Nine Busted In Alleged Central Ohio House Flipping Scam

In Fairfield County, Ohio, The Columbus Dispatch reports:

• Nine people have been charged in connection with a multimillion-dollar mortgage-flipping and theft-ring scheme that authorities say operated out of Fairfield County but stretched far beyond central Ohio. Huey W. Granderson, 32, of Millersport, called the ringleader by Fairfield County Sheriff Dave Phalen, faces the most serious charges. They include racketeering; 11 counts of money laundering; and charges of theft, securing writings by deception and tax evasion. He and the eight others are accused of systematically falsifying tax records and income statements since early 2006. Authorities say the group submitted the records to central Ohio businesses and mortgage companies to get loans for expensive property, vehicles and construction equipment. The value of the fraud is said to approach $3 million.

***

• "This was a well-organized criminal enterprise," Phalen said. Most, if not all, of the homes are in foreclosure, he said. [...] Mary Jo Hudson, director of the Ohio Department of Insurance, said her department took the lead in the case because some insurance companies lost money. That, in turn, affects everyone's rates, she said. "It is all interconnected," Hudson said. "In this case, we began pulling on a thread and unraveled an entire sweater."

For more, see Nine charged in mortgage fraud, theft scheme ($3 million in homes, vehicles).

NY Judge Gives Go-Ahead To Foreclosure Sale, Says "Pro Se" Homeowner Failed To Prove Violations Of State Anti-Predatory Lending Statute

In Nassau County, Long Island, The New York Law Journal reports (reported at law.com):

• Declining to halt a foreclosure sale, a Long Island, N.Y., judge has been left with the "unhappy result" of a loan that should not have been taken for which the homeowner is nevertheless responsible. The case of Alliance v. Dobkin, 10625/06, is illustrative of the nationwide mortgage lending crisis: An increasing number of borrowers who agreed to onerous loan terms to finance homes they could not otherwise afford now are facing foreclosure. [... Nassau County Justice Daniel R. Palmieri] ruled that Dobkin could not rely on the state's prohibition against predatory lending to forestall foreclosure of her home.

***

• In her court papers, Dobkin, who represented herself, relied exclusively on LaSalle Bank, N.A. v Shearon, 100255/07, a Staten Island case where a judge found the lender guilty of multiple violations of the state's anti-predatory lending laws. [...] The only difference between that case and hers, argued Dobkin in court documents, was that her situation was "more outrageous."

***

• John Cilmi, whose Manhattan firm, Cilmi & Associates, represented the plaintiffs in the Shearon case, said in an interview that the decision was "concise and well-reasoned" under the applicable statutes. However, utilizing only the statutes can paint an incomplete picture, said Cilmi, who was not involved in the Dobkin matter. "When you review the statute, even if a home loan does not fall under it due to the dollar amount involved, that does not mean that there is not potential fraud involved in other aspects of the lending process."

For more, see N.Y. Judge Finds Homeowner Liable for Loan (Homeowner relied on 'LaSalle Bank v. Shearon,' thought to be the first reported decision enforcing provisions of the Banking Law).

Go here other posts referencing the LaSalle Bank v. Shearon case.

Editorial Note:

Not having the benefit of legal counsel, Ms. Dobkin represented herself in this case. undo mortgage loans TILA batallion

Report: Mortgage Servicers Unable To Keep Up With Loan Workout Workload; Fail To Adopt Systematic Approach

The Washington Post reports:

• Seven out of 10 troubled mortgage borrowers remain without a plan to work out their loans despite increased industry efforts to help them, according to a new report from a coalition of state attorneys general and banking regulators. The coalition collected data from 13 of the largest subprime lenders from October through January and found that they are overwhelmed by their workload and unable to keep pace with the growing number of borrowers who are falling behind on payments.

***

• The good news is that more lenders appear to be embracing long-term solutions by rewriting the loan terms instead of simply rescheduling payments, the report said. Five of the 13 lenders are modifying the loans, usually by lowering interest rates and less often by forgiving part of the principal. But while lenders appear more motivated to help, they continue to work on a case-by-case basis instead of adopting a more systematic approach. As result, the process is time-consuming and often fails to help borrowers before they fall into foreclosure.

For the story, see Most Troubled Mortgage Borrowers Without Plan, Report Finds.

See also, Reuters: US states find little change in mortgage servicing. MortgageServicingIssuesAlpha

Team Of Volunteer Lawyers Mobilize To Defend Ohio Homeowners In Foreclosure

U.S. News & World Report recently ran a story on how the State of Ohio is addressing its foreclosure crisis. It reports that "the state has enlisted more than 1,300 lawyers—from state agencies and the private sector—to help struggling homeowners avoid foreclosure by reaching agreements with lenders or, if need be, through litigation." It interviewed Ohio Attorney General Marc Dann, who commented on what the function of these lawyers will be:

• The lawyers will work with the borrowers to see if there are defenses to the actual foreclosure, whether there was fraud or unsuitability in the creation of the mortgage to begin with, and then to assist in two other ways: either to help litigate the case or to help structure a settlement.

• With these complex mortgage products—the adjustable rates, the no-document loans that were out there—there are all types of things in the generation of loans that give rise to defenses. And with the fact that these loans then started to become sold seven, eight, nine, 10 times in the process, there are even legitimate legal issues as to whether or not the person filing the foreclosure has the legal right to file a foreclosure because they don't have ownership of the mortgage note. [...] We just convinced a court of appeals—the 10th District Court of Appeals in Franklin County, Ohio—to find that you can't bring a foreclosure action if you don't have paper that proves that you own the house.

When asked about the progress of Ohio's initiative so far, Dann commented:

• It's been actually kind of rewarding. My uncle is a retired transactional lawyer, and he said, "I've been negotiating with banks my whole life. I am so excited about getting to do this." So he signed up, went to the training. My aunt is happy because it gets him out of the house. Here is a guy that was representing big Fortune 500 companies negotiating with their banks. All of a sudden, that playing field is about to get leveled.

For more, see How Ohio Is Tackling the Foreclosure Crisis.

For Ohio homeowners, see Ohio Foreclosure Assistance Information.

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

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here, Go Here, and Go Here. undo mortgage loans TILA batallion missing mortgage foreclosure docs beta

Ohio Appellate Court Cases Point To The Need For Foreclosing Lenders To Prove Note Ownership & Otherwise Establish Right To Foreclose

A recent Ohio appeals court ruled last month that a foreclosing mortgage company is not entitled to a foreclosure judgment if they can't prove their ownership of the promissory note and how they came about owning the mortgage. For the ruling, see Everhome Mtge. Co. v. Rowland, 2008-Ohio-1282; (10th Dist. Ct. App.; March 20, 2008).

In making its ruling, the court cited prior Ohio appellate court decisions that also point to the apparent need for a foreclosing mortgage lender to prove that it is the owner of the promissory note and, thererfore, the real party in interest to initiate the legal action. For those cases, see:

• First Union Natl. Bank v. Hufford (2001), 146 Ohio App.3d 673; 3rd Dist. Ct. App., and
• Washington Mut. Bank, F.A. v. Green (2004), 156 Ohio App.3d 461; 7th Dist. Ct. App.).

Inasmuch as these cases are appellate court cases from the Ohio judiciary, they appear to carry more weight than any Ohio trial court decisions that have ruled to the contrary.

For the long version of this post, see Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court.

In a related story, see U.S. News & World Report: How Ohio Is Tackling the Foreclosure Crisis.

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

Plummeting Condo Market Faces More Woes: Mortgage Financing About To Dry Up

Syndicated real estate columnist Kenneth Harney writes in a recent article:

• If you own or plan to buy a condominium, an ominous new phase of the mortgage credit squeeze could be looming on your horizon. As a result of underwriting changes by giant investors Fannie Mae and Freddie Mac, plus severe new restrictions by private mortgage insurers, getting a loan on a condo unit - or even refinancing one you already own - could prove tougher than you imagined.

***

• Under Fannie Mae's changes, most of the due-diligence research on condominium projects' key characteristics - their legal documentation, the adequacy of condo association operating budgets, percentage of unit owners who are late on association-fee payments, percentage of space allocated to commercial use, and percentage of units owned by investors - must now be performed up front by loan officers. Not only is this time consuming and costly, but under the new procedures, Fannie Mae expects the lender to warrant the accuracy of its research. Some condo project legal documents run into the hundreds of pages of text, yet lenders are supposed to take legal and financial responsibility for their accuracy.

***

• Bruce Calabrese, president of Equtable Mortgage Corp. in Columbus, Ohio, said "everybody is really backing off condos" because of all the restrictions and changes. He said he personally owns two condo units - one in Florida, another in Myrtle Beach, S.C. - and even though he is in the mortgage industry, "I don't think I could refinance either of them right now if I tried."

For more, see Condo financing getting a lot harder in wake of credit woes (San Francisco Chronicle); or Restrictions on condo loans getting severe (St. Petersburg Times).

More On The Trouble Facing Florida Condo Associations

In South Florida, The Miami Herald reports:

• At the Fountains of Tamarac, the condo association has no insurance, a couple of unit owners are cutting the community's grass themselves, and 90 percent of the unit owners aren't paying their maintenance fees. Even two banks, both of whom acquired their condos out of foreclosure, haven't paid their dues. [...] The Fountains of Tamarac is an extreme example of a growing problem in South Florida: As the economy slumps and home prices fall, a growing number of home- and condo owners are not paying their community fees. That's creating enormous problems for their neighbors, who must either pick up the slack by paying higher fees or else live with reduced services.

***

• How widespread are such problems? According to a recent Internet survey of 487 Florida condo and homeowner associations by the Hollywood-based law firm of Becker & Poliakoff: (1) 51 percent said that mortgage foreclosures were creating a revenue shortfall and a burden on the association's finances, (2) 37 percent said they have raised maintenance fees to cover the shortfall, (3) 43 percent said they have units that have been unoccupied for at least six months because of mortgage foreclosures.

• And that's a small sampling. There are 7,149 condo associations in Miami-Dade and Broward counties alone, according to the Florida Department of Business and Professional Regulation.

For more, see Unpaid fees trouble condos (From the West Broward suburbs to Miami's trendy Brickell high-rises, condo associations are raising fees or cutting services because some of their members aren't paying their share) (when link expires, try here).

In related articles, see:

• Sarasota Herald Tribune: Homeowners groups are in a fix (As properties go into foreclosure, associations try to recoup back dues),
• The Daily Herald: Associations need to face troubled times square on.

Twin Cities' Suburb Hit Hard By Effects Of Housing Boom & Bust

In Minnesota, the Minneapolis Star Tribune recently published a three part report on the real estate problems being faced in Wright County, a Twin Cities suburb.

• Just two years ago, Wright County epitomized the American dream of home ownership. Young families went there in droves, attracted by the cheap land, good schools and bucolic neighborhoods. But today, that dream is unraveling, as foreclosures rip through Wright County neighborhoods at a rate of 23 a week. What happened?

• Plummeting home values means some families are trapped, unable to refinance, sell or make ends meet. Speculators helped drive the boom in Wright County — and the bust. Towns welcomed the development with new schools and wider roads. Now they’re paying the price.

For more, see:

• Part 1: Minnesota's new ghost towns (In Wright County, reckless speculation and the mortgage meltdown have turned subdivisions into virtual ghost towns),

• 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).

Mortgage Servicers, Foreclosures, Legal Standing & Proving Ownership Of Promissory Note

In Iowa, The Des Moines Register reports:

• Figuring out which company to deal with during a foreclosure can be daunting. Even if the original mortgage was with a company recognized by the borrower, that company may not be the one acting against the borrower in court. For example: Wells Fargo filed more than 3,600 foreclosure lawsuits in Iowa from January 2005 to February 2008, more than any other company identified in Iowa court data. But the company could be taking legal action because it processed payments for another mortgage company or acted as a trustee for investors - not because it's the original lender.

• Two company names that often appear on Iowa foreclosures - Deutsche Bank and Mortgage Electronic Registration System, or MERS - can be even more puzzling to borrowers.

***

• University of Iowa law professor Katherine Porter led a national study of 1,733 foreclosures and found that 40 percent of the creditors filing the lawsuits did not show proof of ownership [of the promissory note]. [...] Companies, she said, have been "putting the burden on the consumer - who is bankrupt - to try to decide whether it's worth it to press the issue."

• Max Gardner III, a bankruptcy attorney in North Carolina and a national foreclosure expert, said the trend is spreading to other states. "You have to prove in North Carolina that you have the original note," he said. "Judges have not (asked for) that very often, until the last five or six months."

For more, see Firm pursuing foreclosure might not be your lender.

For Katherine Porter's report examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims.

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

Twin Cities' Lender Seeks To Buy, Work Out Problem Mortgages

In St. Louis Park, Minnesota, the St. Paul Pioneer Press reports:

• Mark Saliterman's bank isn't quite 3-years old and hasn't turned a profit, but the 58-year-old entrepreneur still thinks it can help fund troubled Twin Cities homeowners out of foreclosure. VisionBank of St. Louis Park, which Saliterman started in 2005, is rolling out a program to help homeowners who are in or are facing foreclosure keep their homes. Through HumaneMortgage, VisionBank will purchase problem mortgages at a discount from other lenders and lower the monthly payments to a rate the homeowners can afford.

For more, see VisionBank sets sights on problem mortgages (Plan to buy, re-fi loans could curb foreclosures, owner says) (if link expires, try here).

Washington State AG Settles Suit With Florida-Based Upfront Fee Foreclosure Rescue Operator

The Washington State Attorney General’s Office announced yesterday:

• Approximately 200 Washington consumers who paid for a service that they thought would help save their homes from foreclosure will receive partial refunds under a new settlement announced [yesterday] by the Washington Attorney General’s Office. The homeowners each paid $1,200-$1,500 to Foreclosure Assistance Solutions LLC, of Clearwater, Fla. More than 70 percent of homeowners who signed up with Foreclosure Assistance Solutions ended up losing their homes anyway. The company went out of business in fall 2007. [...] The Attorney General’s Office accused the company of violating the state’s Consumer Protection Act, Credit Services Organization Act and Commercial Telephone Solicitation Act.

***

• Foreclosure Assistance Solutions did not admit to any wrongdoing in the settlement but agreed to pay $78,125 in restitution to Washington consumers, as well as $20,000 in attorneys’ fees. The settlement also includes injunctive provisions limiting how the company does business, should it offer services again in the future, as well as an additional $100,000 in civil penalties for failure to comply with the agreement.

The Washington AG stated that some of the solicitations sent to the homeowners by Foreclosure Assistance Solutions mimicked official government notices. In addition to announcing the settlement in this case, AG Rob McKenna also issued a reminder on the recent passage of legislation, HB 2791, designed to regulate foreclosure rescue operators.

• The Washington Attorney General’s Office introduced legislation this past session to help protect homeowners from foreclosure rescue scams where the “rescuer” agrees to purchase the distressed property then sell or lease it back to the original homeowner. HB 2791 takes effect June 12, 2008. The new law will require that the purchaser prove the homeowner is able to make the payments and provide a written contract with clearly disclosed terms. The new law gives the homeowner the right to cancel the contract within five business days. It also requires that the original homeowner receive at least 82 percent of the difference between the property’s fair market value and the underlying mortgage should the home be sold to a third party.

For more, see Foreclosure rescue company must refund 200 Washington consumers.

To view the cionsent decree and the original lawsuit in this case, see:

• Settlement - State of Washington v. Foreclosure Assistance Solutions LLC,
• Original Complaint - State of Washington v. Foreclosure Assistance Solutions LLC.

Other posts referencing Foreclosure Assistance Solutions.

Go here for a website possibly created by an unsatisfied customer of Foreclosure Assistance Solutions.

Business Booms For Specialty Insurers Issuing Coverage On Empty Detroit Houses, Buildings; Lapse Of Standard Coverage A Risk When Property Left Vacant

In Michigan, Crain's Detroit Business reports:

• Business is booming for specialty insurers who write policies on the increasing number of vacant houses and buildings in metro Detroit. Vacancy rates for buildings have been increasing in metro Detroit at a faster rate than in Michigan and nationally, caused by bank foreclosures, increasing unemployment and a downturn in the real estate market. “With Michigan's economy in turmoil, you cannot drive anywhere in the state and not see "for sale' signs, "foreclosed' signs or empty storefronts and homes,” said Alan Jay Kaufman, chairman, president and CEO at Burns & Wilcox, a Farmington Hills-based broker.

***

• Some owners are not aware of the need for special vacant-property coverage, Kaufman said. While policies vary, standard homeowners or commercial insurance generally does not cover a property 30 days after it is vacant, he said. “Commercial people know they need this insurance. Most homeowners do not know they need special insurance if they are selling their own property and vacate it,” Kaufman said. Business owners and homeowners of vacated properties could incur big out-of-pocket losses with a fire, vandalism, water damage or theft, Kaufman said.

• [Executive director of the Insurance Institute of Michigan Pete] Kuhnmuench said the high foreclosure rate in Detroit makes it more likely that homeowners and business owners will just walk away from their property. “We hear stories all the time from insurance agents about people who did not have proper coverage and lost everything due to a fire or crime,” Kaufman said. “People left their home and did not tell their insurance agent.”

For more, see Vacancy rates spur growth of policies for empty buildings. foreclosure arson xerox

Housing Fraud Spreads In California's Central Valley

The Fresno Bee reports:

• Janie Torres thought she was getting help from her friendly neighborhood real estate agent. Instead, she lost her home -- becoming an apparent victim of a form of fraud spreading across California's Central Valley as the mortgage crisis deepens.

• From phony foreclosure consultants who take thousands of dollars in illegal prepayments and then do nothing, to real estate agents offering complicated rescue schemes that take away people's homes, mortgage scammers are increasingly active, law enforcement and real estate officials say.

• Schemes range from homeowners being defrauded by phony foreclosure "rescue" services -- Tulare County prosecutors have accused one woman of defrauding more than 200 people across the state -- to nationwide schemes, like one described in a federal indictment unveiled last month in Sacramento. And while some alleged scammers are now facing criminal prosecution, it's likely many more cases have yet to surface, law enforcement officials say.

For more, see Valley housing scams spread (Phony 'rescue' services lure homeowners in crisis).

Maine Passes Legislation Regulating Foreclosure Rescue

Buried in a recent story reported in Foster's Daily Democrat is the following blurb on recent legislation passed in Maine:

• In consumer issues, homeowners facing foreclosure get new protections from predatory lenders. The law targets practices such as purchasing titles for far less than fair market value, then creating contract provisions that make it impossible to repurchase the property.

For the article, see Dozens of Maine laws enacted.

For the Maine statute, including a summary of the new law, see An Act To Protect Homeowners from Equity Stripping during Foreclosure (or go here for .pdf version).

"Jingle Mail" Reports On the Increase In Arizona

In Arizona, The Arizona Republic reports:

• Instead of mailing in their monthly mortgage payment, a growing number of homeowners are sending lenders their keys. As housing prices fall and rates on some mortgage loans rise, more homeowners are walking away from their homes, according to housing-market watchers. [...] The growing trend, called "jingle mail," is pushing up foreclosures and alarming market watchers, particularly in metropolitan Phoenix, where home prices have dropped 18 percent in the past year.

***

• The mortgage industry is struggling to estimate how many homes are going into foreclosure because of people who don't want to pay, rather than because of people who can't afford to pay. Industry estimates and anecdotes suggest the figure is climbing in the Valley because so many people who bought during the peak are now upside down in their mortgages.

***

• "Instead of calling it a foreclosure, these couples are saying, 'We're giving it back to the bank,' and then moving a couple of blocks away and renting a home for half their mortgage payment," [one housing analyst] said. "These people are finding it easier to walk away."

• Businesses are popping up that guide homeowners on the best way to walk away from their mortgage. [...] Also, the Mortgage Forgiveness Debt Relief Act of 2007 took some of the penalty away from a homeowner filing for foreclosure. Before the act, if a bank sold a foreclosed home for less than the mortgage and forgave the rest of the debt, the borrower had to pay tax on the difference. Now, the Internal Revenue Service is forgiving the [tax on the] difference.

For more, see More homeowners mailing keys to lenders (Owing more than home is worth, recent buyers walk away).

Minnesota Housing Advocates Demonstrate At Governor's Mansion In Response To Veto Threat On Foreclosure Moratorium Proposal

In St. Paul, Minnesota, Workday Minnesota reports:

• In response to Governor Tim Pawlenty’s threats to veto the Minnesota Subprime Foreclosure Deferment Act, families facing foreclosure brought the crisis to the governor’s mansion on Summit Ave in Saint Paul. On Saturday, members of the housing-focused community organization ACORN and other groups constructed “Subprime City – the fastest-growing city in the nation” – made of tents, cardboard boxes, and sleeping bags. Families facing foreclosure held signs saying, “Governor Pawlenty, I’m losing my home. Can I stay here?’

For more, see Homeowners take mortgage crisis to the grounds of the governor's mansion.

Builder In Foreclosure Sues Bank Alleging Conduct That Doomed 4-Unit Development

In Holmes Beach, Florida, the Sarasota Herald Tribune reports:

• First Priority Bank, the region's most troubled community bank, has been hit with a lawsuit alleging that mismanagement and false statements on the part of its employees doomed a Holmes Beach condominium development. The lawsuit, filed by Ohio developer Benton Benalcazar in response to First Priority's Feb. 28 foreclosure action, states that bank managers not only delayed the construction of four, 2,400-square-foot condominium units, but they actually tried to sell the property to other customers long before Benalcazar defaulted on his company's $1.7 million loan.

For more, see Customer sues First Priority Bank (Developer Benton Benalcazar accuses the bank of delaying work on his project, then trying to sell it).

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