Wednesday, January 16, 2008

San Diego Landmark Embroiled In Litigation Between Developer, Residents; Mortgage Holders Face Grim Prospects

In another condo quagmire story, voiceofsandiego.org reports on the unfolding saga of a California landmark building on the edge of downtown San Diego that was once a hotel, but was rehabbed and converted into condos a couple of years back. A dispute between the developer and its residents involving alleged construction defects stemming from the rehab and failure to disclose certain material facts are the prime contributors to the problem. Plummeting prices of the residential units in the building causing owners to lose their home equity and mortgage holders to eat hundreds of thousands of dollars from resulting foreclosures is another contributor to this mess.
  • The red neon letters spell EL CORTEZ when they're all working, launching a beacon from the stately white building atop its namesake hill on the edge of downtown San Diego. But when the letters are on the fritz, as they are now, they flash and blink, muddling the sign's message and portending another: all is not right with the landmark.

***

  • The building is mired in litigation between homeowners and the developers. The homeowners association and individuals in various suits are suing over construction defects, parking agreements, HOA reserves, disclosures on property tax agreements and the building planned for next door. And of the five units in the building currently for sale, four are being sold for about half of their original selling price by lenders who repossessed them. The other is listed for less than is owed on the mortgage.

  • Take unit 405, a two-bedroom, two-bath condo that sold in November 2005 for $625,000. It's been repossessed by the lender and is now listed for sale with an asking price of $290,000 -- a 54 percent price reduction. Another bank-owned unit that once sold for $405,000 is now listed at $199,000. Another one, No. 304, sold in February 2006 for $699,250. Now it's listed as a bank-owned sale for $294,500 -- a 58 percent difference. And though sales have slumped countywide, buyers are especially scarce on this project. Lenders, already reviewing each deal more meticulously, are extremely averse to making mortgages on buildings in litigation. The banks selling the repossessed properties are forced to keep lowering the prices until a buyer can pay cash or work out some other deal with a lender.

Among the problems complained of by the residents of this luxury building are the defective systems that have resulted in bursting pipes and sewage back-ups, failure to disclose that a major real estate tax break was expiring - resulting in a significant hike in unit owners' maintenance charges, and the developers' plan to build a new 12-story contemporary building right next door to the eight decade old landmark - which will kill the views of the city that the building currently enjoys.

For more, see Trouble at El Cortez (In a renovated San Diego landmark, there is dysfunction among the developer and the homeowners).

"Straw Buyers" File Suit Against "Money Store" In Alleged Maryland Foreclosure Rescue Scam

(original post 1-15-08)
Two Maryland residents currently have litigation pending in a Maryland Federal Court accusing foreclosure rescue operator Metropolitan Money Store of duping them into being "straw buyers" in a foreclosure rescue, equity stripping scheme that, according to their lawsuit, purportedly:
  • "was geared to help people in the community who have homes that were about to go into foreclosure. Their specific role was to be an 'investor' by submitting their social security numbers for which they would be paid in return a $10,000 fee."

According to the lawsuit, the Plaintiffs were never told that they would be purchasing a home or would be assuming home ownership from the homeowners who were in foreclosure.

The lawsuit alleges violations of the Federal Real Estate Settlement Procedures Act ("RESPA") and the Maryland Protection of Homeowners In Foreclosure Act ("PHIFA"), negligence, restitution and unjust enrichment. The suit also seeks to void the deeds to, and the mortgages on, the subject homes that arose out of the equity stripping transactions involved.

In addition to Metropolitan Money Store, the other defendants named in the suit are:

  • Fordham and Fordham Investment Group, LTD., RTE Title & Escrow, LLC, Sussex Title LLC, Joy Jenis Jackson, Kurt Fordham, Alexander Jamil Chaudhry, Jennifer McCall, Southern Title Insurance Corp., Chicago Title Insurance Company, and Exit Powerhouse Realty.

The case, originally filed in a Maryland state court in Prince George's County in September, was transferred by the defendants to Federal Court in November. Representing the Plaintiffs are Charles M. Maynard LLC, Rockville, MD and Joe D. Watson, Rockville, MD.

To view the lawsuit, see this direct link to Law, et al. v. Metropolitan Money Store, et al. on the PACER system (approx. 1.32 MB - PACER registration required - 34 pages - $2.40).

Alternatively, you can contact me at HomeEquityTheft@yahoo.com and I'll e-mail it to you (please put "Law et al. v. Metropolitan Money Store" in the "Subject" line).

Go here for other posts on Maryland foreclosure rescue operator Metropolitan Money Store.

Mass AG Seeks Injunction Freezing 500 Fremont Foreclosures

In Massachusettts, The Boston Globe reports:
  • The Massachusetts attorney general asked a state court yesterday to block Fremont Investment & Loan from commencing foreclosure actions against 500 borrowers in Massachusetts. Attorney General Martha Coakley had previously filed suit in October accusing Fremont of predatory and unfair lending practices, and yesterday attorneys from her office told a Suffolk Superior Court judge the state wants to review each mortgage that is subject to foreclosure and try to stop proceedings on any loans they believe were made fraudulently.

***

  • Many Fremont loans had lower teaser rates that rose after two years, often pushing borrowers' payments beyond their ability to pay. Fremont mortgages were "a recipe for disaster," and Fremont was aware its mortgages contained "multiple layers of risk" to borrowers, [assistant attorney general Jean] Healey said. In the request for an injunction, state lawyers argued the loans were "structurally unfair" and Fremont made them without regard to borrowers' ability to pay.

For more, see State asks court to halt 500 foreclosures by Fremont.

Go here for a West Tisbury, MA lawsuit against Fremont alleging predatory practices.

Fremont, Saxon Engaged In Unfair, Deceptive, Predatory Lending Practices, Says Martha's Vineyard Lawsuit

In Massachusetts, on the island of Martha's Vineyard, the Martha's Vineyard Gazette reports:
  • The town of West Tisbury has filed a lawsuit against a mainland subprime mortgage company that loaned more than half a million dollars to an affordable homesite owner in town who had no ability to repay — and then foreclosed on the property. The lawsuit charges Saxon Mortgage Services Inc., a Texas-based lending institution, and Fremont Investment and Loan of southern California, with unfair, deceptive and predatory lending practices. Filed in Dukes County Superior Court on Dec. 20 by West Tisbury town counsel Ronald H. Rappaport, the complaint seeks to reestablish a set of protective covenants that run with the property to ensure that it will remain affordable in perpetuity.

For more, see Lawsuit Targets Subprime Bank.

Go here for a post on the Massachusetts Attorney General litigation against Fremont alleging predatory practices.

Non-Profit To Assist Some Victims Of Pennsylvania Wrap Around Mortgage Ponzi Scheme

In Lancaster County, Pennsylvania, Lancaster Online reports:
  • The United Way of Lancaster County aims to take some of the sting out of a scam that burdened hundreds of area homeowners with larger mortgage payments than they expected.The agency will set up a fund to assist the victims of Berks County-based OPFM Inc. and Image Masters. OPFM mortgage broker Wesley A. Snyder has pleaded guilty to defrauding some 800 borrowers, including more than 300 in Lancaster County. The United Way's Fraud Victims' Fund is not intended to help all borrowers. Only those in danger of losing their homes because they can't make higher mortgage payments will receive aid.

For more, see United Way steps into mortgage scam breach (Sets up fund that will help people at risk of losing their homes to mortgage broker’s misdeeds).

See also:

Go here and go here for other posts and links to other media reports on the Ponzi scheme operated by Wesley Snyder.

Lawsuit Involving Title Underwriter Revolves Around $5.1M In Missing Escrow Funds Once Held By Now-Defunct Agency

In Christian County, Missouri, the Springfield Business Journal reports:
  • A Branson development company suing a Nixa-based title agency that suddenly ceased operations in June will soon have access to internal documents subpoenaed from the agency’s underwriter. On Jan. 9, Christian County Circuit Judge Mark Orr heard from attorneys representing Branson Hills Development Co. and LandAmerica Financial Group, the Virginia-based company that underwrote title policies issued by Guaranty Title Co. LandAmerica pulled the plug on its agent after evidence of an alleged check-kiting scheme surfaced and immediately initiated an audit that found at least $5.1 million missing from Guaranty Title’s escrow accounts at area banks. The money belonged to developers, banks and builders as well as homebuyers and sellers who found themselves out of luck when Guaranty Title was shut down. The agency – co-owned by Rick Burton, Kathy Allen and Stephanie Gray – had at least nine regional offices that employed some 45 people.

The developer is seeking to hold LandAmerica responsible for the actions of Guaranty Title based on its agency agreement with the now-defunct title company. For more, see Judge OKs subpoena of Guaranty Title audits (Branson Hills attorney asserts that the underwriter is party responsible for actions of defunct title company).

For an earlier SBJ article on this case, see Attorneys flood courtroom chasing Guaranty Title funds (Problem: Amount left behind is unclear and reportedly dwindling).

Click here for more in SBJ's ongoing coverage of Guaranty Title's collapse.

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

Texas Feds Indict 16 In Straw Buyer, Flipping Operation

In Austin, Texas, the Austin American Statesman reported last week:

  • A federal grand jury in Austin has indicted sixteen people — 11 of them from Austin — in a multimillion dollar fraudulent real estate flip-for-profit scheme, U.S. Attorney Johnny Sutton's office announced [last week]. The indictment says that the group, led by Cornelius Robinson, 47, of Austin, conspired to defraud mortgage lenders in the purchase of 25 properties in Austin and San Antonio. The defendants are accused of buying the properties and then immediately selling them to a "straw buyer," who was in on the scheme, at a higher price. "The mortgage lenders were deceived as to the true nature of the transaction and financial status of the 'straw buyer,' " who did not make subsequent mortgage payments, said a statement issued by Sutton.

Source: 16 indicted in real estate scheme (Convictions could lead to 30-year sentences).

See also, 16 indicted in Austin-area mortgage fraud scheme: Others charged were:

  1. Silvia Seelig, age 45, of Austin, who during the conspiracy, was a licensed real estate agent and an alleged straw buyer;
  2. George H. Watson, age 55, of Austin, a licensed attorney who specializes in real estate transactions. Watson served as the closing attorney on numerous real estate transactions associated described in the Indictment;
  3. James Douglas Atwood, age 51, of Austin, Cornelius Robinson’s uncle and an alleged straw buyer;
  4. Michael Breon, age 39, of Austin, an associate of Cornelius Robinson and an alleged straw buyer. Breon, a licensed loan officer and mortgage broker, was employed by several different loan origination and mortgage companies during the conspiracy;
  5. Sindu Sukumaran, age 36, wife of Michael Breon and an alleged straw buyer;
  6. Doris Ann Hill, age 40, of Austin, a personal banker employed at Wells Fargo Bank. For a fee, Hill allegedly agreed to provide a false verification of deposit to loan underwriters in relation to real estate transactions;
  7. Julius Meyers Lofton, a 45-year-old licensed real estate agent living in Austin and an alleged straw buyer;
  8. Roy Rivers, age 52 of Austin, friend of Cornelius Robinson and James Atwood and an alleged straw buyer;
  9. Danielle Guice Rosas, a 40-year-old resident of Austin and an alleged straw buyer;
  10. Stanley Ma, a 27-year-old resident of the Honolulu, Hawaii area and an alleged straw buyer;
  11. Leonard Brown, age 38, of Houston, Texas, and an alleged straw buyer who also allegedly provided a false verification of employment in association with Onyx Consulting and defendant Ma;
  12. Russell Snead, a 43-year-old resident of the Seattle, Washington area, an associate of Cornelius Robinson and an alleged straw buyer;
  13. Marlon Nathan Torres, age 45, of Hutto, Texas, an associate of Cornelius Robinson;
  14. Jeffrey Andre Wilkins, age 46, of Austin, a friend of Cornelius Robinson and an alleged straw buyer; and,
  15. Leroy Williams, a 46-year-old resident of Austin and an alleged straw buyer.

Tuesday, January 15, 2008

Another West Palm Problem With Newly Built Condos

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Cracked walls. Corroded pipes. Another abandoned home in foreclosure? Nope. It's the luxury condominium known as One City Plaza in downtown West Palm Beach, condo owners say. The building's condo association, fed up with what it claims are numerous building defects, has filed a nasty lawsuit against One City Plaza's developer, Kolter City Plaza Ltd. The association claims the upscale condominium is replete with defects including building code violations, design flaws and safety issues. How bad? Try water intrusion in the garage, roof and lobby; cracked walls in the garage, utility rooms and building exterior; and rusting metal roof trusses, according to the lawsuit, filed late last month in Palm Beach County Circuit Court.

***

  • One City Plaza, among the first of the new condos to open downtown, was developed by Kolter, a Canadian concern. The luxury, 350-unit building has units ranging in price from $300,000 to more than $1 million.

For more, see Land-use attorney ready for fresh start (2nd story from the top) (original story no longer available online; try here for full story reprinted on another website).

Forbes On How Lehman Had Pocket Picked Out Of $50+ Million In Southern California Mortgage Scam

Forbes magzine has an article on the ongoing criminal and civil proceedings involving a major alleged mortgage fraud scam which resulted in Lehman Brothers taking a hit out of upwards of $50 million, according to court documents. An excerpt from the story:

  • The U.S. Attorney in Los Angeles says the scam was masterminded by developers Charles Elliot Fitzgerald and Mark Alan Abrams, with help from Joseph Aram Babajian, real estate broker to such stars as Warren Beatty, Ryan Seacrest and Harrison Ford. Five people have been indicted on multiple charges of fraud and conspiracy. Between 2000 and 2003 the defendants allegedly stole tens of millions of dollars by inflating the values of homes. According to the criminal complaint, they bought real estate at fair prices, had the properties appraised at far higher amounts, borrowed those greater sums from Lehman and pocketed the difference, using the money to fund extravagant lifestyles. Five people, developer Abrams among them, have pleaded guilty to multiple felonies and await sentencing after they testify against other defendants. Babajian (pronounced Baba-zhan) and Fitzgerald have entered not guilty pleas.

For more, see Real Estate Rip-Off (How Lehman Brothers was swindled out of $50 million).

Go here for earlier posts on this story.

NY Governor To Propose Bill Stengthening Foreclosure Protections For Homeowners

In his recent State of the State speech to the legislature, New York State Governor Elliot Spitzer addressed the foreclosure rescue problem in the state, telling the legislature:
  • I will send you a bill that amends state foreclosure law to provide additional protections for homeowners. In addition, working with Attorney General Cuomo, I will submit legislation that enhances our anti-fraud laws, to ensure that those who engage in mortgage scams are punished.

Go here for the text of Gov. Spitzer's speech (courtesy of Political State Report).

Baltimore Judge Denies Title/Escrow Company Dismissal Request In State AG's Foreclosure Rescue Suit

In Baltimore, Maryland, WBAL-TV 11 News I-Team reporter Barry Simms reports that a request filed by Laurel-based Cornerstone Title and Escrow to dismiss it from a foreclosure rescue lawsuit filed by Maryland Attorney General Doug Gansler was denied yesterday by Judge Martin Welch. An excerpt from the story:
  • In July, homeowner Claretta Taylor told I-Team reporter Barry Simms about her struggle to keep her home. "I've become leery of people. I don't trust people now, especially when it comes to my finances. I scrutinize everybody," Taylor said. Taylor said that a television ad by Michael K. Lewis promised hope, so she signed up for his MKL financial diet. After scrutinizing the deals given to Taylor and about nine other homeowners facing foreclosure, Assistant Attorney General Scott Bailey filed a complaint in October.

  • The complaint accused Lewis, his brother, Ernest, and other members of his so-called African-American Business Network of stripping the equity from the properties and charging numerous undisclosed fees. The attorney general's office said it believes Cornerstone Title and Escrow, based in Laurel, is involved in the foreclosure rescue scheme. "Each of the defendants played a role in the scheme. They should be held liable for that," Bailey said.

For more, see Company Tries To Get Out Of Foreclosure Scheme Case.

Go here for other posts on Maryland foreclosure rescue operator Michael K. Lewis.

For the Maryland AG's warning on foreclosure rescue, see Foreclosure Scams: Don’t Fall Prey to a Foreclosure Shark!

Go here for a list of Maryland organizations that provide foreclosure counseling to consumers in every region of the state.

Maryland Governor Calls For Ending Foreclosure Rescue, Starting Mortgage Servicer Monthly Reporting

(original post 1-14-08)
In Landover, Maryland, The Baltimore Sun reports:
  • Gov. Martin O'Malley announced a wide-ranging plan yesterday to confront an unprecedented rise in home foreclosures and combat predatory mortgage scams, including legislation to slow the minimum time for foreclosure from 15 days to more than four months. The Democratic governor proposed new requirements for brokers and lenders to ensure that borrowers can afford the mortgages, changes to the state's foreclosure process to make it more consumer-friendly, and a ban on the conveyance of property in so-called foreclosure rescue schemes. O'Malley's administration also wants Maryland to become the second state in the nation, after California, to require that loan servicing companies file detailed monthly reports about how many loans are in default and their efforts to help borrowers by refinancing or modifying the loan terms. State officials said there is a gulf between what servicers say they are doing and the actual assistance they are providing.

***

  • O'Malley outlined his plan at a news conference on the front lawn of Landover resident Velma Floyd, who almost lost her first home recently in a foreclosure rescue scheme, in which troubled homeowners refinance and are instructed to temporarily sign over the title of their homes. Floyd's broker is under investigation by state regulators and therefore wasn't named. "We just want to keep our home, and we want to help others keep their homes," Floyd said.
For more, see O'Malley unveils home aid (Plan is meant to halt surge in foreclosures).

See also, O'Malley Proposes Mortgage Reforms (The Associated Press):

  • O'Malley's plan does not include new regulations for businesses that offer "Cash for Houses."

For the Maryland AG's warning on foreclosure rescue, see Foreclosure Scams: Don’t Fall Prey to a Foreclosure Shark!

Go here for a list of Maryland organizations that provide foreclosure counseling to consumers in every region of the state.

Go here if you're a Maryland resident and want to file a complaint with the state Attorney General.

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

Arizona Governor Calls For Foreclosure Rescue Regulation

The Arizona Republic reports on Arizona governor Janet Napolitano's recent State of the State address. Buried among the legislative proposals urged during her speech was the passage of an Arizona Home Equity Theft Protection Act, which would regulate foreclosure rescue operators. For the story, see Gov. focuses on schools, health care in State of State.

Go here for the text of her speech (courtesy of the Tucson Citizen), in which, among other things, she tells the legislature:
  • [Y]ou need to pass the Arizona Home Equity Theft Protection Act, to license "equity purchasers." There are some in this category who prey on vulnerable homeowners and use deceptive practices to cheat them out of their homes. Let's pass the bill and put the bad guys out of work.

Washington State AG Calls For Foreclosure Rescue Prohibition

In Washington State, a recent editorial in The Olympian comments on an agressive legislative agenda set by state Attorney General Rob McKenna for the current session of the state legislature which sets forth a number of consumer protection measures, including the prohibition of mortgage foreclosure rescue schemes. For the story, see McKenna sets bold agenda.

Oregon Legislature To Propose Laws Protecting Homeowners In Foreclosure Rescue Deals

In Salem, Oregon, Salem-News.com reports:
  • Later this week, the [Oregon] House Consumer Protection Committee will introduce a [...] bill that will crackdown on fraudulent and abusive rescue-mortgage scams aimed at homeowners facing potential foreclosure. [...] To prevent further victimization of homeowners, Senate Democrats have endorsed three specific foreclosure reforms to be enacted in the February session: protecting homeowners from scams that promise a "rescue" from foreclosure, but actually take further equity from homeowners; a new requirement that homeowners facing foreclosure be provided with clear and understandable language about their rights and options; and new regulation of loan originators, who are currently unlicensed and free to target distressed homeowners with unsuitable refinancing offers. "Homeowners facing a foreclosure crisis need to be protected from scams," said Sen. Ben Westlund (D-Tumalo), chair of the Senate Commerce Committee. "We have an obligation to act."

For more, see Democrats Say Fairness for Homeowners Remains Focus for Senate (Legislation Introduced to Rein in Unlicensed Loan Originators).

Florida AG, Company Founded By Real Estate Seminar Guru Settle Claims Over Alleged Questionable Practices

In Florida, the South Florida Sun Sentinel reports:
  • Florida consumers could receive more than $1 million in reimbursements from a company that state regulators said misrepresented its real estate and investment seminars by promising unrealistic results. [Florida] Attorney General Bill McCollum on Thursday said the state had reached a settlement with Whitney Information Network Inc., which advertises through television infomercials such programs as "Star Trader," "Wealth Builder Workshop" and "Focus on Foreclosure."

For more, see Whitney Information Network settles with state over claims in seminars (Whitney to reimburse clients who claim they were misled).

For Florida AG news release, see Infomercial Company to Modify Business Practices, Reimburse Dissatisfied Customers (Consumers will have collectively received more than $1 million in refunds for non-productive seminars).

In a separate story on company founder Russ Whitney, The News-Press (Southwest Florida) recently reported:

  • Russ Whitney, founder of the Cape Coral-based Whitney Information Network, announced his resignation as the company's chief executive officer as of Dec. 31. Whitney, 52, will continue to serve as chairman of the board of directors and will act as an adviser to the company. His resignation was among the recommendations of an internal investigation launched after the company announced a year ago that it was under investigation by the U.S. Attorney for the Eastern District of Virginia and the Securities and Exchange Commission. Federal authorities have refused to comment on those investigations. The company notified the Securities and Exchange Commission in May that its earnings reports have been delayed by the internal investigation.

For more, see Whitney Information Network (7th blurb from the top).

Monday, January 14, 2008

One Key Player Cops Plea In Wisconsin "Body Snatcher" Mortgage Fraud Case

In Milwaukee, Wisconsin, the Milwaukee Journal-Sentinel blog reports:
  • Federal prosecutors have scored one significant promise of a guilty plea in the sprawling Michael Lock mortgage fraud case, but so far others aren't following suit. Chianti Clay, a key figure in the case, has agreed to plead guilty, according to paperwork filed last week -- the deadline for filing motions in the case. But no other plea agreements have appeared on the case file. And five defendants including Lock have filed motions (including Krista Jeray, who has former Waukesha DA Paul Bucher as her defense attorney), a good sign they are fighting the charges. There are four other defendants who didn't file motions or plea agreements (Monique Dunlap, Marcus Leonard, Ruben Fields and Nicole Brown).

  • Lock -- who headed a crew known as the "body snatchers" -- is facing a slew of other charges in state court, including homicide for which he is set to go to trial in February. Lock's federal trial has been scheduled for April.
Source: Most not taking pleas in Lock case.

It appears that of the ten defendants named in the original mortgage fraud indictment, only Clay has copped a plea to date. In addition to those named above, the additional defendants listed in the indictment are Jerhonda McCray, of the mortgage brokerage company, World Financial Mortgage, Kevin Slamann of Excell Closing Services, and Lisa Colella (fka Lisa Geiger).

See Plea Agreement - U.S. vs. Clay to view Clay's plea.

For a copy of the original indictment, see U.S. vs. Lock, McCray, Slamann, et al.

Go here for earlier posts & story updates on this case.

Disbarred Florida Attorney / Closing & Title Agency Owner Faces 54 Criminal Charges; Bond Set At $3M

(original post 1-13-08)
In Vero Beach, Florida, TC Palm reports:
  • Police arrested former attorney Ira C. Hatch Jr. late Friday and charged him with racketeering, money laundering, grand theft and operating as a money transmitter without proper registration. Officials with the Vero Beach Police Department, State Attorney's Office and local FBI office went to serve Hatch, 60, with warrants involving 54 criminal counts at his home Friday morning, but he was in Winter Park, said Vero Police Lt. Kevin Martin. Through arrangements made with his Viera-based attorney, Greg Eisenmenger, Hatch turned himself in at the police station at 4:55 p.m. He is in the county jail on $3 million bond [...] .

***

  • Hatch owned Coastal Escrow Services Inc. of Vero Beach and Coastal Title Services of Port St. Lucie. The companies closed over Labor Day weekend, leaving real estate companies and individuals without what police estimate is more than $4 million in deposits. [...] Officials have estimated there are at least 500 potential victims nationwide of Coastal Escrow.

For more, see Former Vero Beach attorney Hatch jailed; bond set at $3 million.

In a related story, see Hatch bail reduction request denied.

Hatch is also involved in civil litigation against his former law partner, Kevin S. Doty. For more on this story, see Former Hatch partner in Vero Beach files countersuit to recover money. (Hatch vs. Doty - Doty answer & countersuit).

Go here for earlier posts on Ira Hatch & Coastal Escrow Services.

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

NBC Nightly News On Reverse Mortgages

Last Thursday, the NBC Nightly News ran a report on reverse mortgages and featured a California senior citizen homeowner who only needed a few bucks to fix her porch, and now fears that she may be facing financial ruin as a result of a reverse mortgage she took out. Reportedly, as part of the deal in getting the reverse mortgage, the sales agent sold the 78-year old woman a long term annuity that doesn't mature until 2033, and faced a 20% penalty for trying to access that money early. She is now part of a class action lawsuit going after the sales agent, the broker, and the lender alleging elder financial abuse.

To watch the report, see Back-stabbed by reverse mortgages? (no longer available online).

See also Pitfalls to Reverse Mortgages (NBC video).

For other posts related to reverse mortgages, go here , and go here. reverse mortgage yak

Minnesota Feds Meet With 200+ Renters, Would-Be Homeowners In Parish Marketing Mess

In New Prague, Minnesota, the Pioneer Press reports:
  • Federal investigators asked for an earful from New Prague residents who could lose their homes as a result of one of the largest cases of mortgage fraud in Minnesota history. It looks like the officials got what they wanted. To make room for dozens of hurt, angry and confused renters and would-be homeowners, they borrowed a church. More than 200 residents of the Prague Estates community crowded into Holy Trinity Lutheran Church on Thursday night to meet with Assistant U.S. Attorney Joe Dixon, Senior U.S. Probation Agent Bernadette Valento and Gary Hansen, a court-appointed receiver.

  • The officials hoped to determine what kind of sentences they should seek in the case of Michael and Ardith Parish, Eagan homebuilders who used fraudulent mortgage loans to keep their company afloat. The Parishes, both in their 60s, pleaded guilty in November to playing lead roles in the mortgage scheme, which involved almost 200 homes across the metro area that are now in various stages of foreclosure. More than 100 of them are in New Prague.

For more, see New Prague / Home fraud victims vent anger to authorities (Recommended sentences for Parish mortgage scam will reflect residents' losses).

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

Another Newly Built South Florida Condo Quagmire Rears Its Head In WPB

In West Palm Beach, Florida, The Daily Business Review reports:
  • The Whitney, a newly built condo development in downtown West Palm Beach, has joined the growing number of developments hit with foreclosure lawsuits. California-based lender iStar FM Loans is seeking to foreclose on about 146 unsold units, or about two-thirds of the 210-unit building, which was completed in mid-2007.

Highlights from the story:

  1. The foreclosure revolves around $37 million which is allegedly due, but has not been paid,
  2. The principals behind Evernia Properties, the project developer, are first-time developers (Editor's Note: ???) Enrique Dillon, Ricardo Djmal and Ricardo Weinstein,
  3. The principals are also investors in another project under foreclosure, the Villa Mare & Yacht Club Residences in Boca Raton, a 160-unit conversion project that defaulted on a $50 million loan from Ocean Bank,
  4. Dillon, a native of Argentina who was a computer exporter and principal of several technology-related businesses before becoming involved with real estate developments (Editor's Note: ???), is chief executive officer of Evernia Properties,
  5. The current mortgage holder acquired its interest by assignment from from California-based Fremont Investment & Loan, the original project lender, only two days before its July 1, 2007 payment-in-full due date,
  6. Subcontractors have been stiffed out of payment for their services and some have filed mechanics' liens on the project,
  7. Most of the unsold units, according to the sales & marketing agent, are in contract,
  8. Reportedly, those contract purchasers who want to close on their purchases and move in can't because of "lien issues" - since Nov. 14, no units have closed at the Whitney, according to Palm Beach County public records,
  9. There are other contract purchasers who have apparently changed their mind about buying units in The Whitney; thirty-seven lawsuits from buyers seeking to back out of their contracts have been filed,
  10. Contract purchasers put down deposits of 20% of the purchase price - only half of which was required to be held in escrow; if the property is foreclosed, contract holders may find themselves out of luck with respect to the 10% that the developer pocketed.

For more, see Condo Meltdown: Lender seeks foreclosure on WPB’s new Whitney project (if link expires, see if this link works).

For story update, see (4-14-08) The Palm Beach Post: Deal in works to save condo facing liens.

Some Predict Other Cities To Follow Cleveland's Lead In Suit Against Major Lending Institutions; Wall Street Buzzing

In Cleveland, Ohio, The Cleveland Plain Dealer reports:
  • Cleveland's lawsuit against 21 investment banks is likely to inspire similar efforts from cities and even homeowners who feel they have been hurt by foreclosures. That's the prediction from attorneys and others who follow real estate and finance, given the national attention the city has received with its novel argument that the banks created a public nuisance. Two lawyers -- one who believes in the city's position, and one who does not -- each described the case Friday as "just the tip of the iceberg." The suit, filed late Thursday in Cuyahoga County Common Pleas Court, accuses the banks of encouraging irresponsible home loans that ruined entire neighborhoods. Among the banks targeted were Deutsche Bank, Goldman Sachs and Merrill Lynch. Wall Street has been buzzing since. Lawyers, lenders and civic leaders have been, too. The case even caught the attention of CNN commentator Lou Dobbs.

For more, see Cleveland's lawsuit against investment banks may prompt other cities to pursue action (Cleveland seeks retribution in foreclosure epidemic).

For a Cleveland Plain Dealer editorial on this story, see Cleveland's lawsuit against Wall Street is bold, and a little shaky (Cleveland is going after the big investment houses with a gutsy, risky suit over destructive subprime lending).

See also, The Cleveland Free Times: Payback Time (Cleveland Sues Banks Over The Foreclosure Crisis, But Takes A Legal Road Less Traveled).

For the original Cleveland Plain Dealer story, see Cleveland sues 21 investment banks over subprime mess (Big-name firms blamed in costly subprime crisis).

Squatters In Abandoned Homes A Concern For Cleveland

In Cleveland, Ohio, a recent editorial in The Cleveland Plain Dealer expresses concern about some of the problems that may arise if large numbers of the city's homeless population begin to take up residency in some of Cleveland's 10,000 abandoned dwellings.
  • On the human side, many people who are chronically homeless need help with mental illnesses or substance abuse problems, but [Executive Director of the Northeast Ohio Coalition for the Homeless, Brian] Davis' fears about outreach workers trespassing on private property to serve squatters or getting themselves tangled up with criminals mistaken for homeless people are more than valid.

  • On the property side, Cleveland already has a huge problem with abandoned homes. Even under the best circumstances, a long-abandoned house deteriorates. That process is hastened when thieves strip it of fixtures to sell as scrap, or other kinds of crime move in. Add homeless people to the problem of abandoned dwellings, and it's only a matter of time until the first structure fire. And then the first one that claims lives.

For more, see Squatters put their lives and others' property in the balance.

Go here for posts on vacant homes, foreclosures and squatters. squatter foreclosure zebra

Home Repossessions Pummeling Pawtucket's Plunging Municipal Cash Flow

In Pawtucket, Rhode Island, The Providence Journal reports:
  • Investors stuck with bad loans and people losing their homes because they have fallen behind on their mortgage payments aren’t the only victims of the subprime lending crisis, according to city officials. The city, too, is being hurt by the wave of foreclosures [...] . Tax revenues have plunged because banks that foreclose on delinquent borrowers don’t have to pay taxes on the foreclosed property until it is sold to another buyer, Finance Director Ronald L. Wunschel said in an interview. By state law, Wunschel said, banks are exempt from paying property taxes until a deed is recorded indicating that the foreclosed property has been sold. At that point, all back taxes are due and payable. But, until then, the city receives no revenue from foreclosed properties, Wunschel said. As a result, he said, the recent wave of foreclosures has created a serious cash crunch for the city, contributing heavily to the nearly $1 million deficit that Pawtucket is facing in the current fiscal year.

For more, see Pawtucket hurt by foreclosures. delinquent tax problem

Sunday, January 13, 2008

Judge Jams Foreclosing Lender's Improper Grab For Excess Insurance Cash On Fire-Destroyed Home

A mortgage lender, who claimed was owed about $134,800 on a loan in default, foreclosed on a Missouri home. At the foreclosure sale, the lender was the winning bidder, entering a "credit bid" of $99,700. Unbeknownst to the lender, however, the home was destroyed by fire about one month before the foreclosure sale. A couple of months after the sale, the homeowners received the proceeds from the fire insurance policy in the form of a check from the insurance company (made out to the homeowner and the lender) for $164,400, which the homeowners promptly turned over to the bankruptcy Trustee (the homeowners had filed bankruptcy during the course of the foreclosure proceedings).

Even though it already had acquired title to the property (sans improvements) by bidding $99,700 at the sale, the lender nevertheless demanded $134,800 of the insurance proceeds, the full amount of the debt it claimed was owed to them by the homeowners (and without reduction for its $99,700 bid). Conversely, the Trustee and the homeowners claimed that the lender was only entitled to the amount of its secured debt, reduced by the "credit bid" of $99,700.

The bankruptcy judge agreed with the Trustee and the homeowners, saying that the debt owed to the lender must be reduced by the amount that it bid for the home at the foreclosure sale, and the fact that the lender was clueless that the home went up in smoke a month before the sale was the lender's tough luck. Among other things, the judge stated in his decision:
  • [T]he Bank here elected to foreclose, bidding $99,771.17 for the property, even though it could have pursued the insurance proceeds instead. It is unfortunate that the Bank did not know that the Property had been destroyed by a fire when the Bank foreclosed, but the rule of caveat emptor applies to foreclosure sales, and the Court cannot protect the Bank from the consequences of that rule or the Bank’s failure to conduct even the slightest due diligence before it bid at the foreclosure sale.

To view the Federal bankruptcy judge's entire decision, see in re Newby, Case No. 04-31294 (Bankr. W.D. Mo., 2006). foreclosure arson yak

Pittsburgh-Area Volunteer Fire Department Facing Foreclosure Seeks Operating Funds

According to media reports from Carnegie, Pennsylvania:
  • Carnegie officials will sponsor a town meeting for suggestions on what to do about the borough's Volunteer Fire and Rescue Bureau's request for a 1.5-mill fire protection tax that would give the volunteers about $400,000 annually in operating funds. [...] Fire bureau members say they are behind on their mortgage payments and facing imminent foreclosure, but borough officials are dealing with financial constraints of their own.
***
  • Fire Chief John Kandracs said the department needs $150,000 immediately to avoid foreclosure.

For more, see:

Go here for updated story on the Carnegie, Pa. Fire and Rescue Bureau.

Suspicious Fire Hits Salem Home In Foreclosure

In Salem, New Hampshire, The Eagle-Tribune reports:
  • A fire that left a home uninhabitable was labeled suspicious by investigators this week, and that house is set to be auctioned off later this month. Fire Marshal Jeff Emanuelson said yesterday that an investigation into the New Year's Eve blaze at 6 Meisner Drive continues. He referred all other questions to the Police Department. Deputy police Chief William Ganley also confirmed the fire has been labeled suspicious, but he would not say if there were any suspects in the case.

Reportedly, a foreclosure sale of the home is scheduled for January 25. Officials would not disclose where the current owners and family were staying. The fire killed two of the family's four dogs. For more, see Investigators: Salem fire suspicious.

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

Weymouth Duplex Facing Foreclosure Goes Up In Smoke; Investigators Blame Filthy Furnace, Cracked Chimney

In Weymouth, Massacusetts, The Patriot Ledger reports that a local two family non-owner occupied home in foreclosure was hit by fire last week. One unit was vacant; in the other, the tenant reports that all his familiy's possessions were destroyed. Regarding the suspected cause of the fire:
  • Officials were suspicious about the fire because it broke out the day before the foreclosed building was to be sold. But Weymouth Fire Chief Robert Leary said the fire started because the burner had not been cleaned and the thermostat in the vacant unit had been left set at 75 degrees. "Anything suspicious has been ruled out,’’ Leary said. ‘‘There’s no apparent arson." Results of an investigation by personnel from the state fire marshal’s office and the Weymouth Fire Department were released Wednesday. In addition to finding that the furnace was dirty, investigators determined that a cracked chimney let fire get into several levels of the home simultaneously.

For more, see Dad, kids lose everything in fire; Furnace blamed for blaze that destroyed duplex on Sunday.

See also, WCVB-TV Channel 5 report: Arson Investigated In Home Blaze (House Was To Be Foreclosed On) (read story) (watch video). (Another issue that surfaced: the fire chief said his staff was stretched thin because of recent budget cuts. Firefighters from Quincy and Braintree were called in to help put out the fire.)

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

More On Arson & Foreclosures

The St. Petersburg Times reported recently:
  • It's one of the most drastic consequences of the mortgage meltdown - people who burn down their homes so they can collect the insurance money and wiggle out from under their loan. The premise is hardly new - dozens of homes in New Orleans mysteriously caught fire in the weeks after Hurricane Katrina when homeowners apparently discovered they had fire, but not flood, insurance. What has fraud investigators worried now is whether the growing mortgage crisis will lead to another, far more widespread, spike in arson cases.

For more, see Call it mortgage lightning (A storm of home arson is expected as owners' loan rates reset and payments jump).

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

Jacksonville Judge Who Fired Cancer-Stricken Judicial Assistant "A No-Good Son Of A *itch!" Says Chief Judge

In Jacksonville, Florida, The Florida Times Union reports:
  • Twelve days before Christmas, Circuit Judge Aaron Bowden fired his 17-year judicial assistant, who had been on leave since August with cancer. The Jacksonville judge said he feared her prolonged illness would leave him without an assistant at a time when the state had implemented a hiring freeze.

  • But his decision left Christine Birch, 54, with no medical, life or disability insurance and has created a firestorm at the courthouse. Chief Circuit Judge Donald Moran responded by calling Bowden "a no-good son of a [*]itch," prompting Bowden to respond with a blistering e-mail defending his decision and calling Moran's criticism irresponsible, unprofessional and unseemly. Other judges' assistants were also appalled by Birch's firing. They raised money to pay her rent this month.

For more, see Judge fires his assistant, draws criticism (The woman, his aide for 17 years, has cancer and was on leave).

For other posts on some of the knuckleheaded members of our esteemed judiciary, go here and go here. knuckleheaded judges zeta

Saturday, January 12, 2008

Homeowner Facing Foreclosure Commits Suicide By Setting Home Ablaze, Say Cops

In Elk River, Minnesota, the Minneapolis Star Tribune reported last month:
  • The man who died when his Elk River house burned set the fire on purpose in what police said [...] was a rare manner of suicide. Corey R. Cook, 43, used a flammable liquid to start the fire [...], police said. Police said Cook's home was under foreclosure. He died of smoke inhalation, police said. No one else was in the home at the time.

Source: Man who died after setting house on fire is ID'd; home was under foreclosure.

See also, Elk River fire claims man’s life (Elk River Star News).

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

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

Church In Foreclosure At Center Of Arson Fire

In Albany, Georgia, The Albany Herald reported earlier this month:
  • Investigators are questioning a possible suspect in the arson of an Albany church, while more details of the church’s financial troubles are revealed, authorities said. [Last week], fire officials and police responded to the 2400 block of West Gordon Avenue to a fire. When they arrived, they found the sanctuary of Trinity Metropolitan Baptist Church burning. The fire, which Albany Fire Chief James Carswell called a malicious act of arson, is believed to have caused an estimated $150,000 in damage to the building, fire officials said. [...] According to a legal ad placed in The Albany Herald [...], at least three different lenders were set to foreclose on the property and sell it at auction Wednesday [January 2, 2008] on the courthouse steps.

For more, see Church was set for auction.

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

Arson Claims Another Home As Vacant Foreclosure Goes Up In Flames

In Sugarcreek Township, Ohio, the Greene County Dailies reported last month:
  • State and local authorities are looking for a group of witnesses who may have information about a Nov. 18 arson that destroyed an [sic] vacant Fernwood Court house valued at about $400,000. [...] The house was believed by investigators to have been vacant since around October 11, when Citizens Bank, of Flint, Mich., took possession of it after foreclosed on the owners, [Fire Chief Randy ] Pavlak said.

For more, see Witnesses sought in Fernwood arson.

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

Insurance Regulator Directive Aims To Stem High-Profile Attorney Fraud On Massachusetts Consumers

Massachusetts Lawyers Weekly reports:

  • Insurance companies in Massachusetts are to notify consumers by mail when a settlement payment of $5,000 or more is sent to an attorney, according to a recent directive from the [Massachusetts] commissioner of insurance. Under the new guidelines, insurers are instructed to send consumers a written notice that refers to the amount of the check, the name and address of the party to which the check is mailed and a copy of the check — or, if the payment is made by electronic transfer, the amount and date of the transfer. The measure has been hotly debated since it was first proposed by the [Massachusetts] Clients' Security Board ["CSB"], which spent several years lobbying for the guidelines. The CSB argued that payee notifications would stem the infrequent but high-profile cases of attorney fraud. [...] Calling the measure "far from foolproof but better than nothing," [CSB Chairman Peter G.] DeGelleke predicted that, in the end, the guidelines "will make a difference. New York reports that the implementation of the rules there reduced losses and claims."
For more, see Insurers told to send payee notification letters to clients (Measure 'far from foolproof' but seen as an improvement).

For members of the public who have sustained a financial loss caused by the dishonest conduct of a Massachusetts attorney acting as an attorney or a fiduciary, see Massachusetts Clients' Security Board. Go here for links to summaries of cases they've heard involving clients' claims against Massachusetts attorneys.

For other states, see:

Two Year Degree Now Required For New California Appraisers

VoiceOfSanDiego.org reports:
  • With prosecutors nationwide illuminating real estate fraud schemes undertaken during this decade's heated housing market, at least one of the state's legions of real estate professionals face new training requirements. California's Office of Real Estate Appraisers raised the bar last week for would-be appraisers wishing to join the 19,500 appraisers already licensed and working around the state. The tightened requirements are expected to increase professionalism and to help weed out unscrupulous potential licensees looking for an easy job. [...] Now, with more stringent education requirements -- notably, a required two-year associate's degree from an accredited institution to become a certified residential real estate appraiser, tougher examinations and increased course hours -- they sense the change will help. Previously, potential appraisers had been required to attend private appraisal training but no additional college training.

For more, see With Fraud Gaining Attention, New Appraisers Now Must Go to College.

More On Abandoned Pets & Foreclosures

In Vallejo, California, the Times-Herald reports:
  • A holiday surge in unwanted pets is filling kennels and creating a need for more animal adoptions, a Vallejo-Benicia Humane Society worker said Wednesday. "During November and December, we usually see a surge in the number of surrenders," said Peter Wilson, director of humane services at the no-kill shelter, which includes 20 kennels for so-called adoptable dogs and 30 for cats. [...] While other cities and counties have reported more abandoned animals in the wake of the foreclosure crisis, Solano County animal rescue workers said there is little evidence of a direct correlation locally.

For more, see Unwanted pets fill kennels in Vallejo.

For more on "foreclosure pets", go here and go here. petsII and foreclosures

Friday, January 11, 2008

City Of Cleveland Files Subprime Mortgage Suit Against Wells Fargo, 20 Others For Leaving Neighborhoods In Ruins

In Cleveland, Ohio, The Cleveland Plain Dealer reports:
  • Mayor Frank Jackson took aim at Wall Street on Thursday with a lawsuit against 21 major investment banks that he said have enabled the subprime lending and foreclosure crisis here. The one-of-a-kind suit, filed in Cuyahoga County Common Pleas Court, accuses venerable institutions such as Deutsche Bank, Goldman Sachs, Merrill Lynch and Wells Fargo of creating a public nuisance. Jackson contends the companies irresponsibly bought and sold high-interest home loans. The result: widespread defaults that depleted the city's tax base and left entire neighborhoods in ruins.

***

  • Cleveland is the second major U.S. city this week to sue over the ills of subprime loans. On Tuesday, Baltimore sued Wells Fargo, alleging the bank intentionally sold high-interest mortgages more to blacks than to whites - a violation of federal law. The Baltimore and Cleveland efforts are believed to be the first attempts by large cities to recover losses blamed on the foreclosure epidemic, which has particularly plagued Ohio.

  • But Cleveland's suit is even more unique because the city has based its complaints on a state law that relates to public nuisances. The suit also is far more wide-reaching than Baltimore's in that it targets the investment banking side of the industry, which feeds off the mortgage market.

For more, see Cleveland sues 21 investment banks over subprime mess (Big-name firms blamed in costly subprime crisis).

See also, The Cleveland Free Times: Payback Time (Cleveland Sues Banks Over The Foreclosure Crisis, But Takes A Legal Road Less Traveled).

For a copy of the lawsuit, see City of Cleveland v. Deutsche Bank Trust Company, et al. (available online courtesy of Bill Moyers Journal) (if you have a problem with this link, drop me a line at HomeEquityTheft@yahoo.com and I'll e-mail it to you - be sure and put "City of Cleveland v. Deutsche Bank" in "subject" line).

Go here for updated posts on Cleveland's lawsuit against 21 investment banks.

FBI Fails To Pay Phone Bills; Results In Service Shutoffs, Lose Access To Wiretaps

It's been often reported that a big hurdle faced by the FBI in pursuing all the mortgage fraud going around is its lack of resources. If a recent story by Dan Eggen of The Washington Post is to be believed, they are apparently having enough trouble just keeping their phone bills current.
  • Telecommunications companies have repeatedly cut off FBI access to wiretaps of alleged terrorists and criminal suspects because the bureau did not pay its phone bills, according to the results of an audit released yesterday. [...] "Late payments have resulted in telecommunications carriers actually disconnecting phone lines established to deliver surveillance results to the FBI, resulting in lost evidence," [Justice Department Inspector General Glenn] Fine said in a seven-page summary of the audit's findings (pdf format) (html format).

***

  • The late payments were part of a broader pattern of lax bookkeeping identified by Fine's review. A review of 35 employees with access to such funds found that half had personal bankruptcies or other financial problems, the report said. In one case prosecuted in June 2006, an FBI telecommunications specialist pleaded guilty to stealing more than $25,000 intended for telephone services.

***

  • The group's national security policy counsel, Michael German, also said that the report raises questions about the motives of large telecom firms, which have, in many cases, allowed the government to run wiretaps on their systems without warrants. "It sounds as though the telecoms believe it when the FBI says the warrant is in the mail, but not when they say the check is in the mail," said German, a former FBI agent.

For more, see FBI wiretaps go dead as phone bills go unpaid (The Boston Globe), or Wiretaps Are Cut Over Unpaid Bills (The Daily Herald).

For the FBI official response to the Inspector General's report, see Response to Inspector General Audit of FBI Management of Confidential Case Funds and Telecommunications Costs.

Minnesota Closing Agent Gets 24 Months For Preparing Phony Closing Docs In 60+ Real Estate Deals

(original post 1-10-08; revised 1-11-08)
In Minnesota, the Prior Lake American reports:
  • Jill Lehn of Prior Lake was sentenced to 24 months in prison in Federal Court on Thursday afternoon, according to an IRS Criminal Investigation spokesperson. Lehn, a former mortgage loan closing agent and real-estate purchaser, pleaded guilty to federal fraud charges relating to a mortgage pay-out scheme on Dec. 20. Lehn pleaded guilty to one count of wire fraud and one count of money laundering before U.S. District judge Michael J. Davis. Court documents prepared between December 2004 and August 2006 state that Lehn prepared fraudulent closing documents relating to over 60 real-estate transactions.

For more, see Lehn sentenced to serve two years in prison for role in LHS mortgage-fraud case.

See also, the Minneapolis Star Tribune: Two more people convicted of a fraud scheme run through LHS Mortgage in Burnsville were sentenced this week in a St. Paul federal court - Also reports that another member of the scheme, Isadore Stewart, 40, of Stillwater, was sentenced Wednesday to 18 months in prison and three years of supervised release.

For a four page article by Jill Lehn in which she urges others in the real estate business not to make the same mistakes she made, see Tips On How To Ruin Your Life, by Jill Lehn.

Go here for earlier posts related to Jill Lehn and this mortgage fraud case.

Maryland Servicemember Has Home Sold Out From Under While On Duty; Lender Falsely Represented Military Status In Foreclosure Action, Says Suit

In a recent column in The Baltimore Sun on the Maryland foreclosure process in which it is described as being "greased a little too slickly in favor of lenders," an example is given of one Maryland homeowner who, while away serving in the U.S. Army, had his home sold out from under him in a foreclosure sale by the mortgage lender:
  • Army Staff Sgt. Kevin Atiase was serving his country at Fort Sam Houston, Texas, when a mortgage company sold his Frederick house in a foreclosure proceeding a year ago. He couldn't attend court and didn't learn a judge approved the sale until it was too late, according to a brief filed with the Maryland Court of Special Appeals.

***

  • Because of his military status, Atiase, the Army sergeant, was entitled to a freeze of foreclosure proceedings under the federal Service Members Civil Relief Act, his lawyer argues. The act is to help "those who dropped their affairs to answer their country's call," the Supreme Court has said. But the lender falsely represented that Atiase was not in the military, the suit alleges, and the house had already been sold by the time he found out what was happening.

For more, see Seizing of homes too easy in Md.

Go here for other posts on the Servicemembers Civil Relief Act.

Communication Problems Between Collection & Loss-Mitigation Departments Cause Impediments For Homeowners Facing Foreclosure

A recent column by syndicated real estate columnist Kenneth Harney highlights the impediments that financially strapped homeowners run into when trying to work out a payment plan on home mortgages in default with their lender.
  • Listen to real estate attorney Nancy Gusman of Largo, Md., who represents financially distressed homeowners seeking ways to avoid foreclosure: "It's insane," she said in an interview. "(Mortgage) servicers tell everybody, 'Call us as soon as you have problems making the monthly payment.' But then the borrowers call and are told, 'Oh no, we can't talk to you about a loan modification. Your file is in the collections department (not the loss-mitigation department where loan modifications and short sales are handled) because you're only 30 days late.'"

***

  • Robert Padgett, director of nonperforming loan servicing for mortgage investor Freddie Mac, says mishandling of troubled accounts between collection departments and loss-mitigation and workout departments is "a problem. The collection folks are trained to recognize loss-mitigation (loan modification) opportunities early" in the process, and are supposed to push them through quickly to the specialists who can custom-craft workout solutions. But clearly that doesn't always happen.

For more, see:

South Jersey Upfront Fee Foreclosure Rescue Operator Facing Felony Charges

In Mount Holly, New Jersey, the Burlington County Times reports:
  • A judge ruled yesterday that a Mount Laurel businessman will face separate trials on charges that he stole $105,000 from customers and that he fraudulently obtained $250,000 from insurance and risk-management companies. Peter Rogers, 64, of St. David Drive committed the crimes as president of Express Consolidation Refinance & Mortgage Consultation Inc. of Cinnaminson and Moorestown, prosecutors said.

***

  • As president of Express Consolidation, Rogers contacted individuals whose properties were in foreclosure and offered to help them save their homes through renegotiating, refinancing and reassignment of mortgages, prosecutors said. Rogers was paid between $400 and $3,700 by each homeowner but did not do any work, prosecutors said. As a result, the victims either lost their homes or declared bankruptcy, prosecutors said.
    Fifty-five of the 77 victims were Burlington County residents, prosecutors said.

  • Rogers will face charges of theft by deception, forgery and securing execution of documents by deception in the trial involving the alleged theft from his customers.

The case is being handled by the Burlington County Prosecutor's Office in Mount Holly.

For more, see Judge says businessman will face two trials (Of the 77 alleged victims, 36 lost their homes, 28 declared bankruptcy, one turned his property over to Rogers and a few were able to save their homes).

See also, Two trials ordered in Mount Laurel fraud case.

Go here for story updates on this case.

Realtor Uncovers Rent Scam Involving Her Listing & Craigslist

In Chico, California, the Chico Enterprise Record recently reported:
  • A local Realtor, who happens to be the 2008 president of the Chico Association of Realtors, was exposed to a new take on Internet scamming involving real estate. Debbie Brodie of Realty World Choice Properties discovered a house she was representing was the target of a scam when she started getting calls from people asking about renting the place. Brodie was trying to sell the house for the owner. Brodie discovered that scammers were promoting the three-bedroom house for rent on Craig's List, an Internet-based ad service. Scammers picked up the house photo from Brodie's Multiple Listing Service information, and included her name in a e-mail address that wasn't hers. The scammers were trying to get $600 a month for rent, with a $200 deposit, and may have been asked for two months rent in advance. Brodie uncovered the scam when she was called by potential renters who had searched for her name on the Internet.

For more, see Scammers find real estate a sweet target.

Go here for other posts on tenant rent scams involving people renting out homes they don't own. unwitting tenant rent scam zebra

Tenants Entitled To Actual Damages For Emotional Distress, Says California Court; Landlord Allowed For Unsanitary Conditions

A recent article in Realty Times poses the following query:
  • Suppose a tenant finds him or herself living in a "slumlord" unit. Everything is deteriorated. Unsanitary conditions prevail. What is the tenant's recourse? Is he or she entitled to damages? More specifically, is he or she entitled to damages for emotional distress?

  • The answer is "yes" if you live in California's Second Appellate District, where the case of Un Sil McNairy et al. v. C.K. Realty et al. was heard.

In affirming a Los Angeles Superior Court ruling finding a breach of the warranty of habitability and violations of former California Civil Code section 1942.4, subdivision (b)(1) (awarding $5,000 in actual damages, $1,000 in special damages, and $4,000 in punitive damages to each of 20 tenants), the California intermediate appellate court looked to both earlier California cases, as well as cases from Arizona, Oregon, West Virginia and Vermont in support of its decision that the calculation of a tenant's actual damages for being subjected to unsanitary conditions by a landlord includes damages for emotional distress.

Further, the court also ruled that, with two execptions, an additional 84 tenants who were prohibited from testifying during the damage portion of trial should be afforded the opportunity to testify regarding their damages, if any, as a result of the lack of potable water and the cockroach infestation.

The court quoted a 1980 California appellate case for the proposition that a tenant's monetary damages in these circumstances does not necessarily reflect the true nature of his/her actual damages:

  • " 'Generally, the residential tenant who has suffered a breach of the warranty does not lose money. He instead cannot bathe as frequently as he would like or at all if there is inadequate hot water; he must worry about rodents harassing his children or spreading disease if the premises are infested; or he must avoid certain rooms or worry about catching a cold if there is inadequate weather protection or heat. Thus discomfort and annoyance are the common injuries caused by each breach and hence the true nature of the general damages the tenant is claiming.' " (Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903, 915-916.)

For the Realty Times article, see A Tenant's Emotional Damages may be Actual Damages.

For the California Appeals court decision, see McNairy v. C.K. Realty (2007); 150 Cal.App.4th 1500 , -- Cal.Rptr.3d -- (Case available online courtesy of FindLaw.com; may require free registration).

Editor's Note: The tenants' emotional distress in this case was suffered in the context of living in an apartment with unsanitary conditions. I wonder, in the context of a rent skimming situation, where an unwitting renter unexpectedly finds him/herself facing a foreclosure eviction due to the landlord's pocketing of the tenant's rent and security deposit without making the mortgage payments, whether the tenant's emotional distress would be compensable as actual damages, or the landlord's conduct punished with punitive damages.

Prince George’s County Could See 8,000+ Foreclosures In '08, Warn Officials

In Prince George's County, Maryland, Gazette.net reports:
  • From the bench at the Prince George’s County Courthouse, Circuit Court Judge Herman C. Dawson has seen a daily line of people unable to pay for their homes. In 2005, there were about 3,700 foreclosure cases in court, he said. But in 2006, the number rose to 4,100. And in 2007, Dawson estimated more than 6,000 people went through foreclosure proceedings in the county – the highest in Maryland. And it’s expected to get worse, state officials said at a conference Jan. 3 with local leaders in Upper Marlboro, where they warned that more than 8,000 county homeowners might face foreclosure this year.

For more, see State fears ‘tsunami’ of failed mortgages (Warning that Prince George’s could see 8,000 foreclosures, Maryland officials urge assistance message).

Michigan Man Faces Charges Of Race-Based Threats Interfering With Rights Of Home Seller, Real Estate Agent

From the U.S. Department of Justice:
  • [Federal officials recently announced] that Curtis M. Gottler of Livonia, Mich., was indicted by a federal grand jury for hate crimes and other charges stemming from threats he allegedly made to a local couple and their real estate agent in an attempt to keep the couple from selling their home to African-Americans. The defendant was also charged with a hate crime and a threat for sending a threatening letter through the U.S. mail to an African-American resident of Livonia.

  • One count in the indictment charges Gottler with attempting to interfere with the right of the couple to sell their home without discrimination on the basis of race. According to the indictment, on Aug. 24, 2007, Gottler left a handwritten note at the couple’s home indicating that he would track them down and harm them if they sold their home to African-Americans.

  • Gottler is also charged with one count of attempting to interfere with the real estate agent’s right to assist the couple in selling their home without regard to race, and one count of making a threat in interstate commerce. According to the indictment, these charges relate to a threatening e-mail Gottler sent on Sept. 15, 2007, to the real estate agent who was representing the couple in the sale of their home.

  • Gottler is also charged with two counts stemming from a letter he allegedly sent on June 25, 2007, to an African-American resident of Livonia, in which he threatened to harm the resident if the resident failed to leave Livonia. For this incident, the indictment charges Gottler with one hate crime and one count of sending a threat through the U.S. mail.

For the U.S. DOJ news release, see Livonia Man Indicted for Federal Civil Rights Violations for Threatening African-American Residents.

Indiana Man Gets 15 Months For Interference (Cross Burning) With Another's Housing Rights

The U.S. Department of Justice announced earlier this month:
  • A federal judge [recently] sentenced Kyle Shroyer of Muncie, Ind., to serve 15 months in prison for his role in burning an eight-foot cross in front of a biracial family’s home, announced [federal officials]. Defendant Kyle Shroyer admitted in September 2007 that he and another man conspired to violate the civil rights of a woman and her three biracial children by burning the cross at their home in Muncie, Ind., in March 2006. At the hearing [...], Shroyer was sentenced to 15 months in prison, three years supervised release, a $500 fine and a $100 special assessment. The judge enhanced the defendant’s sentence because the crime was racially motivated and because several of the victims were unusually vulnerable because of their age.

For more, see Indiana Man Sentenced for Role in Cross-burning.

Thursday, January 10, 2008

Fannie To Reimburse Loan Servicers For "HOPE" Counseling Referrals For Delinquent Homeowners

Fannie Mae announces:
  • As part of its ongoing commitment to support borrowers facing potential foreclosure, Fannie Mae will reimburse its servicing partners when they refer homeowners who are behind in their mortgage payments to the HOPE Hotline for counseling. "We have to do everything we can, and early intervention and delinquency counseling are key to helping many at-risk homeowners avoid foreclosure," said Jason Allnutt, Vice President for Credit Loss Management and Quality Assurance at Fannie Mae. "We believe that in these difficult times, independent counseling agencies can play a unique role by helping servicers help borrowers find more opportunities to avoid foreclosure and keep their homes." The toll-free hotline, 1-888-995-HOPE, is available 24-hours a day to provide mortgage counseling in multiple languages.

For more, see Fannie Mae Will Reimburse Its Servicers for Referrals to HOPE Hotline.

See also, How to Avoid Foreclosure and Protect Home Equity.

Gary-Area Mortgage Broker Nailed With Federal Indictment In Alleged Scam To Fraudulently Obtain $1 Million For Clients To Buy 27 Homes

In Northwest Indiana, The Times (Munster, IN) reports:
  • A Merrillville mortgage broker has pleaded not guilty to charges she used fraudulent information on credit applications to persuade banks to loan her clients more than $1 million to buy 27 homes, nearly all in Gary. Tameka Bryant, 35, of Lynwood, appeared in court Wednesday on 14 counts of fraud. In addition to the mortgage fraud charges, prosecutors say Bryant used someone else's Social Security number on loan forms at a jewelry store and elsewhere.

For more, see Feds: Woman obtained 27 Gary homes through fraud.

South Florida Condo Buildings Buckling Under Pressure From Defaults

In South Florida, The Miami Herald reports:
  • As the region's housing market sputters into the new year, a collection of largely unoccupied new towers are straining under hundreds of millions of dollars in defaulted mortgages. In the 20 buildings in Miami-Dade and Broward counties with the largest numbers of units in foreclosure, loans in default totaled more than $271.8 million, according to an analysis by Condo Vultures, a Bal Harbour real estate consulting firm and brokerage. The epicenter: Miami's financial district along Brickell Avenue, where three of the top five buildings are located. Condo Vultures' principal Peter Zalewski jokingly refers to that area as Miami's "foreclosure district.''

***

  • "It reflects the speculators that were coming in and coming in hard. They all had expectations of how spectacular Brickell was going to be from an investment perspective," with its new vibe, retail and night life, Zalewski said. Others said widespread mortgage fraud, involving inflated appraisals and faux buyers, also led to the dizzying rise in defaults.

***

  • Lisa Magill, a lawyer with Becker & Poliakoff, which represents community associations, said she knew of associations struggling to cover expenses because more than 10 percent of their residents were behind on fees. Unkept grounds and disruptions in services could result, she said.

For more, see Condo buildings buckle under foreclosures (South Florida’s many condo buildings began to sink under hundreds of foreclosures – and it may get worse in 2008).

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