Wednesday, May 21, 2008

City Of Baltimore, Wells Fargo Slug It Out In Federal Court

In Baltimore, Maryland, The Baltimore Sun reports:
  • In the latest accusation over who's to blame for hundreds of home foreclosures, city attorneys filed a motion last night in federal court saying that Wells Fargo Bank's actions are far more devious than the city's and that the court should force the lending institution to pay the city millions of dollars in lost revenue.

  • The city and Wells Fargo have each blamed each other for the mortgage crisis: First, Baltimore said Wells Fargo Bank was responsible for hundreds of home mortgage foreclosures. Then, the bank shot back with allegations that the city forecloses on many more homeowners through its own tax lien programs.

  • In the motion filed in U.S. District Court in Baltimore late last night, attorneys for the city argue that Wells Fargo's motion to dismiss the city's case should be ignored and that the bank's attempt to blame local government for housing problems and urban ills is "palpably false."

For more, see City says federal court should force Wells Fargo to pay for lost revenue (The two have blamed each other for hundreds of Baltimore home foreclosures).

In a related story, see Baltimore Business Journal: Baltimore alleges Wells Fargo targeted homeowners with needless refinancing offers.

To view the lawsuit, see Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A., et al. (8.76 MB).

Go here for other posts referencing Baltimore's battle with Wells Fargo.

Countrywide's Mozilo "Disgusted" By Homeowners' "Form Letter" Pleas For Help; Sets Off Furor

In California, The Los Angeles Times reports on the furor set off by Countrywide chief Angelo Mozilo when he clumsily hit "Reply" instead of "Forward" on an email from a homeowner seeking help in saving his house:

  • Apparently clicking "reply" when he meant to hit "forward," Countrywide Financial Corp. Chairman Angelo Mozilo ignited an online furor Tuesday by describing a mortgage customer's plea for help as a "disgusting" example of form letters inundating the Calabasas home lender. Mozilo's e-mail rocketed back to the customer, Daniel Bailey Jr., who had asked Countrywide to modify the terms of his loan so he wouldn't lose his home of 16 years.

  • Much of the language in Bailey's message to Countrywide was borrowed from a form letter available at the website LoanSafe.org, a coaching service for troubled borrowers. Bailey, who says he operates a photo studio, posted his e-mailed exchange with the lender on a LoanSafe forum.

  • His original e-mail was sent to 20 Countrywide addresses, including Mozilo's. Such mass e-mails have overwhelmed e-mail boxes at Countrywide, disrupting its operations and prompting Mozilo's heated response, the company said. "This is unbelievable," Mozilo said in his e-mail. "Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting." The reply touched off debate on housing websites.

For more, see Countrywide Financial Chairman Angelo Mozilo's e-mail sets off a furor (He calls a borrower's plea for help a "disgusting" example of form letters inundating the Calabasas mortgage lender).

Go here for the e-mailed exchange with Mozilo on a LoanSafe forum.

See also, The Wall Street Journal Blog: Oops! Countrywide Chairman Mozilo’s ‘Disgusting’ Email.

Go here, Go here and Go here for more on other Countrywide problems with consumers.

Upcoming Hurricane Season Poses Threat To Vacant Foreclosures, Unfinished / Abandoned Homes & Adjacent Neighborhoods In Coastal Areas

Housing Wire reports:
  • As the hurricane season ramps up, fallout from the ongoing mortgage crisis provides a new, potentially hazardous twist; vacant properties that may be ill-prepared to handle a storm. The Institute for Business & Home Safety said Tuesday that more than half a million properties in hurricane-prone states are in some stage of foreclosure, and warned that the many thousands of foreclosed homes standing empty in coastal areas from Texas to Maine could exacerbate property damage in their neighborhoods if the wind starts to blow.

***

  • IBHS notes that a house is most vulnerable to high winds when the building “envelope” is not sealed by approved forms of opening protection, such as storm shutters or reinforced garage doors. Building materials and other debris from partially completed new homes sitting unsecured along the coasts also could become shrapnel or missiles impacting nearby buildings [and people].

For more, see Half a Million Foreclosed Properties Face Hurricane Damage.

Flood Of Foreclosures, "For Sale" Signs Hitting Working Class Northeast Neighborhoods Hard

The extent to which the residents in Northeast working class neighborhoods are being hurt by foreclosures and the high level of housing inventory currently on the market is described in three recent articles on the state of affairs of neighborhoods in The Bronx (New York), Newark (New Jersey), and New Bedford (Massachusetts). For more, see:

Go here and go here for other posts on vacant homes leaving its mark on neighborhoods. neighborhood destruction from foreclosures zach

Guidance From Tax Man On Loan Mods Welcome News For Mortgage Servicers

Housing Wire reports:
  • In clarification that market participants said will further embolden servicers to modify mortgages that are likely headed for trouble, the Internal Revenue Service on Monday outlined the tax effects on securitized mortgages that have been modified to avoid foreclosures. Under Revenue Procedure 2008-28, the IRS said that it will not challenge the tax status of securitization vehicles when a servicer modifies a loan — even a performing loan — so long as the modification fits within the new scope outlined by the government agency.

***

  • Many servicers have been looking to work with borrowers proactively, ahead of potential default activity, but have been unsure about whether doing so might jeopardize the favored tax status of a particular securitization trust. The reason is tied to IRS rules regarding the favorable tax treatment of REMICs, which mandate not only a static pool requirement but a “passive management” requirement that has served to essentially limits servicers’ ability to modify loans to only those situations where a default is deemed imminent — in other words, to those situations where borrowers have already become delinquent on their payments.

***

For more, see IRS Issues Guidance on Loan Modifications.

Go here for IRS Revenue Procedure 2008-28.

Go here for other related posts on mortgage servicing issues. MortgageServicingIssuesAlpha

Tuesday, May 20, 2008

Voluntary Foreclosures On The Rise?

Forbes reports:
  • To the distress of many banks and investors, American borrowers are increasingly viewing voluntary foreclosure as a practical financial decision, stripped of its taboo. Perhaps a bigger problem is that banks don't want to talk about the problem and they don't appear to know what to do about it. As long as it persists, there will be downward pressure on home prices, especially in overbuilt markets where the supply of housing already outstrips demand.

***

  • In mid-April, Chief Risk Officer Don Truslow of Wachovia acknowledged the troubling trend during a conference call: "I don't know where the tipping point is, but somewhere when a borrower crosses the 100.0% loan-to-value, somewhere north of that . . . their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up."

  • Even more disconcerting, Truslow added that the trend was "almost regardless" of borrowers' creditworthiness. Lender's are beginning to report that loan-to-value ratios are better indicators of the likelihood of default than borrowers' FICO scores, a widely used metric of creditworthiness developed by Fair, Isaac. (See "Subprime In Sheep's Clothing")
For more, see Deadbeat Homeowners Hit The Road.

Non Profit Law Firm To Offer Predatory Mortgage & Mortgage Foreclosure Clinic

In Watsonville, California, The Salinas Californian reports:
  • The Watsonville Law Center is offering a legal-advice clinic to help counter predatory lending practices against low-income communities in Santa Cruz and Monterey counties. The Predatory Mortgage and Mortgage Foreclosure Clinic will be held Thursday [May 22, 2008] with volunteer attorneys giving free legal advice to low-income clients who believe they have been victims of predatory home loans and are facing mortgage foreclosure.

Information: 722-2845, www.watsonvillelawcenter.org.

Source: Law center holding mortgage advice clinic.

Another Alleged Foreclosure Rescue, Equity Stripping Scam Victim Points Finger At Head Brothers

In Lawndale, California, The Daily Breeze reports on the story of an area couple who say they were ripped off out of their home equity in an alleged foreclosure rescue scam by a guy named "Mike" and "Mike's" brother. According to the story:
  • "Mike" was Jeremy Michael Head, 30, of Huntington Beach. He is now awaiting trial on a 13-count indictment for mail fraud, money laundering and other related offenses. Head and 15 others were indicted Feb. 28, charged with fraudulently taking $6.7 million.

  • Head's brother, Charles Head, was the alleged ringleader of the scheme. He was indicted a second time on March 13 with six others. He is accused of orchestrating an "equity stripping" scheme that netted $5.9 million. More than 300 known victims and 150 homes were involved in the fraud, said Lauren Horwood, a spokeswoman for the U.S. Attorney's Office.

For more, see Lawndale couple counts cost of home fraud (Clark family hoped to reduce payments, but refinancing became nightmare).

Go here for other posts on the Head nationwide foreclosure rescue operation.

Court Bans Flipper From Real Estate Business In Iowa

In Des Moines, Iowa, The Associated Press reports:
  • A Des Moines real estate investor accused of consumer fraud has been banned from doing business in Iowa. A Polk County District Court judge on Monday ordered John Davis to stop selling, renting, leasing or investing in real estate in Iowa. The order resolves a consumer fraud lawsuit filed by the Iowa attorney general's office against Davis and his companies in 2006. Davis, who agreed to the terms of the order, also was ordered to pay $30,000 to reimburse consumers.

***

  • Iowa Attorney General Tom Miller says the lawsuit alleged that Davis sold homes at highly inflated prices to customers with average or below average credit scores. He says Davis also used phantom down payments to help customers get mortgages. Miller says all the loans cited in the lawsuit ended in foreclosure.

Source: Court bans real estate investor from doing business in Iowa.

From the Iowa Attorney General's Office:

Fairfax, Prince William Consider Homebuying Programs Targeting Foreclosed Homes

In Northern Virginia, The Washington Post reports:

  • Fairfax County is developing a program to allow as many as 100 first-time home buyers to purchase foreclosed houses at cut rates to bolster the county's affordable-housing efforts and help prevent the region's mortgage crisis from causing neighborhood decline. Dubbed the Silver Lining program, county housing officials have proposed spending as much as $6.4 million over two years to help such middle-income professionals as teachers, police officers and firefighters afford the region's housing.

***

  • Although Fairfax has not been hit nearly as hard by foreclosures as neighboring Prince William and Loudoun counties, the number of foreclosures has risen dramatically as a result of the subprime mortgage crisis -- from 198 in 2005 to 4,527 in 2007. Most of the foreclosures are clustered in Springfield, Herndon, Centreville and the Route 1 corridor. The situation has raised concerns about depressed property values, a decline in maintenance and higher rates of crime, including vandalism.

***

  • A similar proposal will be considered today in Prince William, where county staff will present a program to supervisors that would make low-interest loans available to county employees to encourage them to buy houses there.

For more, see Fairfax May Offer Deal On Foreclosed Homes.

Squatters Pocketing Money Renting Out Homes They Don't Own; Others Hit Up Lenders In "Cash For Keys" Deals

Reuters reports:
  • [S]quatting is on the rise across the United States as foreclosures surge, eviction notices mount and homes go unsold for months, complicating the worst U.S. housing slump in a quarter century and forcing real-estate brokers to enlist the help of law enforcement and courts to sell empty houses.

  • In some regions, squatting is taking on new twists to include real-estate scams in which thieves "rent out" abandoned homes they don't own. Others involve "professional squatters" who move from one abandoned home to another posing as tenants who seek cash from banks as a condition to leave the premises -- a process known by real-estate brokers as "cash for key."

For more, see As homes foreclose in U.S., squatters move in. unwitting tenant rent scam yacht

Monday, May 19, 2008

Boston Feds Indict Eleven For Allegedly Tricking Lenders Out Of $10.6M In Mortgages Using Straw Buyers, I.D. Theft

In Boston, Massachusetts, The Boston Globe reports:
  • The Justice Department yesterday charged two Boston lawyers, seven mortgage brokers, and two others with fraudulently obtaining more than $10.6 million in loans using straw buyers or stolen identities to purchase 21 properties in the Boston area. Federal officials said it is the biggest mortgage fraud in Massachusetts since the 1980s.

  • During the height of the housing boom in 2005 and 2006, the lawyers and brokers allegedly falsified information about borrowers and inflated the purchase price of homes by as much as $250,000 to fool mortgage lenders and banks into loaning them more money, according to the charges filed yesterday in US District Court in Boston. The ring netted about $1.7 million in profit. [...] At least 14 of the 21 properties involved have been seized by lenders, according to county deed records.

***

  • Two Boston lawyers, Eric L. Levine, 55, of Brookline and J. Daniel Lindley, 59, of Jamaica Plain were involved in all the transactions, according to court papers. [...] Seven of those charged worked for New England Merchants Corp. in Arlington: Ernst Appolon, Ralph Appolon, Daniel Appolon, Andre Junior Lamerique, Widner LaMarre, Jermaine Blake, and Samuel Jean-Louis. The remaining defendants are Latoya Haltiwanger, a broker with Topdot Mortgage, and Quincy resident Jean Noriscat. Daniel Appolon and Jean-Louis have not been arrested.

For more, see 11 are charged in $10.6 million loan-fraud scam.

From the Boston U.S. Attorney's Office:

Pending Pennsylvania Legislation May Cause Concern For Foreclosing Lenders, Servicers

In Pennsylvania, DSNews.com reports:
  • A Philadelphia attorney says a piece of legislation that made it through the state House in April could significantly impact the way servicers and lenders do business in Pennsylvania. Michael McKeever, with the law firm of Goldbeck, McCafferty & McKeever, issued an advisory to inform attorneys and lenders about some of the changes that would result if a series of five house bills make it into law—specifically House Bill (H.B.) 1083 [go here for bill information]. McKeever told DSNews.com that H.B. 1083 has "two features that will impact the foreclosure process."

For more, including consequences to mortgage servicers for improper application of payments under HEMAP homeowner assistance loans, see Pending Legislation May Impact Pennsylvania Default Attorneys/Lenders.

South Bend Cop Admits Role In Straw Buyer Mortgage Scam Involving 190 Houses

In Indiana, the South Bend Tribune reports:
  • A South Bend police officer has admitted to a mortgage loan scam that involved 190 houses in the South Bend area and bilked lenders out of hundreds of thousands of dollars. Sgt. Robert Culp, a 17-year veteran of the department, was relieved of duty with pay Friday, pending the adjudication of his case, a South Bend police spokesman said. Culp, 43, of New Carlisle, who works in the Metro Special Operations Section, was involved in a scheme between 2003 and 2007 to buy dilapidated houses and sell them at two or three times their actual value, according to federal court documents.

For more, see Officer pleads guilty to bank fraud (Was involved in mortgage loan scam involving 190 houses).

More On Discount Mortgage Investors Buying Delinquent Loans

Bloomberg News reports:
  • The way out of the worst U.S. housing slump since the 1930s goes through Angel Gutierrez. Gutierrez buys bad mortgages a dozen at a time for a fraction of their face value from lenders overwhelmed by the highest number of defaults in 23 years. When he goes door to door to negotiate lower payments for homeowners or pay them to move so he can sell the house, he's speeding up the recovery by establishing a price for the homes and flushing out the least reliable borrowers.

For more, see Recovery From Worst Housing Slump Since 1930s Comes With Angel.

Sunday, May 18, 2008

Crime Stoppers' Calls On The Increase As Financially Strapped Tipsters Look To Pocket Needed Reward Cash

The New York Times reports:

  • To gas prices, foreclosure rates and the cost of rice, add this rising economic indicator: the number of tips to the police from people hoping to collect reward money. [...] Cities and towns from Detroit to Omaha to Beaufort County, N.C., all report increases of 25 percent or more in the first quarter, with tipsters telling operators they need the money for rent, light bills or baby formula.

***

  • [M]any programs report a substantial increase in Crime Stopper-related arrests and recovered property, as callers turn in neighbors, grandchildren or former boyfriends in exchange for a little cash.

***

  • Some people have made a cottage industry of calling in tips. Although repeat callers do not give their names, operators recognize their voices. “We have people out there that, realistically, this could be their job,” said Sgt. Zachary Self, who answers Crime Stoppers calls for the Macon Police Department. “Two or three arrests per week, you could make $700, $750 per week,” Sergeant Self said. “You could make better than a minimum-wage job.”

For more, see As Prices Rise, Crime Tipsters Work Overtime.

South Florida Condo Bust A Boon To Investors, Out-Of-Town Buyers

The South Florida Sun Sentinel reports:
  • The glut of condominiums for sale in South Florida is attracting a legion of bargain hunters. Out-of-state and international buyers are descending on the area in search of deep discounts as prices continue to crater. They want to get in now and wait out the housing slump because they think the region remains a powerful long-term draw. With the lingering real estate downturn, now in its third year, some condos are selling at 25 to 60 percent less than during the boom times, when investors hoping to "flip" units bid up prices.

For more, see Condo crunch in S. Florida good news for bargain hunters (Real estate bust is big boon for foreign buyers).

Chula Vista Code Enforcement Chief To Testify Before Congress On New Ordinance Targeting Foreclosing Lenders

In Chula Vista, California, KNSD-TV Channel 7/39 reports:
  • A local ordinance, which holds lenders responsible for the condition of abandoned properties or financially distressed homes, is becoming a model for other cities. Authored by Chula Vista's code enforcement manager Doug Leeper, the city's Residential Abandoned Property Program states that violators who fail to maintain properties can be fined up to $1,000 for each day the property remains unkempt. If they don't pay, the city places a lien on the property.

  • Leeper has been contacted by more than 150 cities for help in crafting new legislation to deal with the fallout of homes abandoned during the nation's foreclosure crisis, officials said. Leeper is headed to Washington, D.C., to testify before a U.S. House of Representatives subcommittee about the ordinance [this] week.

Source: Chula Vista Official Lauded For Innovative Foreclosure Ordinance (Leeper Authored Foreclosure Policy Others Now Looking To Emulate).

More On Lawsuits Accusing Some Foreclosing Lenders Of A Role In Ruining Neighborhoods

ABC News and USA Today report:
  • [H]awthorne [Area Community Council] and the city of Minneapolis are pioneers in an emerging civic strategy to sue lenders and banks to recoup lost revenue and reclaim neighborhoods devastated by the mortgage crisis. Around the country, the loss of tens of thousands of homes to foreclosure is shrinking cities' tax base, straining city services such as policing, and ruining neighborhoods. [...] Cleveland, Baltimore and Buffalo also have sued lenders and banks in recent months. St. Paul has written to its lenders threatening a lawsuit if they don't fix their foreclosed properties.

  • "Hundreds of cities across the United States are in the same position," says Greg Squires, a professor of sociology at George Washington University who studies urban redevelopment. "I think there will be more lawsuits. If we get an early decision in one of these cases, it will either encourage or discourage" other cities from filing suit. Alan Mallach, a senior fellow at the National Housing Institute, says the lawsuits are "a bit of a reach under the laws of most states, but & a creative court could reasonably make some law in that direction."

For more, see Cities sue home lenders (Communities Take Banks, Lenders to Court for Failing to Fix Up Foreclosed Homes) (Go here for entire story on one web page). neighborhood destruction from foreclosures zach

Fort Lauderdale SWAT Team Finds Homeowner In Foreclosure Dead From Self-Inflicted Gunshot

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:
  • Police officers and a SWAT team surrounded a Coral Ridge house Thursday night to investigate a weapons complaint and later found the homeowner dead from a self-inflicted gunshot wound, officials said. For more than five hours, police descended on the neighborhood. They attempted to get the man to come out of the house in the 2100 block of Northeast 54th Court, but to no avail, said Sgt. Frank Sousa, Fort Lauderdale police spokesman. After firing gas canisters into the home, the SWAT team went inside and found the man dead at about 11:15 p.m., Sousa said. Police identified the man as Steven R. Decker, 44.

  • County records list Decker as the owner of at least a dozen properties in the Fort Lauderdale area. At least two of them, including the Coral Ridge house, went into foreclosure recently, court records show. On Thursday, Decker received a notice that the Coral Ridge house was to be sold next month at an auction for foreclosed properties, according to the records.

For the story, see Police: Fort Lauderdale man shot himself inside home (SWAT team sent to house over weapons complaint).

In a related story, see ABC News / USA Today: Foreclosures Take an Emotional Toll on Homeowners (Stress, Depression, Suicide Can Accompany the Loss of a Home).

Go here for other posts on foreclosures and suicide.

Go here for other posts on Police stories involving homes in foreclosure. suicide homeowner foreclosure zeta SheriffDeputiesForeclosureAlpha

Saturday, May 17, 2008

Minnesota City Temporarily Slams Brakes On New Rentals

In Columbia Heights, Minnesota, the Minneapolis Star Tribune reports:
  • As more and more foreclosed single-family homes are becoming rental properties, cities are scrambling to deal with all the new "for rent" signs. But one city, Columbia Heights, has simply said, enough. For the next six months, new landlords won't be able to rent their properties because the city has stopped handing out rental licenses.

For more, see Facing foreclosure? Don't count on becoming a landlord (Columbia Heights is putting a six-month halt on new rental applications. Says The city has enough, the mayor says).

Las Vegas Firm Offers Security Services For Vacant Homes / Foreclosures Targeted By Squatters

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • Firefighters still don't know what caused the fire at the old Alystra Casino in Henderson Tuesday night. Businesses in the area tell Eyewitness News it was a well known hang out for vagrants and teens. In fact, these squatters are blamed for destroying unoccupied properties and foreclosed homes across the valley. Now the business community sees a marketing opportunity to deal with the problem.

***

  • [John] Labaum is part of new business the popped up in the wake of the foreclosure crisis. He calls it Squatter Alert. "We go through -- secure the front doors, the garage doors," he said. Labaum's startup company offers security services for foreclosed homes and vacant properties. Instead of a fence or tape, the owners call up Labaum to drive by their properties and keep an eye on things.

For more, see Squatter Alert Seeks to Protect Businesses' Vacant Buildings.

Another Home In Foreclosure Goes Up In Smoke

In Northampton County, Pennsylvania, The Allentown Morning Call reports:
  • A house headed for a mortgage foreclosure sale in two weeks was destroyed by a fire in Wind Gap early Wednesday morning. Borough police, firefighters and a state police fire marshal were looking for the homeowner, Nelson Tittle, and they spent hours sifting through his charred modular home [...] to make certain he was not killed. Shortly before noon, Police Chief Craig Armitage said searchers had not found him.

***

  • Armitage said the cause of the fire has not been determined by state police Fire Marshal Michael Booke. ''As of right now, I'm still marking it as under investigation,'' he said. ''I can't say where he's going to turn up or what his status is.''

For more, see Home headed to foreclosure charred (Fire officials seeking cause of Wind Gap blaze. Resident missing).

Unpaid Self-Storage Bills Causing Many Already Hit With Foreclosure To Lose Their "Stuff"

The New York Times reports:
  • The foreclosure crisis is hitting yet another American locale: the self-storage center. As they lose their homes, people are turning to these humble cinderblock and sheet-metal boxes to store their stuff. But some people cannot keep up with their storage bills any better than they could handle their mortgage payments, and storage companies are auctioning off their property for a pittance.

For more, see Losing a Home, Then Losing All Out of Storage.

Spokane Lawyer Disbarred For Allegedly Looting Trust Accounts Belonging To Kids, Nieces, Nephews; Claims Cash Used In Failed Realty Investments

In Washington State, the Spokesman Review reports:
  • A Spokane businessman, attorney and West Valley School Board member has been disbarred for emptying the trust accounts set up by his grandfather for the education of his nieces, nephews and his own three children. Robert N. Dompier, 53, took over $47,000 from the accounts in what investigators believe was an effort to rescue his failing real estate investments. Dompier agreed to waive a Washington State Bar Association hearing – where he could have presented evidence in his defense – and stipulate to his disbarment without admitting to the charges laid out by the bar disciplinary committee.

For more, see Spokane Valley lawyer disbarred.

Go here for the Stipulation to disbar and the Disbarment order.

Connecticut Insurance Agent Accused Of Ripping Off Elderly Of Nest Eggs

In Waterbury, Connecticut, WFSB-TV Channel 3 reports:
  • A Waterbury couple claims that their insurance agent and financial advisor stole their life savings. Michael and Elizabeth Santopietro said that they trusted Tom Cipriano to help them invest their funds, but said that he took the money and spent it. The I-Team uncovered allegations that Watertown's Cipriano has taken hundreds of thousands of dollars from elderly investors.

***

  • The I-Team uncovered a lawsuit filed by the estate of Elizabeth Karas-Bartolini. The suit claims that the cancer patient was convinced to make a $25,000 investment loan to Cipriano in 2006. Her lawyer said that she died without collecting any of the promised $500 monthly payments.

  • Donato Mancini said that Cipriano convinced him to empty his IRA in return for a promise of 12 percent interest. He said he hasn't seen his money since. Mancini's attorney called Cipriano "immoral, oppressive and unscrupulous."

  • [Cipriano's attorney, Alfred] Morrocco said that all of the loans were financial transactions among friends, although when the I-Team pressed, he admitted that he didn't know how Cipriano knew any of the people who loaned him money.

  • That question is answered in the lawsuit filed by 92-year-old James Frawley and his 91-year-old wife, Eleanor. They said they had never heard of Cipriano when he called out of the blue and convinced them to loan him money.

For more, see Insurance Agent Accused Of Stealing Nest Eggs (I-Team Uncovers Years Of Allegations).

For story update, see Attorney General Picks Up I-Team Report (Blumenthal Launches Investigation Into Financial Adviser).

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

Friday, May 16, 2008

Foreclosure Services Firm Targets Wrong Home; Locks Changed, Valuables Missing, Home In Disarray

In Stockton, California, KXTV Channel 10 reports:

  • Ruth Anderson came home to a mess after work recently. Somebody had turned her condo unit upside down, taking valuables and leaving the place in disrepair. "It was horrible. They took everything they needed or wanted," said Anderson. She called police. At first, Anderson couldn't get in because locks were changed and a notice left behind. The notice said her unit had been purchased by a bank at a foreclosure auction. "I'm not in foreclosure, I bought my home outright years ago," Anderson said.

  • She was right. A company representing Homecoming Financial entered the wrong unit. It was supposed to inspect and re-key unit number 232. Instead went to unit 2 where Ruth Anderson lives. Field Asset Services (FAS), a national company working with banks to prepare foreclosed homes for sale, admitted fault, yet could not explain why valuables were taken from Anderson's condo. An investigation is underway. FAS is now trying to work with Anderson to settle her claim. Calls to FAS in Austin, Texas were not returned to News10 on Thursday.

To see the damage left in the propery owner's home, see Foreclosure Targets Wrong Home (watch video) (read story) (links no longer available).

Go here for other posts on foreclosure services companies who have improperly change locks, remove belongings, etc. ForeclosureLockOuts

Fort Myers Homeowner Accuses Friend Of Obtaining Deed By Deception In Foreclosure Rescue

In Fort Myers, Florida, The News Press reports:
  • Just like 13,571 other mortgages in Lee County, Valerie Hamilton's was behind. But Hamilton thought she was in luck when her friend of 22 years, Beverly Harris, said Harris' husband Robert could help Hamilton avoid foreclosure. Robert Harris said the first step would be to take Hamilton's ex-husband's name off the deed. So he took Hamilton to an attorney, where she signed a form to start that process.

  • According to Lee County Clerk records, the same day that Hamilton signed an agreement for legal services, she also signed a quit claim deed for her east Fort Myers home. "I was signing to get my husband's name off. ... Never did anyone say, 'You're quit claiming the house to the Harrises," Hamilton said. But three days after her ex-husband's name was taken off the deed, the Harrises filed a quit claim.

  • Hamilton said she came home from work to find her belongings in the yard and men inside doing renovation work. Hamilton said Beverly Harris said she was sorry, but that the Harrises owned her house.

For more. see Beware mortgage ‘rescuers’.

Condo Associations Struggling To Pay Bills In Some Markets

The New York Times reports on the struggles that condo associations are having paying the bills in some parts of the country. The problems of two buildings in Miami, Florida are described in this story, which reinforces the fact that for condo owners, a neighbor's financial problem may well become your financial problem.

In one glassy new Miami tower:
  • [N]early one in six residents in the 43-story building is battling foreclosure and their contributions to the building association are shrinking. Each of the remaining owners has had to chip in an extra $1,000 assessment and $50 more a month for cable and Internet. That is on top of [the unit owners'] $450 monthly maintenance fee. Even though [they pay] more, [the] building has broken washers and dryers and unusable exercise equipment, and [the] hallway is spotted with mold.

In another building:

  • [T]he 38 foreclosures in [the] 244-unit building and the unpaid dues nearly cost the residents running water because the building could not pay its bills. The building abruptly stopped repairing its ceiling lobby and left its wiring and ducts exposed when the board ran out of money.

For more, see Collateral Foreclosure Damage for Condo Owner.

In a related story, see The Wall Street Journal: As Dues Dry Up, The Neighbors Pay (if link expires, try here).

NJ Couple Face State Charges In Alleged Foreclosure Investment Scam; Seven Bilked Out Of $1.2M, Says Prosecutor

In Monmouth County, New Jersey, The Star Ledger reports:
  • A Long Branch husband and wife have been indicted on 26 counts of theft by deception, tax evasion and other charges in connection with a $1.2 million investment scam and other illegal activities, authorities said today. A Monmouth County grand jury returned the indictment Monday against Larry Kushner, 56, and his wife, Jacqueline Kushner, 43, Monmouth County Prosecutor Luis Valentin said.

***

  • An investigation by the prosecutor's office and state tax officials showed Larry Kushner bilked seven investors out of $1.2 million from 2000 through 2005, Valentin said. Larry Kushner told investors the money they invested in his company, Foreclosure 911, would be used to purchase foreclosed properties in New Jersey, Pennsylvania or Delaware, the prosecutor said. Instead, he used their money for personal expenses, including several trips for himself and his family to Florida and Israel. Jacqueline Kushner served as president of Foreclosure 911, and much of the stolen money was diverted directly to her, Valentin added.

For more, see:

Disbarred Attorney Charged With Pocketing Clients' Escrow Money From Real Estate Closings

From the Monmouth County, New Jersey Prosecutor's Office:
  • On May 5, 2008, a Monmouth County Grand Jury returned a one count indictment charging Gary Edelson, 47, of Red Bank, N.J., with second degree Misapplication of Entrusted Property.

  • A criminal investigation conducted by the Monmouth County Prosecutor's Office revealed that between August 2003 and November 2005, Edelson, an attorney, failed to properly disburse over $200,000 in funds he held in escrow from fifteen separate real estate closings. On September 27, 2006, the New Jersey Supreme Court ordered Edelson's disbarment from the bar of the State of New Jersey. Additionally, over $170,000 in claims have been paid from the New Jersey Lawyers' Fund for Client Protection.

  • Monmouth County Prosecutor Luis A. Valentin stated, "Edelson violated the fiduciary duty he owed his clients. As a result, he has forfeited his privilege to practice law in the State of New Jersey and he now faces serious criminal charges."

For more, see Former Red Bank Lawyer Indicted for Misapplication of Over $200,000 from Client Funds.

If a New Jersey attorney is representing you and screws you out of money or property through dishonest conduct, go to the New Jersey Supreme Court's Lawyers' Fund for Client Protection for more information.

For other states and Canada, see:

Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. sneaky slick escrow agents gamma

Riverside County Approves Ordinance Requiring Mortgage Lender Registration, Maintenance Of Homes In Default

In Southern California, The Press Enterprise reports:
  • Riverside County supervisors unanimously approved an emergency ordinance Tuesday requiring financial institutions to maintain homes that have fallen into foreclosure. Supervisor Marion Ashley was not present at Tuesday's meeting. Jay Orr, head of county code enforcement, said his office would work with the assessor to identify major lenders in the county, notifying them that they must register properties in default with the county. County supervisors said neighborhoods with homes in foreclosure are seeing declining property values and criminal activity in the empty homes. The ordinance went into effect immediately.

Source: Foreclosed homes must be maintained.

Thursday, May 15, 2008

Federal Judge Allows Shareholder Suit Against Countrywide To Continue

The New York Times reports:
  • Directors and officers of Countrywide Financial, the beleaguered mortgage lender, must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company’s collapse, a federal judge in California has ruled. Rejecting the arguments of Countrywide executives and directors that they were unaware of lax loan operations that led to ballooning defaults, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles ruled Tuesday that she found confidential witness accounts in the shareholder complaint to be credible and that they suggested “a widespread company culture that encouraged employees to push mortgages through without regard to underwriting standards.”

For more, see Judge Says Countrywide Officers Must Face Suit by Shareholders.

Schumer Asks FTC To Join Countrywide Probe

In Washington, D.C., USA Today reports:
  • A top Senate Democrat on Wednesday asked the Federal Trade Commission to join other government and court agencies investigating Countrywide Financial, (CFC) the nation's largest home mortgage lender. Sen. Charles Schumer, D-N.Y., chairman of the Senate Subcommittee on Administrative Oversight and the Courts, made the request based on what he called "an emerging pattern of apparent misconduct" in Countrywide's treatment of borrowers who seek bankruptcy-court protection.

For more, see Senator wants FTC to join Countrywide investigation.

Feds File Civil, Criminal Charges Against Promoters In Alleged "Ponzi-Like, Foreclosure Reinstatement" Scam

In Los Angeles, California, the U.S. Securities & Exchange Commission announces:
  • The Securities and Exchange Commission [Wednesday] filed securities fraud charges against the promoters of an $18 million real estate investment scheme targeting the African-American community in the Los Angeles area and other locations in Nevada and Georgia.

  • The SEC's complaint, filed in U.S. District Court in Los Angeles, charges Jeanetta M. Standefor, a 40-year-old resident of Altadena, Calif., and her Pasadena, Calif.-based company Accelerated Funding Group (AFG) for operating a fraudulent "foreclosure reinstatement" scheme that attracted more than 600 investors between 2005 and 2007. The scheme purported to use investors' funds to cure defaults on distressed properties owned by others. The SEC alleges that while soliciting investor money and promising returns of up to 50 percent within 30 to 45 days, Standefor and AFG were instead operating a Ponzi-like scheme that used money from new investors to pay previous investors. Standefor also used more than $1.9 million of investor funds for personal expenses such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment events, and home renovations. Standefor and AFG also misused investor funds to pay $121,000 in "consulting fees" to Standefor's husband, Darrell R. Dansby.

  • In a related action [...], the U.S. Attorney's Office for the Central District of California announced that Standefor was arrested by special agents with the Federal Bureau of Investigation on criminal charges related to the AFG offering. [Tuesday], a federal grand jury in Los Angeles returned an 11-count indictment charging Standefor with wire fraud, mail fraud, and money laundering.

For more, see SEC, U.S. Attorney Charge Promoters of Real Estate Scheme Targeting African-American Community.

Brooklyn Feds File Indictment In Alleged $44M Fannie Ripoff Of Refi Proceeds

The U.S Attorney's Office In Brooklyn, New York announced last week the filing of an indictment charging Leib Pinter and Barry Goldstein, two former principals of Brooklyn-based mortgage lender, Olympia Mortgage Corporation, with conspiracy, wire fraud, and bank fraud. From the press release:
  • The indictment charges two fraudulent schemes. In the first, Pinter is charged with fraud in connection with the theft of $44 million of payoff proceeds for refinanced mortgage loans funded by Fannie Mae and serviced by Olympia. In the second, Goldstein is charged with fraud in connection with Olympia’s sale of a portfolio of non-performing mortgage loans to Credit Suisse First Boston using falsified loan histories.

For more, see Two Former Principals Of Olympia Mortgage Indicted On Conspiracy, Wire Fraud, And Bank Fraud Charges.

Unwitting Buyer Of Home Used As Meth Lab Wins Lawsuit Against Broker, Seller; Court Orders Rescission, Damages, Attorney Fees

In Tacoma, Washington, a state appeals court recently affirmed damages and court costs on against a real estate agent and brokerage firm for selling real property contaminated by the operation of an illegal meth lab without disclosing that fact to an unwitting home-buying couple, but reduced the award to damages assigned to the home seller for the cost of the mortgage.

A husband and wife purchased an area home and moved in with their family. Unbeknownst to them, the home had recently been the site of a police enforcement action, in which both a meth lab operation and marijuana grow house operation were broken up. The occupants in the house, tenants who were renting the home, were arrested. The owner (home seller) and the real estate agent who eventually sold the home to the home-buying couple were aware of the incident prior to the sale.

Subsequent to moving into the home, the couple's son informed his parents that he learned from someone in the community that the home had been a known drug house. After confirming this fact with police, the couple contacted the local health department, which apparently had no record of any report that the home had been used to manufacture methamphetamine.

Upon determining that the home was contaminated, the health department prohibited use of the property, stated that the couple was financially responsible for the cost of remediation, directed that a certified decontamination contractor would have to perform the remediation, and that use of the property was subject to criminal charges. The couple ultimately sued the home seller, real estate agent, and the real estate brokerage employing the agent.

At the end of the lawsuit, which spanned about two years, the home seller was required to take back ownership of the home, refund the purchase price, pay the accumulated unpaid interest on the couple's unpaid mortgage, late fees and related foreclosure costs incurred by them, who were unable to keep up the mortgage payments after the health department declared the home uninhabitable and ordered the family to vacate the premises. They were also awarded actual and punitive damages.

Among the actual damages incurred by the couple was the loss of all of their personal belongings, including clothing, bedding, furniture, keepsakes, and other necessities as the health department told them they could not remove their personal property from the house because of the risk of cross-contamination. They were also awarded damages for loss of income, damage to credit rating, emotional distress, and litigation expenses.

In addition, the couple's attorney, who represented them on a contingency fee basis, was awarded a legal fee of approximately $140,000, a charge to be imposed on the losing defendants (ie. the home seller, real estate agent, and real estate brokerage firm) in the lawsuit. The fee was based on 800+ hours logged in by the attorney in litigating the case over a 24 month period, and reflected the application of a contingency fee risk multiplier of 1.2.

For all the facts in the case, as set forth in the court decision, see Bloor v. Fritz, et al., No. 35740-2, Wash. App. Ct., Div. II; April 1, 2008 - courtesy of Findlaw.com, free registration may be required).
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In a related story, see The National Law Journal: Meth Lab Residue in Homes Triggers Litigation (Lawsuits over contaminated homes focus on failure to disclose issue).

Go here and go here for other posts on home-based methamphetamine labs. meth lab yak

More Bellyaching Over NY AG's Appraisal Code; Differing Perspectives Of Those With Significant Economic Interests "Not Surprising," Says Cuomo

In Albany, New York, The Albany Times Union reports:
  • New York Attorney General Andrew Cuomo is rocking the home appraisal industry -- and not just in his home state. Cuomo has successfully pushed a "home valuation code of conduct" that will apply nationally and could affect the price paid for real estate. Independent appraisers say it will affect them, too. "This is the straw that broke the camel's back," said Bob La Belle, owner of La Belle Appraisal Group in Clifton Park. "It's not economically feasible for me to stay in business anymore."

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  • Cuomo trumpets the agreement as a triumph for consumers. Reaction from the banking and mortgage industries has been strongly negative. And earlier this month, the federal Office of Thrift Supervision said the process leading to the agreement was "flawed" because it did not allow for input from lenders or federal regulators.

  • Groups like the American Bankers Association and the Mortgage Bankers Association have even accused Cuomo of a power grab that allows New York "to unlawfully exercise authority that resides exclusively in the federal government."

  • Cuomo, though, said reaction to the code has been overwhelmingly positive, and says the reaction from industry was predictable. "The agreements with Fannie Mae and Freddie Mac ... are groundbreaking and require real structural change in the industry," Cuomo said in a statement. "So it is not surprising that current industry participants, many of whom have significant economic interests of their own at stake, have differing perspectives."

For more, see Appraiser: Cuomo plan for code is too costly (Effort to end inflated values for home loans also draws criticism from bankers, mortgage lenders).

Go here for other posts on the NY AG's appraisal code of conduct agreed to and accepted by Fannie Mae & Freddie Mac.

Foreclosure Evictions Resulting In "Tidal Wave Of Displaced Tenants" In Southern California

In Southern California, The Orange County Register reports:
  • [W]hat began as a trickle last year is rapidly turning into a tidal wave of displaced tenants as Orange County foreclosures hit new records. [...] Brenda Magana, a housing specialist at the Fair Housing Council of Orange County, says the problem is snowballing. "Last year we were seeing three or four tenants (facing foreclosure) a month," she says. "Now we're seeing three or four a day."
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  • [California] Tenants do have some rights in these cases. A lender who foreclosed cannot require a tenant to move within 72 hours, say[s local real estate attorney Jon] Janecek. That three-day notice only applies to the former property owner. [California] Tenants must get at least 30 days to move.

  • Don Readinger, a broker and manager of two South County real estate offices and who manages 100 rental properties, says the biggest problem is with out-of-state lenders who don't know the 30-day notice requirement under California law. "They try to intimidate the existing tenants," says Readinger, who is president of the Orange County Association of Realtors.

For more, see House/condo renters latest victims of foreclosure crisis (People renting homes, condos and townhouses find themselves out on the street after the owners fail to pay the mortgage).

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