. Over time, he not only persuades the World War II veteran to give him more than $300,000 in cash and annuities, but he also gets the elderly man to change his will making him sole beneficiary.

  • An East Palo Alto woman takes out a $200,000 loan on her 92-year-old grandmother's house without her knowledge. She leaves the wheelchair-bound senior alone in a house full of rats while she goes on a $75,000 shopping spree -- buying herself a champagne-colored Hummer. After her arrest, she gets a mortgage broker to bring her loan documents in jail so she can take out another $400,000 loan on her grandmother's house.

For the seven editorials in the series (may require free registration), see:

  1. Endangered Seniors (Elder financial abuse has become a hidden national epidemic) (12-9-07),
  2. Theft of Elder Nation: An editorial series (Elder court is crucial) (12-10-07) (The focus is on Alameda County's Elder Protection Court in Oakland, California - reportedly "the only court in the country that handles civil and criminal complaints involving elderly victims in the same central location."),
  3. Theft of Elder Nation: An editorial series (Getting involved early is critical) (12-11-07),
  4. Theft of Elder Nation: An editorial series (State needs to revoke theft license) (12-12-07),
  5. Theft of Elder Nation: An editorial series (Requiring reporting) (12-13-07),
  6. Theft of Elder Nation: An editorial series (Place legal curbs on 'rescue' practice) (12-14-07),
  7. Theft of Elder Nation: An editorial series (Close legal loopholes on persuasion) (12-15-07),
  8. It's time for strong action against elder abuse (12-31-07).

For more on the Elder Protection Court, see KTVU Channel 2 report, Alameda Court Takes Aim At Elder Abuse; or here to watch the KTVU video report.

Go here for all posts on this Contra Costa Times editorial series on elder financial abuse.

Go here , go here , and go here for other posts on elder financial abuse. xero

Florida Mortgage Broker, Closing Agent Sentenced In Equity Stripping / Home Improvement Scam Targeting Seniors

Tthe North Country Gazette reports that Hillsborough County, Florida resident and mortgage broker Michael Danish (10 years in prison, 20 years probation) and title insurance agency owner Donna Whitlock (probation) were sentenced for their roles in a home improvement / equity stripping scam that targeted the elderly. The story reports:
  • Michael Danish was involved in a mortgage fraud scheme that victimized more than 20 individuals who were looking to use home mortgages to purchase air conditioning systems. [...] According to the investigation, Danish frequently obtained mortgages in amounts exceeding the homeowners’ requests, even obtaining some loans of which the homeowners were completely unaware. He also collected third-party checks which were required to be paid out of the loan proceeds and converted the funds to his own use, leaving many homeowners’ bills unpaid. Danish fraudulently obtained over $400,000 from more than 20 victims, many of whom were senior citizens.

***

  • Whitlock [owner of Bay Point Title, Inc.] allowed Danish to close loans outside of her office and notarized the signatures without the signees being present.

Danish pleaded guilty to aggravated white collar crime, failure to disburse funds in accordance with agreements and notary fraud. Whitlock pleaded guilty to notary fraud. Both are liable for the entire amount of restitution ordered by the court. For more, see Florida Broker Pleads Guilty To Fraud.

Go here , go here , and go here for other posts on elder financial abuse. yak elder financial abuse

More Twin Cities Mortgage Fraud Charges Coming

In Minnesota, the Minneapolis Star Tribune reports:
  • Two suspects in the growing number of Twin Cities mortgage fraud investigations have been arrested on suspicion of racketeering and theft by swindle. Donald L. Walthall, 40, of Anoka, and Rahmeen D. Underwood, 30, of Minnetonka, were arrested Friday. Walthall is the owner of Universal Mortgage Inc., a Brooklyn Park brokerage company that allegedly used straw buyers to buy property at inflated prices, and Underwood is a loan officer. The men, both released from custody, couldn’t be reached Saturday to comment. The Hennepin County attorney’s office is expected to announce criminal charges Monday afternoon in what has become a widening mortgage fraud investigation involving hundreds of properties.

***

  • Property records showed that Universal has been at the center of a web of transactions where a small group of investors, including several Universal employees, bought rental properties and quickly resold many at above-market prices.

For more, see 2 arrested in widening mortgage fraud scheme (Charges are expected Monday in the case involving straw buyers for hundreds of Twin Cites properties).

Go here for other posts on the alleged Universal Mortgage straw buyer, home flipping scams.

Permitted "Piggybacks" Fed Freddie's Portfolio Risk

The Washington Post reported last Friday:
  • For a glimpse of the risks that infected the mortgage business in recent years, consider a small slice of what happened at Freddie Mac, the giant home-loan investor chartered by the government to bring stability to the housing market. Before the era of easy credit, home buyers were ordinarily required to come up with down payments, which gave them an equity stake in their property. That equity reduces the danger of foreclosure, and federal law prohibits Freddie Mac from buying mortgages that cover more than 80 percent of a home's value -- unless the loan comes with a safety net, such as an insurance policy that would kick in if the borrower defaults. However, in recent years, Freddie Mac permitted home buyers to borrow all or part of the remaining 20 percent by using second loans, called "piggyback" loans, with no safety net.

***

  • The purchase of piggyback loans is one of many factors that has left Freddie Mac exposed to potentially larger losses as a nationwide debt bubble deflates. The McLean company turns out to have been more vulnerable to a downturn in housing prices than it appeared.

For more, see 'Piggyback' Loans Allowed by Freddie Fed Mortgage Risks (multiple pages); go here for the one-page "Print" version).

Another Homeowner Facing Foreclosure Despite Making All Mortgage Payments

In New Port Richey, Florida, WTSP-TV Channel 10 reported last week:
  • [Nadine] Knowles can't understand how she is losing her home despite making mortgage payments of $812.90 to Litton Mortgage every month. Knowles' certified bank statement shows the checks were cashed, but the company says she defaulted. "It just doesn't add up," Knowles says.

  • Knowles believes her problems started after her initial mortgage on the house was sold to another mortgage company. The new company started an escrow account for her taxes and insurance, even though Knowles has proof she has already bought and paid for insurance and paid the taxes. [...] But it did no good when Knowles came to Pasco Court and showed the judge she had proof that she had made her payments and it had been deducted from her account. The judge issued an order that her home be sold on the courthouse steps.

For more, see Woman makes payments, but faces foreclosure. Go here to watch the WTSP-TV Channel 10 coverage.

Go here for a story of a Maryland family who lost home to foreclosure despite making all the mortgage payments.

Go here for other posts on other lender screw ups. ForeclosureLockOuts

Sunday, December 09, 2007

Georgia Chief Justice Violates State Ethics Rules; Fined $3,100

In Atlanta, Georgia, The Associated Press reported late last month:
  • Georgia's top judge has agreed to pay $3,100 in fines for violating state ethics laws. Chief Justice Leah Ward Sears will pay the sum from her own wallet, not her campaign coffers, as part of a pair of consent orders approved by the state Ethics Commission [late last month]. Sears was facing ethics complaints from her 2004 re-election campaign. They alleged that the state's first female chief justice accepted contributions exceeding the state's $5,000 legal limit, including one $20,000 donation from a law firm. Sears also acknowledged misreporting some campaign finance information as part of Thursday's consent order.

Source: Chief Justice Agrees To Ethics Fine.

Go here for posts on other knuckleheaded members of our esteemed judiciary. naughty judges

Florida Man Charged In Alleged Home Repair Scam That Defrauded Six Seniors

In Florida, the Daytona Beach News-Journal reported recently:
  • An Ocala man accused of promising home repairs in east Volusia County, then disappearing with homeowners' deposits, was arrested ... by the State Attorney's Office. Timothy W. Gladden, 52, systematically defrauded six elderly Volusia County residents by promising home repairs that were never made after collecting thousands of dollars, according to the charging affidavit. All of the victims, who were at least 70 years old, were given a "free inspection" of their homes between late September and mid-October, the affidavit states. Gladden then presented a list of recommended repairs he offered to fix for a fee. Gladden collected just under $20,000 from his victims.

For more, see Ocala man charged in home repair scam.

Go here , go here , and go here for other posts on elder financial abuse. yak elder financial abuse

1031 Exchange Intermediary Under Fire; Facing Accusations Of Pocketing $160M Of Clients' Cash

The Miami Herald recently ran a story on Edward Okun, the owner of 1031 Exchange Group, a company in the business of holding, in trust, the money of investors wanting to defer their tax bills on sales of investment real estate. The story describes the hot water he finds himself in for allegedly misappropriating millions in those funds that were held in trust. An excerpt from the story:
  • The flashy 59-year-old businessman amassed a reported personal fortune of $659 million -- with all the trappings: a 130-foot yacht, a fleet of luxury cars, a helicopter and several private jets. But the empire Okun built is now unraveling amid a federal investigation, lawsuits and claims by hundreds of investors who say they were fleeced of $160 million in one of the largest business collapses of its kind.

For more, see Miami Beach investor accused of misspending $160 million (A Miami Beach businessman is accused of squandering $160 million from investors. He signed an agreement that let him keep his two multimillion-dollar homes).

Go here for other posts on Edward Okun.

Go here for other posts on problems with 1031 exchange intermediaries. sneaky slick escrow agents beta

Cops I.D. Eight More Victims In Norfolk Home Repair Scam Targeting Seniors

In Norfolk, Virginia, The Virginian-Pilot reports:
  • Police on Friday identified eight additional victims of a local home repair scam, and said there may be more who have yet to come forward. Police say the scam involved a man and a woman approaching elderly residents and telling them that their homes had water or termite damage, according to a news release. The couple required the residents to pay up front by check. Then they cashed it and disappeared, police said.

  • On Nov. 30, police announced the arrest of two people in connection with the crime. Timothy Shawn Levine, 31, ..., and Keaton Taylor, 28, ..., both were charged with two felony counts of obtaining money by false pretenses and conspiracy to commit a felony.

Source: Norfolk police identify eight more victims of home repair scam.

Go here , go here , and go here for other posts on elder financial abuse. yak elder financial abuse

Orlando Cops Bust Local Woman Running Meth Lab Out Of Her Home

In Orlando, Florida, WFTV Channel 9 reports:

  • Orlando police shut down a meth lab Friday. Cops described the operation as big and dangerous. The extensive operation was found in a residential neighborhood [in downtown Orlando]. Police said neighbors are lucky no one was hurt from the lab for two reasons. Firstly, it's a duplex and the fumes could have come through the ducts and affected the people who live next door. Second, police said, the lab easily could have exploded, putting the whole block at risk. [...] The next step is to call Code Enforcement. Investigators said the house is contaminated, but the state can't legally take control of it.

For more, see Meth Lab Bust Near Downtown Orlando Is City's Largest.

For WFTV Channel 9 video report, see Woman Arrested After Police Find Orlando Meth Lab.

For a post related to meth labs, generally, see Beware Of Homes Used As Indoor Pot Farms & Meth Labs.

Go here for some methamphetamine information resources.

Go here and go here for other posts on home based meth labs. meth lab zeta

More Fires Linked To Copper Thefts, Say Firefighters

In Cincinnati, Ohio, WKRC-TV Channel 12 reported last month:

  • A dangerous trend emerges as more thieves break into homes to steal copper. Firefighters, particularly on Cincinnati's West Side, say those thieves are starting more fires. In some cases, firefighters say copper thieves are starting fires on purpose, sometimes it's accidental. But regardless, it's often very close to homes where neighbors may not be aware of the danger next door.

***

  • "[T]hey'll either sometimes set the fire to cover up the theft or in trying to remove the copper say with a torch, they may start a fire," said Anson Turley, District 3 Fire Chief.
    Firefighters say usually vacant houses are the targets. Whether the fires are deliberately set, or accidental, the risk some copper thieves are posing to neighbors is real. [...] Firefighters are asking people fixing up homes to make sure they're secure, especially at night. They're also urging people who live next door to vacant homes to keep a close eye on them.
Local firefighters also say the damage associated with copper theft is escalating. In one recent case, thieves caused $500 in damage for just $10 worth of metal.

For other stories on stolen copper, see Copper Thefts I and Copper Thefts II. copper metal theft yak

Copper Thefts In Vacant / Unoccupied Homes

Recent copper theft stories from vacant or unoccupied homes:

Chicago, Illinois: Copper pipe stolen from home ($2,000 copper theft discovered when home seller was giving the home's new owners a tour of the property),

Syracuse, New York: Police investigate three copper pipe thefts ($1,500 pipe theft from home under construction; similar theft at vacant home; basement break-in, stolen pipe results in damaged furnace),

Woodbury, Connecticut: Copper pipes stolen from Woodbury home (Out of town woman who owns a local home found nasty surprise - someone broke in through basement door and stole her plumbing),

Ross County, Ohio: Police blotter (Vacant home broken into and copper pipe was reported stolen from basement of one home; 75 feet of copper tubing was stolen from another home),

Canton, Ohio: Two arrested in vacant house with copper wire, police say (Canton police arrested two men in a vacant house alongside rolls of copper wire, electrical outlets, a hammer, crow bar and wire cutters. Someone saw men enter vacant home & called cops to report the men were “smashing up the place”),

Antioch, California: Police Log (Man found vacant rental house vandalized, with the compressor and copper lines removed from refrigerator),

Hawkins County, Tennessee: Copper theft victim offers reward (Hawkins County detectives are investigating two copper burglaries. One victim's vacant rental property was robbed of its wiring. In another, daughter of out-of state owner discovers copper theft and associated damage when she stopped by to check on unoccupied home),

Crafton, Pennsylvania: Police blotter (Copper pipe was stolen Nov. 20 from the basement of a vacant home. A basement door was forced open; Police Log: Copper pipe stolen from vacant home - in another incident, both copper pipe and the water meter were stolen from a vacant home on Nov. 28 - the piping is valued at $200),

Dearborn, Michigan: Resident alerts police to suspects in Orchard copper theft (Aware of reports that copper had been stolen from vacant homes in the area, a local resident contacted cops when she saw two men wearing DTE vests and carrying a meter approach an unoccupied home and attempt to enter it. Police responded and apprehended two men while they were in the basement of the home. Officers said the men later admitted to involvement in other copper thefts in the area),

Tuscaloosa, Alabama: Police blotter (Kitchen sink and copper tubing were taken from a vacant house),

Hillsdale, Michigan: Brown Introduces bill aimed at stopping copper theft (Copper thefts widely reported in Hillsdale County. Victims include owners of seasonal and vacant properties; buildings under construction. Thefts have included plumbing materials as well as lines run from propane tanks to structures).

For other stories on stolen copper, see Copper Thefts I and Copper Thefts II. copper metal theft yak

Cops Arrest Indiana Woman Facing Foreclosure In Alleged Attempt To Torch Home, Pocket Insurance Cash

In Putnam County, Indiana, WRTV Channel 6 reports:
  • A Putnam County woman asked a neighbor to burn her house and help her blame someone they would allege tried to rape her, the county prosecutor said. Authorities alleged Christina Snyder, 31, concocted the scheme so she could collect insurance money. Snyder was arrested after the neighbor told police of the plot and that she offered him $5,000 to participate, authorities said. Snyder was charged with attempted arson, attempted insurance fraud and conspiracy to commit arson, 6News' Jack Rinehart reported.

  • According to court records, a bank had filed for a mortgage foreclosure on Snyder's rural home.

For more, see Police: Woman Planned To Burn Home, Allege Rape (Authorities: She Wanted Insurance Money, Asked Neighbor To Help).

Go here to watch the WRTV Channel 6 video report.

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

Florida Attorney Gets 15 Years For $13.5M Client Ripoff

In Miami, Florida, the North Country Gazette reports:
  • Former Miami-attorney Louis S. Robles has been sentenced to 15 years in prison and ordered to pay $13.5 million in restitution to the victims of his offenses after pleading guilty of three counts of mail fraud in connection with his misappropriation of settlement monies from clients afflicted with asbestos-related injuries and illnesses.

U.S. Attorney R. Alexander Acosta, whose office prosecuted the case, said:

  • Attorney Louis Robles abused the special trust that his clients placed in him. Robles sought out clients who were dying and cheated them out of millions of dollars, so that he could finance his own extravagant lifestyle. We hope that today’s sentence and court-ordered restitution will alleviate some of the suffering he caused to asbestos victims and their families."

For more, see Asbestos Attorney Robles Imprisoned For Client Ripoff.

For the U.S. Attorney press release, see Former Miami Attorney Sentenced To 15 Years For Misappropriating $13.5 Million In Client Settlement Money.

If a Florida attorney is representing you and screws you out of money or property through dishonest conduct, go to The Florida Bar's Clients' Security Fund for more information.

For other states, see:

Saturday, December 08, 2007

Specter, Others To Intervene In $29.2M Pennsylvania Ponzi Scheme

Lancaster Online reports:
  • Michelle Weaver's relentless phone calls, e-mails, faxes and pestering of government officials have finally paid off. Weaver, the de facto leader of a group of more than 800 homeowners stung by Wesley A. Snyder's $29.2 million mortgage fraud, has convinced U.S. Sen. Arlen Specter to hold a hearing on the subject at 3 p.m. Monday at Penn State's Harrisburg campus. [...] Specter's office said Friday the hearing will examine the mortgage crisis that soaked homeowners, including 300 from Lancaster County, for more than $26 million and ripped off 31 investors for $3 million. The event will take place in Room 210 of the school's student center on West Harrisburg Pike in Middletown. Representatives from loan services Snyder used, as well as Fannie Mae and Freddie Mac, are scheduled to testify regarding what they can do to help distressed homeowners.

For more, see Hearing set on loan mess (Senators to probe Snyder case).

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

Tax Lien Filed Against Bakersfield Flipper

The Bakersfield Californian reports:
  • State tax officials filed a lien against David and Jennifer Crisp this week for taxes owed from 2005. The $35,746.55 lien from the California Franchise Tax Board, which was filed at the county recorder's office Tuesday, is the latest in a string of financial, regulatory and possibly criminal troubles dogging principals, family members, employees and business associates of former Crisp, Cole & Associates companies. David Crisp could not be reached Friday by cell phone. The 28-year-old real estate agent previously ran Crisp & Cole operations with one-time partner Carl Cole, 60.

***

  • As of Friday, at least 105 defaulted and foreclosed properties are linked to associates of the former Crisp & Cole companies, according to an ongoing Californian tally. More than $64.6 million in total loans were taken out against the homes, according to The Californian's analysis. So far, 61 have foreclosed. Of $36.9 million in first and second loans taken out against those 61 properties, public foreclosure auctions have netted $28.1 million, county filings show. All auctions so far have resulted in lender repossessions.

For more, see IRS files lien on Crisp, his wife from '05 taxes.

Go here for special section on the Crisp & Cole "escapades" compiled by The Bakersfield Californian.

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

Recent Copper Theft Stories

Recent copper / other metal theft stories from around the country:

Grand Rapids, Michigan: Copper theft suspect arrested (Cops kill copper caper; plant roll of copper, then follow suspect home and arrest him),

Hawaii: Copper Thieves Hit H-1 Freeway Near Waikele (Copper thieves strike again, leave H-1 Freeway in the dark. Thieves hit 20 electrical pull boxes, making off with 1500 feet of wire. Code prevents locking or welding boxes shut),

Houston, Texas: Copper thieves shelve library activities for day (Thieves cut wiring leading to generator and emergency panel for downtown library complex, leaving it "in the dark"), see also Copper Thieves Cause Power Outage, Damage at Houston Library,

Charleston, South Carolina: Salon A/C Unit Stolen Twice In 6 Months ("I just can't believe that someone would do this for a few hundred dollars when it costs us $9000 if not more when this is all over," said victimized business owner),

Farmington, New Mexico: Copper thefts on rise across New Mexico (Three times this fall, thieves cut ground wires, make off with up to 275 feet of insulated copper from electrical poles and switching station. Last month, thieves took 6+ miles of copper wire from Rail Runner Express track between Albuquerque and Santa Fe, causing up to $350,000 in damage),

McHenry County, Illinois: Thieves nab manhole covers (Troubling trend across McHenry County - about 40 manhole covers and other steel grates have gone missing during the past few weeks. “They’re stealing them on the same basis that they steal copper,” [says local cop]. “It’s for the metal.”),

York, Pennsylvania: Metal Thieves Snatch Three 1,000-Pound Transformers (Three 1,000-pound Met-Ed transformers perched 20 feet above the ground were swiped by metal thieves. It's just one in a string of metal thefts in the city in recent months. In most cases, thieves have been hitting vacant homes.).

For other stories on stolen copper, see Copper Thefts I and Copper Thefts II. copper metal theft yak

Two Dozen Cats Abandoned In Home Facing Foreclosure

KSPR-TV in Springfield, Missouri reports:
  • Twenty-five cats were left with nothing but a bowl of beans and an abandoned home more than two months ago. Finally after lots of legal red tape the Southwest Missouri Humane Society got permission to rescue most of the cats off of Farm Road 88 in northern Greene County. Several stray cats put up a fight as the Southwest Missouri Humane Society tried to rescue them from squalor. Executive Director Bonnie Miller says, "The strategy was to use their hunger." Employees placed food inside cages luring the cats inside.

Reportedly, the cats' owners moved out of state and abandoned them in the house. Without their permission or a warrant, nothing could be done to rescue the cats until a pending foreclosure action reached the stage where the bank could allow entry onto the premises to the Humane Society for the rescue For more, see Cats Rescued After Long Legal Ordeal.

Go here for more on pets and foreclosures.

Friday, December 07, 2007

NY Feds Targeting Foreclosure Rescue, Inflated Appraisal Scams

Reuters reports:

  • The FBI has roughly tripled the number of agents in New York over the past year working on cases involving conduct such as fraudulent foreclosure rescue schemes and inflated home appraisals. Supervisory Special Agent Ben Berry told Reuters in an interview at the FBI's New York office that the agency expects more cases to be brought. "We are now starting to reap some of the benefits of having ramped up a bit here," Berry said. "It takes a while sometimes to bring a case to prosecution."

***

  • Earlier this week, six people were charged with fraudulently obtaining titles to scores of homes and taking out bad bank loans against them worth more than $20 million as part of a home foreclosure "rescue" scheme. [...] In New York, [Berry] said federal prosecutors in Manhattan and Brooklyn had been taking an increased interest in such cases.

For more, see FBI: Mortgage fraud cases up "exponentially".

For more on the foreclosure rescue indictment reported earlier this week, see NYC Feds Indict Six In Alleged Foreclosure Rescue / Equity Stripping Scam Operation.

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.).

Massachusetts Attorney Involved In Equity Stripping / Rescue Operation Loses Beacon Hill Landmark In Foreclosure Sale

There's a column in the The Boston Globe on James Alberino, a Massachusetts closing attorney from Marblehead, and his ownership for the last four years of 22 Beacon Street, a building described as:
  • [A] Beacon Hill landmark treasured by the powerful since famed architect Charles Bulfinch designed it 200 years ago, shortly after he finished his work on the State House.

Alberino reportedly paid $10 million for the landmark four years ago. However, times apparently haven't been so good for him lately as the column summarizes Alberino's 2007 legal problems - which includes a January bankruptcy filing, a civil lawsuit filed by the Massachusetts Attorney General this spring accusing him and 18 others of involvement in a foreclosure rescue scam, an ongoing investigation of him by the Massachusetts Board of Bar Overseers, and finally, this week's foreclosure sale in which he lost ownership of the majestic building at 22 Beacon Street.

The column appears to be, in part, a commentary on the once-booming real estate market, as I understood it, and is encapsulized by this excerpt:

  • When markets are rising - whether real estate or stocks or tulips - all things seem possible. It is what prompts ordinary people to buy houses they can't afford, brilliant traders to buy billions in questionable debt, and a nobody closing attorney from Marblehead to think he belongs in a trophy building at the intersection of commerce and politics.

For more, see Justice, more or less.

Go here for the April, 2007 Massachusets AG Press Release (no longer available online) announcing the filing of the civil lawsuit against Alberino and 18 others, accusing them of involvement in the aforementioned foreclosure rescue scam.

Go here for more on 22 Beacon Street.

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.).

Dozens Charged In Alleged Houston-Area Straw Buyer Fraud Scam

In Harris County, Texas, KTRK-TV Channel 13 (Houston) reports:

  • Authorities are trying to track down the remaining suspects in a multimillion dollar mortgage scam here in Harris County. Thirty-seven people are accused of lying to get millions of dollars from a complex and illegal mortgage fraud ring. Some of the suspects were in court overnight. The judge called each name, including that of the alleged ringleaders, husband and wife, Obbie and Joyce Toliver. The Harris County district attorney's office unsealed the indictments yesterday, which reveals the alleged scam as one of the state's largest ever mortgage fraud scams. Obbie Toliver is accused of fraudulently buying 17 homes using other people's credit, ... . "At first blush, the pitch sounds kind of reasonable to you," said Harris County Assistant District Attorney Lester Blizzard. "The first pitch is, 'Hey, we need your credit. Put your name down. Just put your name down and everything will be just fine'." Authorities estimate at least 25 other people are involved in the alleged scam.

For more, see Dozens indicted of mortgage loan fraud.

For a related story involving Toliver, see Fraud suspect connected to county case (A Brazoria County indictment alleges a mortgage fraud was perpetrated by former Lake Jackson minister Harold Higgins and Obbie Toliver, whom Harris County prosecutors called a leader of a suspected Harris County scheme. Toliver is named in Higgins’ indictment but was not himself indicted in Brazoria County).

Combined Church-Immigrant Based Affinity Fraud Possible In Alleged Bay Area Mortgage Scam

The Wall Street Journal recently ran a story about Naira Costa, a church-going Brazilian immigrant who belonged to an evangelical church that is a spiritual and social haven for Brazilians in the San Francisco, California Bay Area, and her and others' experiences with the church's head deacon, Soario Santos, and other church officers in connection with the purchase of area homes. According to the story:
  • Mr. Santos, a fellow Brazilian, served the Pentecostal church on nights and weekends. During the day, he worked as a loan officer at a mortgage brokerage owned by a Brazilian immigrant. Mr. Santos and other church officers also working at the same real-estate business routinely approached churchgoers to encourage them to buy homes.

  • Weak credit and low wages weren't barriers, Ms. Costa recalls. "He told us that a house easily would appreciate $100,000 in a year," enabling the owner to refinance, says Ms. Costa. "We trusted him implicitly. Everyone at the church was buying houses from him."

  • Today, Ms. Costa and other former Message of Peace parishioners claim that Mr. Santos was a key part of a mostly Brazilian ring that allegedly conspired to defraud people by persuading them to buy homes they couldn't afford. Ms. Costa, the housekeeper, secured a $713,000 sub-prime mortgage. In another instance, a Brazilian baby sitter borrowed $495,000. Now, the home buyers are beset by foreclosures and additional stains on their already-tainted credit.

***

  • A lawsuit filed by Ms. Costa and several others in California superior court alleges that a network of real-estate agents, loan officers and mortgage brokers targeted "vulnerable immigrants," falsified financial records, forged documents and misled the home buyers about the real costs of their mortgages. The suit seeks unspecified damages for the plaintiffs.

For more, see How the Subprime Mess Hit Poor Immigrant Groups (may require subscription; if no subscription, go here).

Unraveling Missouri Flipping Scam Forcing Tenants Onto The Streets

Among the after effects of a massive house flipping scam in Sikeston, Missouri that has left over 300 homes in foreclosure are the problems facing unwitting tenants who are being "foreclosure evicted" out of their rented homes on short notice, despite being current on their rent. Among the reported problems faced by some of the city's displaced residents:
  • Unrefunded security deposits, local homeless shelter unable to meet increased demand for services, ruined furniture due to uncontrollable circumstances in one case, receiving a letter giving one tenant a week to vacate -- two days after she gave birth, children facing confusion as to their new living circumstances - living out of a car one day and bouncing in and out of friends' and family members’ homes on other days as space is available, shortage of rental housing in the area given the recent spike in demand for rentals from others in the same predicament, increased rental rates due to the increased demand.

For more, see Mortgage fraud scheme: Families displaced by housing fraud ("Lost in the shuffle").

For an earlier post on the unraveling Sikeston, Missouri flipping scam, see KFVS-TV "Housejacking" Investigation Reveals Flipping Scam; 300+ Homes In Foreclosure.

For other posts involving rent skimming landlords who pocket rent and allow homes to go into foreclosure, see Tenants Unwittingly Renting Homes In Foreclosure I , II , III , and IV. equity skimming unwittingly gamma

North Carolina Feds Indict Attorney & Broker In Alleged Flipping Scam

In Charlotte, North Carolina, the Charlotte Observer reports:
  • A federal grand jury in Charlotte has indicted a real estate attorney and a mortgage broker, accusing them of defrauding banks and clients during illegal real estate transactions in 2001 and 2002. The attorney, Victoria Sprouse, and the broker, Michael Pahutski, both of Charlotte, were indicted Nov. 16 on charges of mail, wire and bank fraud, conspiracy and money laundering. Sprouse was also indicted on a perjury count. Stephen Hawfield, a Charlotte real estate investor, was named as an unindicted co-conspirator. According to the indictment, Sprouse and Pahutski prepared false mortgage loan applications, submitted false documentation in the applications and illegally held money during the closing of home sales.

***

  • In February, a jury in U.S. District Court awarded a company that had sued Sprouse $1.15 million in damages, although the amount was later reduced. The company, SouthStar Funding, accused Sprouse of defrauding them during real estate transactions.

For more, see Attorney, broker indicted (Pair accused of creating false documents to profit from home sales).

Foer story update (April 2, 2009), see Sprouse guilty of mortgage fraud (Real estate lawyer weeps after jury convicts her of 18 charges of conspiracy, fraud, money laundering).

Go here for other posts on this case.

County Prosecutor's Office Has Foreclosure Rescue On Its Radar Screen

In Ventura County, California, the Ventura County Star reports:
  • [P]rosecutors are seeing a rise in the number of complaints from people who have been wronged in real estate transactions. "We generally categorize it as foreclosure rescue fraud," said Senior Deputy District Attorney Miles Weiss. "Basically, false promises about being able to save people, their credit, the equity in their home, etc." [...] As head of the Real Estate Fraud Prosecution Unit, Weiss is working with people [facing foreclosure] who feel they were cheated ... .
In one active case being investigated, a couple facing foreclosure responded to an offer of foreclosure help. Reportedly, it wasn't until some time after the transaction was consummated and the couple again fell behind in their payments that they learned that they no longer owned their home and had been unknowingly renting the house from the foreclosure rescue operator. They ultimately found out that they had sold their home to the operator for $55,000 less than the market value and paid him an additional $50,000 fee for doing so.

Ventura County District Attorney Gregory Totten vowed at a news conference to end the type of deals that snagged the couple. For more, see Realty fraud gripes rising (Coalition to help owners in distress).

Go here for Ventura County DA's:

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.).

Thursday, December 06, 2007

Are "Contingent Interest" Reverse Mortgages A Scam?

In South Florida, a reader of The Miami Herald's Action Line recently wrote in:

  • As the personal representative for an elderly friend's estate we had to pay $321,000 to pay off a 10-year-old $60,000 reverse mortgage. The culprit? A clause titled ''contingent interest,'' which gave the mortgage company 50 percent of the appreciation in property value over the term of the note. The property appraised at $125,000 in 1996 and at $430,000 in 2006. In addition to the hefty interest and fees, the mortgage company got a further $152,000 under the clause. Please warn your readers.

For Action Line's response:

  • This is why we stressed the importance of doing your homework. Fortunately, these equity-sharing or appreciation-sharing clauses are no longer used, according to Bronwyn Belling, AARP's Washington-based reverse mortgage expert. Only a handful of lenders offered reverse mortgages that included them but ''some of these loans are still out there,'' and Florida had a higher proportion of them, she said.

  • A class-action suit filed on behalf of Californian seniors who had taken out Transamerica Homefirst's ''Lifetime'' reverse mortgages, which contained such terms, was settled in 2003 with an $8 million award to the plaintiffs.

  • Belling warns, however, that with the high demand for reverse mortgages, new variations on contingent-interest loans are beginning to emerge. Counseling -- provided for free -- is required when applying for a federally backed Home Equity Conversion Loan, or HECM, but only California makes counseling mandatory for all types of reverse mortgages. About 90 percent of reverse mortgage loans are HECMs, which have ''lots more consumer protection'' built into them, Belling said. AARP-trained and -tested counselors can be located online at www.hecmresources.org/network.cfm. All local HECM counselors can be located by calling, toll-free, 800-569-4287. ''Getting the free counseling is the best step,'' Belling said, to preventing shocks like this.

For the Action Line column, see When shopping for reverse mortgages, counseling's crucial (no longer available online - courtesy of The Miami Herald).

Go here for other posts on problems relating to reverse mortgages. zebra

Rent Scammers Using Fake Ads On Craigslist Cop Plea

In San Diego, California, KGTV Channel 10 reports that Anthony Zoccolillo, 30, and Robert Ramus, 68, struck a deal with the district attorney and pleaded guilty last week to one count of conspiracy and two counts of grand theft in a rent scam in which they purported to offer for rent homes they didn't own and pocketed the cash paid to them by unwitting rental prospects. According to the story:
  • Zoccolillo and Ramus used the Internet to their advantage, posting fake rental ads on Craigslist and pretending to rent out upscale, vacant homes that were actually for sale and listed on the Multiple Listings Service (MLS). The MLS is a database used by real estate agents, and that is how the pair had information on the homes, including the code to open the lock boxes.

The Channel 10 I-Team brought this scam to light when they set up a sting, offering the two men cash for a rental deposit for a Pacific Beach home. They worked with a private investigator / former cop who pretended to be the sucker in the sting. For more, see Men Plead Guilty In Home Rental Scam, or go here to watch the Channel 10 I-Team video coverage.

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

New Hampshire Establishes Statewide Foreclosure Hotline

In Concord, New Hampshre, The Union Leader reports:
  • The state has set up a new hotline for consumers who face foreclosure on subprime mortgage loans they used to buy their homes. [...] The Banking Department set up a special phone number, 1-800-437-5991, to handle calls from consumers who either face foreclosure or are worried about their loans. Department staff will handle the calls during regular business hours, 8 a.m. to 4:30 p.m.
For more, see NH foreclosure hotline set up.

Florida Lifts Freeze On Fund Holding Investments Tied To Subprime Mortgages; Concerned Municipalities Promptly Pull Out Another $1.2 Billion

Bloomberg News reports today:
  • Schools and towns in a Florida fund that lost almost half its assets to withdrawals last month pulled out another $1.2 billion today when the state lifted a freeze on their accounts, officials said in a statement. Cities and counties that use the Local Government Investment Pool like a bank account are able to tap their funds on a limited basis ... . [...] Participants will have full access to new deposits and 86 percent of existing balances, from which removals are limited to the greater of $2 million or 15 percent.

For more, see Florida Fund Reopens, Has $1.2 Billion of Withdrawals.

See also, Florida Fund Caps Withdrawals as Towns Face Hardships.

For story updates, see:

Go here for related posts on this story. state run subprime

Municipal Governments May Be Stuck Holding Investments Tied To Subprime Junk

A story appearing last month on Bloomberg News reported on the belief of many municipal government finance managers throughout the country that their investment of taxpayer money in state-run government agency investment pools is risk-free and easy. An excerpt from the story:

  • It may be easy, but it's not risk free. What [one local official] didn't know in October -- and what thousands of municipal finance managers like him across the country still haven't been told -- is that state-run pools have parked taxpayers' money in some of the most confusing, opaque and illiquid debt investments ever devised. These include so-called structured investment vehicles, or SIVs, which are among the subprime mortgage debt-filled contrivances that have blown up at the biggest banks in the world.

For more, see Public School Funds Hit by SIV Debts Hidden in Investment Pools.

See also a Miami Herald story (12-6-07): State's investment loss of $2.5B falls below standards (The State Board of Administration reported that it has more than $2.5 billion in downgraded investments in several accounts, including the state retirement fund):

  • The damage caused to Florida by the turmoil in the mortgage industry is growing. Florida's troubled agency in charge of handling investments, under fire for not disclosing the extent of questionable investments it made on behalf of cities and counties across the state, acknowledged Wednesday it holds more than $2.5 billion in investments that have fallen below the state's quality guidelines.

Go here for related posts on how investors are being affected by investments tied to subprime mortgages, including how a Florida state-run fund recently experienced the equivalent of "a run on the bank" when municipal finance managers throughout the state started frantically pulling their cash from the fund before the state stepped in and froze the fund's assets.