Bipartisan Federal Foreclosure Rescue Legislation Proposed

From a press release issued today from the office of U.S. Senator Herb Kohl (D-WI):

• Today, Senators Herb Kohl (D-WI), Susan Collins (R-ME) and Blanche Lincoln (D-AR) unveiled bipartisan legislation to protect financially distressed homeowners -- often elderly -- from unscrupulous financial predators. The Foreclosure Rescue Fraud Act of 2008 would help end the dramatic increase of mortgage schemes that have risen nationally by 800 percent in the last five years, with an estimated 60,000 cases expected this year.

For more, see Kohl Unveils Foreclosure Rescue Scam Bill (Bipartisan Measure Would Protect Financially Distressed Homeowners From Being Targeted).

Increase In Central Florida Real Estate Tax Delinquencies Reported; More Opportunities For Tax Certificate Investors Expected

In Central Florida, The Tampa Tribune reports:

• A slowing economy and stagnant real estate market has translated into a record year of late property taxes. Tax collectors in Hillsborough, Pinellas and Pasco counties are reporting dramatically higher numbers of people who missed the April 1 deadline to pay their property tax bill. In Hillsborough County, the increase is near 30 percent.

***

• When someone misses the deadline for their tax bill, the county prepares to issue and sell a tax certificate, which is essentially an IOU for the delinquent taxes. Hillsborough's tax office advertised 33,106 tax certificates for sale last year to investors. This year that number jumped 29.8 percent, to 42,973. Pasco and Pinellas collectors haven't posted their advertised numbers yet, but based on the delinquent notices they've sent out, both expect huge numbers of certificates to hit the auction block.

For more, see As Housing Market Slumps, More Property Taxes Unpaid. delinquent tax problem

Seven Impediments To Successful Loan Modifications Lead To "Needless Foreclosures"

In a recent article, The Mortgage Professor, Jack Guttentag, lists and describes seven impediments to a successful loan modification of a delinquent mortgage. The list of impediments are:

1. Borrower denial,
2. Moral hazard,
3. Restrictions on servicers,
4. Scarcity of critically needed staff,
5. Mortgage insurance,
6. Second mortgages, and
7. Lack of public disclosure.

For a description of each of these impediments, and how the author defines a "needless foreclosure," see Why needless foreclosures happen anyway (Borrower denial, restrictions on servicers take toll).

Mortgage Servicing Industry "Maze Of Fees, Firms & Flim-Flams" No Longer Fool Bankruptcy Judges

The New York Times reports:

• SLOWLY but surely, a handful of public-minded bankruptcy court judges are drawing back the curtain on the mortgage servicing business, exposing, among other questionable practices, the sundry and onerous fees that big banks and financial companies levy on troubled borrowers. It isn’t a pretty sight, if you are a borrower. But shining a light on this dark corner certainly qualifies as progress. The cases come out of bankruptcy courts in Delaware, Louisiana and New York, and each one shows how improper, undisclosed or questionable fees unfairly penalize borrowers already struggling with mortgage debt or bankruptcy.

***

• “These cases clearly indicate that bankruptcy courts are no longer being fooled by the maze of fees, firms and flim-flams of the mortgage servicing industry,” said O. Max Gardner III, a lawyer who represents borrowers in Shelby, N.C. “The servicers and their lawyers should recognize the clear and present danger of these decisions while they still have time to turn their ships around and do the right thing.”

For more, including the details of the aforementioned Delaware, Louisiana and New York cases, see Piling On: Borrowers Buried by Fees.

Go here , Go here , and go here for posts on questionable mortgage servicing practices.

Editorial Note:

The next question that arises is how long will it take for the state courts, where the vast majority of foreclosure actions are litigated and decided, to stop "rubber-stamping" foreclosure judgments against unrepresented homeowners and catch on to what the Federal bankruptcy judges are now discovering. questionable mortgage servicing practices tactics xero

Probe Into Alleged Colorado Springs "Cash Back" Scam Triggered By Suspicious County Assessor

In Colorado Springs, Colorado, The Gazette reports:

• The mortgage meltdown on Balsam Street that led to five foreclosures prompted an investigation Tuesday by the state's top real estate cop. Erin Toll, director of the Colorado Division of Real Estate, said it will be a "high priority" for her staff to determine whether any wrongdoing led to the Balsam foreclosures and "subpoenas are being drafted as we speak." Her investigation is a response to a formal complaint filed Tuesday by El Paso County Assessor Mark Lowderman, who became suspicious after being questioned by The Gazette for a story published Tuesday about the mortgage meltdown.

***

• Lowderman asked Toll to look into allegations and admissions made by Colorado Springs landscaper Andrew C. Aranda, who bought all five houses within a 48-hour period in November 2006 using $1.9 million obtained from five lenders. Aranda said he was part of a real estate kickback scheme involving a mortgage broker, real estate agent, appraiser and others. [...] Aranda, 27, told The Gazette that he signed documents suggesting he planned to live in each of the houses, though he never intended to move. The deception allowed him to obtain 100 percent mortgages at lower interest rates than if he had described the purchases as investments for resale or rental. All five houses ended up in foreclosure and four have resold, each for about $100,000 less than the price Aranda paid.

***

• Already, Lowderman said he suspects another five houses on Balsam and nearby Fossil Butte Drive may have been involved in a similar real estate kickback scheme. [...] "In one case, it looks like a man bought three houses - one on Balsam and two on Fossil Butte - and another man bought one on Balsam and one on Fossil Butte," Lowderman said. He said a quick check of sales records showed the transactions followed a similar pattern to the Aranda deals and involve some of the same players.

For more, see State investigating kickback scheme on Balsam Street (Fraud probe likely, county assessor says).

For a list of the five homes purchased by Aranda that ended up in foreclosure shortly thereafter, see Prices of Balsam homes, then and now.

Builder Problems Leave Recent New-Home Buyers Stranded In Unfinished Developments

The Associated Press reports:

• [A]s America's housing market has foundered, homeowners who bought into newly rising projects at just the wrong time have found themselves marooned in stalled, abandoned or largely unoccupied developments with little place to turn, placing a strain on them and municipalities forced to pick up the pieces. Experts say it's one of the least examined aspects of the housing downturn, and one that has struck many parts of the country, from areas like Las Vegas, which experienced rampant speculation and overbuilding, to areas where construction was more restrained such as the Jersey Shore and Philadelphia.

For more, see Downturn leaves homeowners without neighbors (no longer available online).

Minnesota's New Ghost Towns

In Minnesota, the Minneapolis Star Tribune reports that, in Wright County, reckless speculation and the mortgage meltdown have turned subdivisions into virtual ghost towns. For more, see:

• Part 1: Minnesota's new ghost towns (go here to get the entire story on one web page),
• Part 2: Housing bets gone bad (Wright County was a haven for speculators -- until they got burned in the downturn.,
• Part 3: Housing downturn has suburbs stuck with the bills (Wright County welcomed growth with new schools and wide roads. But as half-built subdivisions lie fallow, it's paying the price. Officials are scrambling to revitalize neighborhoods that have fallen into decline just years after they were built).

Tens Of Thousands Of "Squatters" Swarm Into Vacant Foreclosed SW Florida Homes

In Cape Coral, Florida, The New York Times reports:

• In a county with one of the nation’s highest foreclosure rates, empty houses have attracted a new type of nonpaying tenant: bees. Tens of thousands of honeybees, building nests in garages, rafters, even furniture left behind. When a swarm came to the foreclosed ranch house at 3738 Santa Barbara Place in Cape Coral, town officials called B. Keith Councell, a fourth generation beekeeper and licensed bee remover.

• On a recent evening, Mr. Councell stood at the light blue house’s open garage door as hundreds of honeybees buzzed over his head and past his ears, disappearing into a hole behind the water meter. The house has been without a human occupant since December. Then he did what he does at most foreclosed homes: nothing. “If it’s in the yard I just take care of it,” Mr. Councell said. “But if it’s in the structure, usually I can’t get permission to go in. And it’s a problem, because somebody’s going to get stung. It creates a risk for everybody around.” [...] Last year, he said, he answered calls about bees in more than 100 vacant houses, and the volume was higher this year.

***

• Mr. Councell said he noticed an increase in calls to vacant houses two years ago, and steadily more since then. “If that continues, then we’ve got a big problem,” he said. [...] When a house is vacant and in foreclosure, Mr. Councell, who rarely uses a computer, finds himself in a tangle of red tape, following trails of loan records to locate the owner, often an out-of-state lender, then a local managing agent. Generally, he said, even when he finds the necessary people, they do not let him on the property, either not wanting to spend the money or not wanting to risk the liability.

For more, see Floridian Is the One to Call When Bees Move In.

In a related story from Cape Coral, Florida, see NBC 2 News: 30,000 bees found in foreclosed home. neighborhood destruction from foreclosures zach

220+ Abandoned Constructuion Sites Identified In One Southwest Florida Town

In Lehigh Acres, Florida, The News-Press reports:

• More than 220 abandoned construction sites have been identified in Lehigh Acres since June, according to Lee County's code enforcement office. [...] A construction project is considered abandoned if no inspection has been passed in six months, said Joan LaGuardia, spokeswoman for Lee County's Community Development department. [...] The homes are in various stages of construction.

***

• County officials are concerned the homes will deteriorate and become safety threats. "We'll have to keep inspecting them," LaGuardia said. But there's a question about how the county can pay for the inspections and any demolition that might be required with budget cuts looming. County Manager Don Stilwell already has told department heads to prepare for a 6 percent decrease in their budgets, LaGuardia said. "We have to cut our budget in code enforcement. We have to cut across the board," LaGuardia said.

For the story, see Town deals with empty nests (More than 220 sites identified since June) (no longer available online).neighborhood destruction from foreclosures zach

Elderly Homeowner Pulls Gun On Process Server Attempting To Serve Foreclosure Notice, Say Cops

In Marion County, Florida, Central Florida News 13 reports:

• An 82-year-old man was arrested after pointing a gun at a process server. Frank Conard was taken into custody after threatening a man who was trying to serve him a foreclosure notice. Robert McGuiness said Conard answered the door in his pajamas, and then said he wanted to change his clothes. But when he came back, he reportedly pointed a handgun at him and said he'd send McGuiness to the hospital. Conard told deputies the Colt .38 wasn't loaded, but he was charged with aggravated assault.

Source: Police: Man, 82, Points Gun At Process Server.

Home-Based Meth Lab Once Used As A "Zoo"

In Boise, Idaho, KBCI-TV Channel 2 reports on local cops busting a meth lab that was being operated in a home in an area neighborhood. Reportedly, a neighbor said that the current owner purchased the home as a foreclosure back in February, and that the prior foreclosed homeowner had used the home as "somewhat of a zoo," having "a hundred cats inside the house along with [...] probably around 30 rabbits and around 20 iguanas." The neighbor said the house was a mess, but the new occupants rushed to move in anyway. They now face felony drug charges. Good luck to the next guy who ends up with the house. For the story, see New information on meth lab bust in Boise. meth lab yak

Colorado Regulator Subpoenas Real Estate Brokerages In Probe Into Alleged Title Insurance Kickbacks

In Colorado Springs, Colorado, The Gazette reports:

• A state regulator has subpoenaed three Colorado Springs residential brokerages as part of her investigation of whether kickbacks were paid by title companies to have business steered their way by real estate companies and agents. The investigation stems from allegations that California title company First American Residential Group Inc. agreed to pay $1 million to Denver-based Re/Max International under such an arrangement. Both companies were subpoenaed along with seven other brokerages in Colorado. The Springs brokerages are not suspected of wrongdoing at this time, said Erin Toll, director of the Colorado Real Estate Division.

For more, see 3 real estate firms subpoenaed in kickback probe.

WPB Condo Site Set For Foreclosure; Dozens Who Placed Deposits For Units Also Sue Developer

In West Palm Beach, Florida, the South Florida Business Journal reports:

• Eastern Financial Florida Credit Union won a $37.3 million judgment in a foreclosure lawsuit against a condominium developer, and will put the vacant West Palm Beach site up for public sale. On April 2, the credit union won the judgment [...] against Merco Group of the Palm Beaches and its principals, Homero Meruelo and Belinda Meruelo, over Palladio Terrace. They never started construction on the site, at 2211 N. Flagler Drive. [...] The property's former owner, The Mark Andrew of the Palm Beaches, won a $6.2 million jury verdict against the Miami Beach-based Merco Group in November. Dozens of people who put deposits on units at Palladio Terrace have also sued Merco.

For the story, see Eastern Financial wins West Palm Beach foreclosure.

West Palm Beach Condo Projects Take A Beating, Stalling Completion Of Downtown Renaissance

In West Palm Beach, Florida, the South Florida Business Journal reports:

• Business and civic leaders hoped a condo boom would complete the renaissance of downtown West Palm Beach, but the real estate bust has swallowed more than two-thirds of the projects. Of the 32 downtown multifamily residential projects on the city's active list, three are under construction, seven are completed and 22 are either stalled or have expired site plans. Four projects have faced foreclosure lawsuits from lenders. One more is marketing a bulk sale of its remaining units at a 47 percent discount, which is expected to further depress prices.

For more, see Condo projects evaporating in downtown West Palm Beach (if link expires, try here or try here).

Some Have Trouble With Completing Short Sales

MarketWatch.com reports:

• As more people fall behind on their mortgages, lenders have been slow to take advantage of a longstanding alternative to foreclosure -- a so-called short sale. [...] Deals can fall apart because the mortgage company rejects the price that has been agreed upon by the buyer and seller. Long delays in getting an answer from the mortgage servicer are another obstacle. The process can be so frustrating that some real-estate agents and home buyers have decided that a short sale isn't worth the effort.

• Shari Adams, a paralegal, bought a foreclosed three-bedroom house in Stuart, Fla., after she tried twice to buy a home being sold in a short sale. One deal fell through when the mortgage servicer turned down her offer after six weeks and didn't make a counteroffer. Another deal collapsed because it wasn't clear that the seller was truly facing a financial hardship. "I basically started to run away from any home listed as a short sale," Ms. Adams says.

For more, see Why Lenders Are Leery Of Short Sales.

See also: Reuters: Realtors complain short-sale process is failing.

Federal Judge Throws Out Suit In Pennsylvania "Wrap Around Mortgage" Ponzi Scheme

In Lancaster County, Pennsylvania, LancasterOnline reports:

• A federal judge has dismissed a suit aimed at forcing 24 mortgage companies to provide relief to more than 800 victims of Wesley A. Snyder's mortgage Ponzi scheme. [...] In his memorandum [last] Friday, U.S. District Judge James T. Giles rejected a suit intended to become a class action against 24 mortgage companies that Snyder sold mortgages for. The suit was originally filed on behalf of a Berks County couple who alleged that Snyder was a servicing agent for a pair of mortgages signed with Bank and County Wide (which was sold to Sun Trust). It alleged that the mortgage companies failed to monitor Snyder's actions. Snyder pleaded guilty to one count of mail fraud and admitted to engineering a Ponzi scheme that will cost his customers an estimated $25 million more in increased mortgage costs.

***

• Under Snyder's system, customers would refinance their mortgages for thousands of dollars more than they owed, then return the extra cash to Snyder, who wrote "wrap-around" mortgages at interest rates a point or more lower than standard rates.

For more, see Suit in Snyder case tossed.

Go here and go here for other posts and links to earlier media reports on the Pennsylvania wrap around mortgage Ponzi scheme involving companies operated by WesleySnyder.

Tenant Family Of Eight Gets Boot As Landlord Loses Home To Foreclosure

In North Port, Florida, the Sarasota Herald-Tribune reports:

• When Alice and Marco Ramirez moved from Fort Myers to North Port last summer, they did it for their six boys, ages 3 to 17, who the couple feared could end up in a gang if they stayed. [...] But the family worked into the night Thursday, packing their belongings and scrambling to find a place to stay after getting kicked out of that home through no fault of their own. The house had been foreclosed on and sheriff's deputies notified the family they had until midnight Thursday to move.

For more, see Foreclosure's grim surprise (When landlord loses his house, a family of renters has one day to pack up and go).

For story update, see

• Hastily Evicted North Port Family Finds A Home.
• Evicted family looks for new home (Victims of foreclosure may first turn to hotel for shelter).

See also, Fox 13 News: Sudden eviction blindsides family of seven.

For other posts involving the problems tenants face in homes in foreclosure, go here, go here, go here, go here, and go here.

Go here for other posts on Police stories involving foreclosures. SheriffDeputiesForeclosureAlpha equity skimming unwittingly epsilon

Foreclosing Lender Set To Repossess Colorado Cat House; Pets Seeking New Home

In Teller County, Colorado, KMGH-TV Channel 7 reports:

• They are animals without a home, dozens of cats, three dogs and a rabbit, whose owner is facing foreclosure. Now, authorities in Teller County are trying to find new homes for the animals. "It's more that just a foreclosure," said Mary Steinbeiser, manager of the Teller County animal shelter. "This woman was hording cats. She was a collector and she just kept bringing them home without spaying or neutering them." [...] The shelter manager said conditions were deplorable inside the house. "There was feces everywhere and no running water." "We are looking for foster homes for these animals," said Aubrey Eastman of Dreampower Animal Rescue in Colorado Springs. [...] The bank [was] expected to take possession of the owner's house this [past] Thursday and lock the doors.

For more, see Foreclosure Leaves Cats, Dogs, Rabbit Needing New Homes. (read story) (watch report).

For story update, see The Colorado Springs Gazette: Dozens of cats left behind in foreclosed home are missing.

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

Houston-Area Warehouses Filling Up With Conficated Items From Foreclosed Homes

In Harris County, Texas, KHOU-TV Channel 11 reports:

• Foreclosures in Harris County are up 16 percent this year, and warehouses are filling up with people’s confiscated belongings. [...] In dozens of cases a month, deputy constables have to evict people who’ve refused to give up their homes. Their belongings are boxed-up, loaded-up and hauled off. But where do they end up? Just east of downtown, a warehouse is filling up with their washers, mattresses, sofas and fans, even their kids little bicycles and teddy bears. [...] As for the belongings in the warehouse: The owners have 30 days to claim them by paying the moving and storage expenses. If they don’t, the items are sold at auction.

For the story, see Foreclosures leave warehouses of goods in their wake.

Canada Not Exempt From Scrap Metal Thefts

In Ontario, Canada, The Windsor Star reports:

• [A]ccording to the [Ontario Provincial Police], thieves recently made off with almost $35,000 in scrap metal -- four 20-foot I-beams, 60 24-foot trusses, and a green steel conveyor system -- from a dilapidated commercial building along Highway 3 near Howard Avenue. Given that the steel booty weighed several tonnes, this was no quick smash-and-grab.

For the story, see Scrap metal theft on the rise in Essex County. copper metal theft yak

Vacant Foreclosure Flooded By Vandals Hit With $100K In Damages

In Beaufort County, South Carolina, The Hilton Head Island Packet reports:

• A vacant Bluffton home in foreclosure sustained $100,000 worth of water damage last week when drains were plugged and water faucets were left running intentionally, according to the Beaufort County Sheriff's Office. The abandoned and foreclosed Westbury Park home, which was for sale, was found April 7 with water covering the first floor, a sheriff's report said. An employee from Brokers Real Estate in Bluffton told deputies that all the sinks and tubs had been plugged with factory-installed stoppers. Water had been turned on, causing overflows.

For more, see Vandals flood vacant home causing $100,000 in damage.

Cop Awaits Sentencing For Embezzling Drug Cash; Used Some To Avoid Foreclosure

In Georgia, the Atlanta Journal Constitution reports on the story of Brenton Garman, a former captain with the Bartow County Sheriff's Office who has pleaded guilty of embezzling $80,000 from the Sheriff's office and currently awaits sentencing:

• While in charge of the narcotics unit, Garmon was supposed to be putting money seized during drug busts into a safety deposit box. Instead, he pocketed $80,493 for himself between 2004 and 2007, according to the U.S. Attorney's Office. Garmon had apparently been having money problems. He used some of the money to avoid foreclosure on his home after his monthly payments ballooned because of an adjustable-rate mortgage, prosecutors said. He pleaded guilty to embezzlement in February.

***

• "Brenton Garmon was probably one of the best drug investigators I've ever seen," Sheriff [Clark] Millsap said. "He could work dope like the best of them."

For the story, see Father, son fall from grace breaking law they once served.

Vacant Home In Foreclosure Allegedly Used By Teen In Shooting Of Another Juvenile

In Polk County, Florida, The Tampa Tribune reports:

• After stealing his older sister's handgun, a 16-year-old Kissimmee boy shot another 16-year-old boy in the lower back [last week] during a drug deal, Polk County deputies say. [...] Deputies arrested Joshua Alan Brown [last] Saturday and booked him into the Juvenile Assessment Center on charges of attempted first degree murder with a firearm, robbery with a firearm, possession of not more than 20 grams of marijuana, possession and/or use of drug paraphernalia and resisting an officer without violence.

***

• Brown lured [the victim] to a vacant house under foreclosure [...] under the pretense of buying drugs, [Brown's] statement said. When [the victim] entered the house, Brown pulled the slide back on his gun to get [the victim's] attention and [the victim] ran as Brown fired one shot into [the victim's] back, according to the statement. [The victim] managed to get outside the house before falling to the ground, Brown said. Brown acknowledged stealing the marijuana from [the victim] and leaving the scene, deputies said.

For the story, see Arrest Made In Teen's Shooting.

Freddie Calls On Loan Servicers To Diversify Foreclosure & Bankruptcy Referrals

Housing Wire reports:

• In a seller and servicer bulletin released Thursday morning, Freddie Mac announced some very big changes to how it expects its servicers to manage their foreclosure and bankruptcy referrals to eligible legal counsel in key U.S. states. The changes represent the first time that a GSE has exerted direct influence over servicing practices in what is typically a widely unregulated area of mortgage banking.

• In particular, Freddie Mac said that servicers must retain more than one law firm or trustee in high-volume foreclosure states, and that servicers will be required to have formal contingency plans in place for managing file referrals in the event that a law firm or trustee cannot accept new bankruptcy or foreclosure referrals.

For more, see Freddie Mac: Servicers Need to Diversify Foreclosure, Bankruptcy Referrals.

Go here to view the Freddie Mac's April 17 seller and servicer bulletin.

Dramatic Increase In Problem Loans Burdening South Florida-Based Banks, According To New Report

In South Florida, The Miami Herald reports:

• South Florida-based banks are showing signs of economic stress, with the number of problem loans on their books climbing dramatically from December 2006 to December 2007, a new report shows. The increase in past-due loans is a reflection of not only the worsening housing market but also challenges from the economic slowdown as even some solid companies are hard-pressed to keep loan payments up to date, banking analysts say.

For more, see South Florida banks' problem loans rise (South Florida-based banks show signs of stress as they ride out the real estate meltdown with attendant loan difficulties, a new report shows) (if link expires, try here).

Go here for list of South Florida Banks: Loan portfolios, as of Dec. 31, 2007.

Maryland Homeowner Settles Lawsuit With Legislator Stemming From Foreclosure Rescue Deal

In Maryland, HometownAnnapolis.com reports:

• A Crofton man settled a lawsuit this week against Del. Tony McConkey. The suit claimed the Severna Park Republican failed to pay the man more than $12,500 from the sale of a home. Details of the out-of-court settlement were sealed as part of a "confidential agreement," according to court records.

***

• Reginald D. Williams and his ex-wife, Deborah Ann Williams, first sued Mr. McConkey in 2005, claiming the Severna Park Republican scammed them out of their house. The case was settled in January 2006 when Mr. McConkey agreed to sell the house, pay off the mortgage and pay Mr. and Mrs. Williams $12,516 each. But last year, according to court documents, Mr. Williams reopened the lawsuit. He said Mr. McConkey violated the previous court order and never paid him his money.

• In November, Mr. McConkey told The Capital he did nothing wrong and that Mr. Williams actually violated the court order first. He said Mr. Williams was supposed to move out of the $400,000 house on Tilghman Drive in February 2006 but had to be forcibly evicted in August 2006. "We held up our part of the bargain," Mr. McConkey said in November. "Actually, Mr. Williams owes me money."

For more, see McConkey, client settle legal dispute (Details kept 'confidential').

Michigan County Treasurers Warn Against Bail Out Scams Targeting Tax-Delinquent Property Owners

In Michigan, The Saginaw News reports:

• County treasurers throughout the state were warning property owners not to fall for a fake foreclosure bail-out that has hit homeowners in recent months. "I don't know where it started, but there are e-mails going out (to treasurers) all over the state, and they're all saying the same thing," said Saginaw County Treasurer Marvin D. Hare. "We're concerned about it." The scammers are targeting property owners whose land is in danger of foreclosure for delinquent property taxes, Hare said. "If anyone solicits you in any way, shape or form to sign your deed and send it to them for any amount of money, don't to it," he said.

For more, see Michigan county treasurers warn of foreclosure bail-out scam.

Two Plea Guilty In Alleged Twin Cities Flipping Scam Involving 162 Properties, $35M In Mortgage Loans

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:

• Two men behind one of the largest mortgage fraud schemes to hit the Twin Cities area pleaded guilty to mail fraud Thursday in federal court. Thomas J. Balko and Jonathan E. Helgason, co-owners of TJ Waconia, pleaded guilty to a three-year scheme that involved 162 properties and $35 million in mortgages. Most of those properties were in north Minneapolis where a city lawsuit charges that the men and their firm laid waste to three neighborhoods, leaving blocks dotted with vacant, deteriorating housing. They turned 141 of the properties over to a court-appointed receiver this week.

For more, see Two plead guilty in $35 million mortgage fraud scheme.

See also, Twin Cities Finance and Commerce: TJ Waconia owners plead guilty to mortgage fraud.

Go here for other posts on the alleged TJ Waconia house flipping operation.

Minnesota AG Accuses Six Foreclosure Rescue Operators In Civil Suit Of Illegally Taking Upfront Fees

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:

• [Minnesota] Attorney General Lori Swanson on Thursday sued six out-of-state foreclosure consulting companies who she claims defrauded Minnesota homeowners out of thousands of dollars. Swanson, who filed the suits in Hennepin County District Court, is also seeking injunctions to stop the companies from operating in Minnesota. The suits allege the companies violated state law by collecting large fees before performing the services they were contracted to complete. [...] In each case, the lawyers said, the companies asked for money up front ranging from about $1,000 to almost $2,400. The firms then demanded more money to continue working with the customers, all of whom were in arrears on their mortgages.

***

• The lawsuits filed Thursday are against National Foreclosure Relief, a Nevada corporation with a California business address; Lewis Loss Mitigation of Alabama, which also does business as Stop Foreclosure and Lewis and Associates Consulting; D.R. Financial Services of California, which also does business as D.R. Financial and Superior Home Loans; American Foreclosure Specialists of Oklahoma; Mortgage Default Assistance of Florida, and Home Assure of Florida. [...] The American Foreclosure Specialists website mentioned that the company was Christian-run and even quoted Bible passages to reassure prospective clients, the attorney general's office said Thursday.

For more, see Attorney general sues foreclosure firms (She says the consulting companies victimized people already facing foreclosure, costing them time and money).

See also, KARE-TV Channel 11: Attorney General targets foreclosure consultants.

For earlier report on a December, 2007 Minnesota Attorney General civil suit accusing two other foreclosure rescue operators of violating state law, 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).

Two Los Angeles-Area Men Charged In Alleged "Fractional Interest Deed Transfer" Foreclosure Rescue Bankruptcy Scam

In Southern California, the Los Angeles Times reports:

• Michael D. Henschel of Van Nuys, who has had a long history of legal run-ins, was arrested Thursday by Los Angeles County authorities, who accused him of operating foreclosure scams that took in hundreds of homeowners, costing some their houses. Henschel, 59, faces 71 [state] charges, including forgery and conspiracy counts, in an alleged scheme to defraud homeowners from 2000 to 2004. Canoga Park resident Alan Mitchell, 70, also was arrested and faces 32 charges.

***

• Henschel and Mitchell are accused of offering to save homeowners from foreclosure if they paid a monthly consulting fee and transferred part-ownership of the properties -- often to a fictitious entity. While pretending to renegotiate loans, the pair charged rent to homeowners, Christopher said. The two men would file for bankruptcy protection using phony debt and made-up names to hold off the banks and extend the "rental" period for several months, he said. After a protracted, expensive process, the banks would reclaim the properties and evict the homeowners anyway, Christopher said. Although only seven victims are mentioned in the complaint, the scheme extended to hundreds of homeowners, he said. [...] Bail was set at $800,000 for Henschel and $400,000 for Mitchell.

• In the past, Henschel has faced a slew of misdemeanor and felony charges and has been convicted at least five times, but he has always managed to dodge prison time. In 1995, he was charged and acquitted in Los Angeles of stealing nearly $90,000 from family friends by filing phony bankruptcies and deed transfers against two properties. In an Arizona case that mirrors the current one, Henschel pleaded guilty in federal court in 2004 to filing more than 200 fraudulent bankruptcies and pocketing more than $50,000 in rental income and fees from homeowners with shaky mortgages. He was sentenced to probation, community service and restitution.

For more, see 2 arrested in alleged foreclosure fraud (The men are accused of operating a scam that took in hundreds of homeowners).

For a 1998 report issued by a California Federal Bankruptcy Court task force that details the types of foreclosure scams involving the abuse of the bankruptcy courts, see Final Report Of The Bankruptcy Foreclosure Scam Task Force.

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

Fort Lauderdale Riverfront Redevelopment Project In Foreclosure As Builder Lays Off Staff, Hit With Liens From Disgruntled Subs

In Fort Lauderdale, Florida The Miami Herald reports:

• Boca Developers had hoped to raze Las Olas Riverfront and build an eclectic mix of condos, offices, shops and entertainment that would become the ''central destination'' in downtown Fort Lauderdale. But the Deerfield Beach developer's plans are in doubt now that Wachovia Bank has moved to foreclose on the beleaguered property at 300 SW First Ave. along the New River. The developer, which is grappling with the turmoil in the residential real estate market, also recently received notice that it's in default on a $205 million loan intended to help finance the Las Olas Riverfront redevelopment and some of the firm's other projects in South Florida and elsewhere.

For more, see Foreclosure filed on Las Olas Riverfront (if link expires, try here).

Legal Aid Lawyers Hamstrung By Federal Rules

An Op-Ed article in The New York Times opines:

• Legal aid lawyers are among the few allies of poor homeowners caught in the subprime-mortgage meltdown. But these lawyers are hamstrung by federal regulations that limit homeowners’ access to speedy, low-cost legal relief.

Among the restrictions is an inability by legal aid lawyers, unlike their colleagues in private practice, to collect attorneys fees from companies who violate their clients' rights when those rights are vindicated in court.

• One restriction prohibits legal aid lawyers, unlike their corporate counterparts, from collecting attorney fees on behalf of vindicated clients. Fee awards are an incentive for both parties to negotiate quickly because legal costs increase as litigation drags on. Recalcitrant lenders can stall as long as they like, knowing it will cost them nothing.

For more on how federal rules are arguably impeding the work of legal aid lawyers, see Unleash Legal Aid.

Go here for other posts referencing legal fee awards in pro bono cases. legal fee pro bono

List Of Lenders Investigated In FBI Probe Now Up To 19

In Washington, D.C., ABC News reports:

• The FBI has again expanded its probe into the subprime mortgage collapse and is now investigating 19 lending institutions, bureau director Robert Mueller told lawmakers [yesterday]. Appearing before a Senate Appropriations subcommittee, Mueller told the panel that there has been a "surge related to the subprime debacle." The investigation has been growing since January, when the FBI began looking at 14 firms. That number rose to 17 last month.

For more, see Mueller: 'Subprime Debacle' Probe Expanded (FBI Director Says 19 Lending Institutions Under Investigation).

Mortgage Foreclosures Leaving Condo Associations Financially Squeezed

In Palm Beach County, Florida, The Palm Beach Post reports:

• At the CitySide townhouses in West Palm Beach, landscapers, bug men and security guards are showing up less often. At Paradise Cove in West Palm Beach, the water in the hot tub isn't so hot anymore. And at Carriage Pointe in Boynton Beach, homeowners are paying a combined $60,000 assessment to cover dues their neighbors aren't paying.

• The culprit in all three cases is the housing bust. With large numbers of homeowners unable to pay their monthly fees, condominium and homeowners associations are being forced to skimp on maintenance and security - and increase dues.

• Fully half of 487 Florida associations surveyed recently by Hollywood law firm Becker & Poliakoff say they're facing financial shortfalls because of the foreclosure crisis. After all, homeowners who aren't making their mortgage payments aren't paying their association dues either.

For more, see Foreclosures force homeowners associations to skimp.

For a related story, see Sarasota Herald Tribune: Foreclosures cause woes for property associations.

Minneapolis To Take Over, Rehab, Resell 141 Mostly Vacant Homes

In Minneapolis Minnesota, Minnesota Public Radio reports:

• Minneapolis Mayor RT Rybak says the city will take control of 141 mostly vacant rental homes on the Northside. A court-appointed receiver will manage the properties and work to rehab and resell them. The homes are associated with T.J. Waconia, a company the city is suing for mortgage fraud. The city's lawsuit accuses Waconia of buying homes, converting them to rental properties, collecting rent and then abandoning the properties.

For more, see City to acquire northside homes for rehab.

See also:

• Minneapolis Star Tribune: Minneapolis takes charge of T.J. Waconia homes in fraud case (TJ Waconia, sued by Minneapolis, was ordered to turn over 141 properties. The city wants to gain ownership, and may sell or rent them),
• Pioneer Press: Waconia's N. Mpls. homes get overseer (City sees ruling as victory in suit over mortgage fraud),
• Twin Cities Finance and Commerce: Judge appoints receiver for TJ Waconia's Minneapolis homes (Firm faces city suit, federal mail fraud charge),
• FOX-TV Channel 9: Judge Orders 141 North Minneapolis Properties to 3rd Party (Mpls neighborhoods filed lawsuit vs TJ Waconia over foreclosures).

Go here for other posts on the alleged TJ Waconia house flipping operation.

Charlotte-Area Real Estate Agency Admits To Hiding Bonuses Received In Home Sales; Agrees To Shut Down

In North Carolina, The Charlotte Observer reports:

• Charlotte-area company Realty Place has agreed to permanently close its doors after admitting to violating state regulations and federal law by hiding real estate bonuses from customers and lenders. In the agreement, approved Wednesday by the N.C. Real Estate Commission, the company said that from 2002 to 2004, Realty Place accepted "numerous" bonuses from homebuilders for representing buyers who purchased homes. The bonuses were paid outside closing and not declared on settlement statements.

• The commission so far has uncovered 300 to 400 secret bonuses paid to Realty Place, said Janet Thoren, the commission's chief deputy legal counsel. The investigation has expanded to involve other Charlotte real estate companies. "It involves quite a few people," said Thoren, who declined to say if federal officials also are investigating Realty Place. "I think the list is probably going to get longer and longer."

For more, see Realty Place calls it quits (Agency admits it took `numerous' secret bonuses from home builders, agrees to close).

Pilot Program Aims To Reduce Philly Foreclosures

In Philadelphia, Pennsylvania, the Philadelphia Business Journal reports:

• The Philadelphia Common Pleas Court Wednesday announced details of a pilot program it hopes will reduce the number of foreclosures in the city. The plan was ironed out by a foreclosure steering committee headed by Judge Annette Rizzo that includes lawyers representing lenders and homeowners as well as social service agencies. Owner-occupied properties will be put on a special track intended to help borrowers with free legal advice and housing counseling.

• All residential foreclosures will be subject to a conciliation conference before the property can be sold via Sherriff's sale. The conference must be held within 30 to 45 days after a complaint is filed and the homeowner and lender must be present. The homeowner will be require[d] to get housing counseling five days before the conference and cooperate fully with a counseling agency, which will provide a report at the conference regarding the possibility of a loan work-out. If a homeowner does not respond to notices, does not appear at the conference, or if it is determined no work-out is possible, the lender can proceed with the foreclosure process.

***

• Michael McKeever, managing partner of Goldbeck McCafferty & McKeever, a law firm that represents lenders in foreclosure proceedings, serves on the steering committee. He said lenders will also have to respond faster to work-out proposals from homeowners and their representatives. "We think this program will create some efficiencies and dispel the myth that lenders are not being cooperative," McKeever said.

For the story, see Details of Phila. foreclosure reduction effort announced.

See also, Philadelphia Inquirer: Advocacy key to Philadelphia foreclosure plan.

Go here for other posts on the Philadelphia foreclosure diversion program. diversion program

Legislative Proposal Protecting Servicers When Modifying Defaulted Home Loans Making Mortgage Execs Uneasy

In Washington, D.C., Reuters reports:

• Leaders of the mortgage industry are uneasy with a plan that would give home loan servicers legal protection if they try to help troubled borrowers avoid foreclosure, lawmakers heard on Tuesday. Such a step could discourage mortgage investment and "potentially threaten the stability and predictable operation of ... our capital market system," the American Securitization Forum, a mortgage investing trade group, told a congressional hearing.

• Home loans originated by banks and other mortgage retailers are typically bundled and sold to investors as new securities overseen by mortgage service companies. If a borrower is in danger of defaulting, the mortgage service company has broad power to rewrite the loan but investors may still sue if they second-guess those changes.

• Legislation sponsored by Rep. Paul Kanjorski and Rep. Mike Castle would shield mortgage servicers from such lawsuits. "Without this legislation, I am concerned that lawsuits could bring modifications to a halt," Castle, a Delaware Republican, said this week of his legislation.

For more, see Mortgage sector uneasy with loan rewrite plan.

See also, The Associated Press: Lawmaker Steps Up Modification Pressure. questionable mortgage servicing practices tactics xero MortgageServicingIssuesAlpha

Loan Servicer Calls Off Tenant Foreclosure Eviction; Agrees To Negotiate With Boston Officials

In Boston, Massachusetts, the Boston Herald reports:

• City officials announced last night that a tenant eviction scheduled for this morning at a foreclosed Dorchester property has been called off indefinitely, giving relief to nervous renters there. Wells Fargo, which services the loan for 200 Norfolk St., has agreed to call off the eviction and negotiate with city officials about a possible sale or extended lease for the tenants, said Michael S. Kelley, administrator for the city’s Rental Housing Resource Center.

***

• City officials said City Life/Vida Urbana had circulated plans to hold an eviction blockade at the property, a tactic that has increased in recent weeks amid the national foreclosure crisis. [...] “Working with servicers, the city of Boston will continue to keep people in homes and try and work out solutions to keep our properties occupied,” said Dot Joyce, a spokeswoman for Mayor Thomas M. Menino. “Wells Fargo has been cooperating . . . We will take our time to sit down and see if something can be worked out.”

For more, see Facing eviction, Dorchester tenants get breathing room.

Foreclosure "Bloodsuckers" May Pose Threat, Raise Concerns In Northern Virginia

In Northern Virginia, the Fairfax County Times reports:

• The phrase “bloodsucker” is being bandied about in some conversations about the foreclosure crisis in Fairfax County, but not in the way that one might suspect. According to the Fairfax-based National Pest Management Association, an unexpected consequence of the rising number of foreclosures in Fairfax County is the number of unoccupied, unkempt properties and their potential for breeding mosquito populations that could heighten the risk of West Nile virus cases this summer.

***

• “Any yard that is unattended and has any container that can hold water – even a plastic tarp or a black corrugated plastic drainpipe – is an excellent breeding ground for the Asian tiger mosquito,” said Jorge R. Arias, supervisor of the Fairfax County Health Department's Disease Carrying Insects Program.

For more, see Foreclosure crisis breeds new threat.

ABC's Good Morning America On Foreclosure Rescue

Good Morning America did a story on foreclosure rescue on Tuesday featuring an Illinois homeowner and the problems she faced.

• Dorothy Galbreath lived in a house her husband of 43 years built for her in University Park, Ill., but after his death, she struggled financially to keep up with the mortgage payments. Facing foreclosure, Galbreath accepted the offer of a company that she said contacted her to help with her mortgage difficulties. "'Mrs. Galbreath, don't you worry. We're going to save your home,'" Galbreath said Alternative Options, the company offering aid, told her. Now Galbreath is without her beloved home, and she believes Alternative Options took advantage of her. "I still can't put it into words. It's like a feeling of being crushed," the former homeowner said. "This is 43 years just wiped away, just like it was never there. All my life [was] wiped away like it never existed." The Illinois attorney general's office said Galbreath's deal showed all the signs of a mortgage rescue scheme.

***

• When Alternative Options initially approached Galbreath, she believed it would help her refinance her home, but after waiting more than a month for aid, Galbreath, a school bus driver, got further behind in her mortgage payments. Then she said she learned the company had a different form of mortgage rescue in mind. Galbreath said she was unaware that she was actually selling her home until she got to the bargaining table in May. She claimed Alternative Options never told her before the meeting that she was selling her house. "So right then and there, it was either sign the papers or go ahead into the foreclosure," she said.

***

• Alternative Options told ABC News in a written statement that its purchase of Galbreath's home "prevented the foreclosure" and it took several steps to help her buy her home back. The company added it regretted that she couldn't buy back her home and said it has "had significant success with other homeowners."

***

• ABC News asked the Illinois attorney general to review Galbreath's case. "We are subpoenaing this company to find out their business practices and to make sure that there are not other people similarly situated to Dorothy who have ended up losing their homes due to fraud," said Illinois Attorney General Lisa Madigan. "For so many people in the United States, their home is really their bank account. And so in addition to the devastation they face when they lose their home, they're also losing & their life savings."

For the entire transcript of the story, see Beware of Mortgage Foreclosure Rescue Scams (Find Out the Tips You Need to Protect Yourself).

Go here to watch the Good Morning America report (available online courtesy of Yahoo! News).

*****************

ABC News' Good Morning America also broadcast a story on 2-24-09 on the "Produce The Note" strategy of hammering sloppy lenders and their attorneys attempting to foreclose on homes without first establishing in court that they have the legal standing to do so.

For the story (approx. 5 minutes), see Fighting Against Foreclosure (Some homeowners have found a new tactic to keep the banks at bay).

Recent Raids By Minnesota Feds Involve Suspected Realty Fraud First Reported By County Property Appraiser 3+ Years Ago; 145 Properties Implicated

In Beltrami County, Minnesota, the Minneapolis Star Tribune reports:

• In August 2004, a source in the Bemidji real estate industry complained to the FBI about a real estate agent who appeared to be engaging in fraudulent deals involving rental properties. But federal agent John Egelhof said he was too busy to pursue it at the time. So were the Minnesota departments of Revenue and Commerce.

• Duane Ebbighausen, the Beltrami county assessor, said he notified those agencies in 2004 of a pattern of suspected frauds so extensive that they actually raised the assessed values of properties in Beltrami County. The deals involved real estate agent Edward Detwiler and his associates. Even so, no investigation took place for more than three years -- until Mary Bettelyoun of Frazee called Egelhof in December.

• Bettelyoun charged that Detwiler had tricked her disabled father, Alvin Bettlelyoun, and her mother, Vonnie Rose, into buying a decrepit home. On March 26, FBI agents raided Detwiler's former sales office, Realty Executives -- the Producer Group, seeking records on nearly 150 property transactions. Agents also searched Trust Mortgage and Action Appraisal, two separate entities with offices at the same address.

For more, see FBI raids in Bemidji focus on alleged realty fraud.

93 Year Old Queens Man Bilked Out Of $800,000 Of Property In Alleged Real Estate Scam

In New York City, The Daily News reports on one unwitting elderly victim of a real estate scam that cost him plenty:

• While predatory lenders have been known to focus on minority neighborhoods, the most common targets are the elderly, [Queens DA's office head of economic crimes investigations Greg] Pavlides said. "They are the most vulnerable," he said. "They're equity rich and cash poor."

• Nobody knows that more than Mary Thompson, 66, whose father, Artee McKoy, 93, a retired barber, was bilked of $800,000 worth of property by a close friend's daughter. Alexandra Gilmore, 36, ingratiated herself to McKoy, who lives alone in Jamaica and suffers from dementia. Gilmore then swiped the deed to his home and flipped his investment property in Bayside twice, using refinancing schemes she set up without his permission, prosecutors said. "He's a very good, warm-hearted person. He'd give you the shirt off his back," said Thompson, who lives in New Jersey. She is now seeking justice and restitution in court for her father.

• However, prosecutors can take care of only half of that task, Pavlides noted. "We can put the bad guys in handcuffs, but we can't get you your house back," he said of the distinction between criminal and civil cases. Fraud crimes carry three- to nine-year sentences. But a defendant who can pay back a victim's losses can walk away with time served or a lighter sentence.

• Thompson said she was "very happy" about Gilmore's February arrest. But it didn't quite deliver peace of mind, she said. "They were doing their duty and their job, but that doesn't help pay off these big loans," she said of the prosecutors. "My father could be put out of the house at any time."

For the story, see Homeowners duped into signing over property have little recourse.

Go here for the Queens District Attorney news release on this case.

Go here and go here for other posts on deed theft by forgery, swindle, etc. deed theft yahtzee elder financial abuse whale

Dateline NBC Goes Undercover To Investigate Questionable Sales Practices By Some Insurance Agents To Sell Retirement Investments To The Elderly

Last Sunday night, Dateline NBC 's hidden cameras reveal what some insurance agents say -- and what they don't -- when pitching retirement investments to senior citizens. Dateline and company:

• go behind the scenes to uncover the techniques they use: inside sales meetings -- where we catch the questionable pitches; inside training sessions -- where we discover agents being taught to scare seniors; and, finally, inside senior's homes to reveal the tricks some agents use to puff their credentials to make a sale.

Investigative reporter Chris Hansen presents the report, and gets assists from the states of Alabama, Minnesota, and his elderly widowed Aunt Alice.

For a transcript of the show, see Tricks of the trade (A Dateline hidden camera investigation sees what insurance agents say -- and what they don't -- when they think they are alone with a senior) (Go here for entire transcript on one web page).

Go here to watch a preview of the program.

Go here to watch Chris hansen's entire report (7 video clips total). elder financial abuse valedictorian

Worcester Foreclosure Problem Not Limited To Homeowners Losing Roof Over Their Head

In Massachusetts, the Worcester Telegram & Gazette News reports:

• [E]arlier this year, police Capt. Paul B. Saucier pointed out, police inside a vacant foreclosed home discovered that the copper fittings to a natural gas line had been removed. The slightest jarring of the gas line, which hadn’t been shut off, and exposure to flame could have sparked a major explosion.

***

• There have been instances, Capt. Saucier said, of people found using drugs inside vacant foreclosed properties, but not to the extent the site could be considered a “drug den” where users frequently congregate. Where police have seen a sharp increase, the captain said, are thefts and vandalism at vacant foreclosed properties, particularly theft of copper pipe and fittings. The price of the metal, which can be sold at scrap yards, has risen from 65 cents a pound in 2002 to about $3 a pound today. The average home contains about $300 worth of copper pipe and fittings. Capt. Saucier noted a March 27 call police received from the real estate agent for a foreclosed house at 324 Millbury St. The agent said the house had been broken into and all copper pipe had been ripped out and removed.

• William T. Breault, chairman of the Main South Alliance for Public Safety, said the situation was painfully apparent at a foreclosed and vacant house at 1 Cheney St. in the Main South district. For several months, he said, the door locks remained broken and people were going in and out of the dwelling at all hours. Inside were mattresses and considerable trash. All the copper in the home had been stripped, although the gas hadn’t been shut off. The windows and doors were boarded shut earlier this year and vagrants seem to have stopped coming by. “That’s happening all over the place,” Mr. Breault said.

For the story, see Houses of cards. neighborhood destruction from foreclosures zach copper metal theft yak

Indoor Pot Farms A Threat To Firefighters, Public Safety

In Lee County, Florida, The News Press reports:

• Grow house operators often rewire homes to steal electricity to run high intensity lights, pumps and air conditioning. "Anytime you're messing with the meter it could kill you," said Karen Ryan, spokeswoman for the Lee County Electric Cooperative. There are 14,000 volts in the wires at the pole, Ryan said. Transformers reduce that to 220 or 110 volts at the meter.

• Rewiring the house creates risks for firefighters, too. "Generally they don't catch fire," said Lehigh assistant fire chief Solon Duncan. "The main thing is we have no way to shut the power off," Duncan said. Growers bypass the electric meter to conceal their thefts. They might alter the box where the meter plugs in or run wiring underground from a nearby house, Duncan said. Growers also will block windows, which eliminates escape routes for firefighters who might have to fight a fire inside the building. "They do booby trap these places to hurt anyone trying to get in there," Duncan said. An example would be wiring a door to shock anyone trying to enter the house.

For more, see Grow houses can impact utility bills, public safety.

In Lee County, Florida, Lehigh Acres has apparently been a busy place for recent marijuana grow house busts. Go here for an interactive map of the location of 33 grow house busts in Lehigh Acres from Oct. 1, 2007 - March 31, 2008.

Go here and go here for other posts on Marijuana Grow Houses. pot grow ops beta