Florida Foreclosure Rescue Firm Unravels As Authorities Arrest One; Two Others Flee; Alleged Supporting Cast Face Civil Suits

In Central Florida, the St. Petersburg Times reports the latest story on now-defunct foreclosure rescue operator 4 Solutions and the financial mess a number of its homeowner/clients find themselves in. To date, one individual has been charged with crimes by local Tampa cops, two others have fled, and there are a number of ongoing civil suits targeting the 4 Solutions principals and others allegedly involved in equity stripping, foreclosure rescue transactions. A federal investigation by the Secret Service is also currently ongoing.

• [T]hings started unraveling when Tampa police got a tip about 4 Solutions last summer. In August, they arrested Carmen Oliveri, the wife of 4 Solutions director Jose Oliveri, after she accepted a check from a 4 Solutions client at his Tampa home. Carmen and Jose Oliveri entered into a scheme to defraud the homeowner by presenting loan terms without disclosing that he was signing over his Tampa home, an arrest report states. Carmen Oliveri is facing grand theft and fraud charges. Her attorney, Frances Perrone, declined to comment.

• Jose Oliveri and Mario Quiroz, the director of Frontier Capital, have been harder to track down. They stopped replying to lawsuits early last year and summonses served to their Seffner homes came back. They're probably in Peru, attorneys and homeowners say.

Reportedly, closing documents showed that almost $30,000 went to 4 Solutions' Coral Gables law firm, Scaglione & Quesada, in one transaction.

• Todd Mackey, an attorney for several homeowners who entered into deals with 4 Solutions, said he has seen other closing documents with that same instruction that gives tens of thousands of dollars to the law firm.

Reportedly, some homeowners claim that 4 Solutions slipped sale documents into their paperwork and other times, it has been alleged that employees forged signatures or falsely notarized documents.

For more, see Homeowners find big problem in 'Solutions'.

Go here for earlier posts on 4 Solutions.

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

Central Florida Attorney Charged With Theft Of Client's Foreclosure Sale Surplus Proceeds

In Central Florida, the Ocala Star Banner reports on the experience of a couple who lost their home in a foreclosure sale where, apparently unbeknownst to them, the sale price at auction exceeded the amount due to the foreclosing lender by $36,000 - an amount that rightfully belonged to the couple:

• After the foreclosed home was sold, the $36,000 in surplus equity was held by the Marion County Clerk of the Court Registry. In January 2007, [foreclosed homeowner Nicolas P. Cabrera Jr.] received a letter from Citivest Group, LLC in Apopka, telling him that they had found his money in a records search and offered to recover the money for him for a fee. Cabrera signed a contract with Citivest in June. Citivest then hired [Orlando attorney Norman Sanders] Moss to recover Cabrera's money.

***

• In December 2007, Cabrera received a letter from Moss stating that, after signing an affidavit, Cabrera would receive a check for $31,453.10. That would be the balance owed to Cabrera after Citivest was paid its $4,289.06 fee and Moss was paid his $789.86 fee. Cabrera signed the affidavit and returned it to Moss. But the $31,453.10 check never materialized.

***

• In the meantime, Citivest filed a civil suit and, on April 16, received a $320,381.97 final judgment against Moss. Moss allegedly has absconded with more than $107,000 from four Citivest clients, including Cabrera.

***

• Moss was arrested and charged with grand theft, a second-degree felony. He will be arraigned June 20 in an Orange County courtroom. Also, at the request of the Florida Bar Association, the Florida Supreme Court granted an emergency suspension of Moss' license. The final hearing on Moss's law license is scheduled for June 6 at the Seminole County Courthouse.

For more, see Couple says lawyer took their money.

Second Lien Holders Feel The Pinch As "HELOC Hell" Begins To Spread

Financial Week reports:

• As the housing market continues to deteriorate, problems for lenders and insurers are spreading from first-lien mortgages to home-equity lending. Those who engage in this form of lending have a weaker claim on collateral, and so face a greater risk of loss. As a result, this development promises to throw cold water on claims that the credit crisis is abating.

For more, see Now lenders are facing HELOC hell (Second-lien creditors have a greater risk of loss, so credit crisis may not be abating after all).

Financial Pinch Being Felt Amongst The Wealthy As Some Struggle To Maintain Appearances

In New York City, The New York Times reports on the apparently devastating problems being felt by some amongst the wealthy caused by recent financial struggles:

• One of [Manhattan divorce attorney Nancy Chemtob's] clients recently confessed that his net worth had decreased to $8 million from more than $20 million, and he thinks that his wife will leave him. He has hidden their fall in fortune by taking on debt to pay for her extravagant clothes and vacations.

• Hairstylists and private jet rental companies say the wealthy are cutting back on luxuries like $350 highlights and $10,000-an-hour jet rentals.

• “Even if they’re not in danger of not paying their mortgage, there’s still a psychological change,” said Chris Del Gatto, chief executive of Circa, which has watched its business jump by 50 percent in the last year as wealthy clients sell their spare diamonds and Rolexes.

• Some older couples, he said, are selling estate jewelry to help support their children who have lost Wall Street jobs. Bankers are paring down their collections of Patek Philippe watches. Wives from Greenwich and Scarsdale are selling 2-carat to 35-carat single-stone diamond rings. One recent client explained to Mr. Del Gatto that she was selling $2 million in diamonds she rarely wore, because her friends wouldn’t notice that they were gone. “She said, ‘If I sold my Bentley or my important art, they would notice,’ ” he said. “That we hear, in differing examples, every day.”

• One New York real estate developer cut his budget to less than $250,000 a year from $1.5 million a year. “A year ago, he would have only flown Gulfstreams,” [Justin Sullivan, managing director of Regent Jet, which leases private airplanes] said. “Now it’s moving to the point where he’s flying Beech jets and Learjets.”

For more on the devastating effects of the recent financial downturn being felt by the wealthy, see It’s Not So Easy Being Less Rich.

Non Profit Law Firm Continues Free Legal Clinic Reviewing Loan Document Making Referrals For Predatory Lending Victims

In Watsonville, California, the Register-Pajaronian reports:

• The Watsonville Law Center will offer a free legal advice clinic today between 4:30 and 6:30 p.m. The clinic is for low-income clients who believe they have been victims of predatory home loans and now face mortgage foreclosure. Clients must call WLC and make an appointment ahead of time to attend the clinic and meet with one of the three volunteer attorneys.

• The goal is to help homeowners identify any legal claims and remedies, and evaluate any options regarding their homes. After the lawyers review documents, they will refer clients to appropriate resources, including law enforcement, if they have been victims of predatory lending and fraud.

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

For the story, see Mortgage foreclosure legal advice clinic meets today.

Go here for more on the WLC Predatory Mortgage and Mortgage Foreclosure Clinic.

Hawaii Feds Indict Five In Alleged Straw Buyer Foreclosure Rescue Scam

In Honolulu, Hawaii, the Honolulu Advertiser reports:

• Five people have been indicted on federal charges in a scheme in which they allegedly profited from home mortgage loans that were obtained by falsifying applications, court documents show. An indictment handed down May 15 and unsealed the next day alleges that John Gilbert Mendoza, Antonio Alcantara Jr., Ira Altwegg, Albert A. Alimoot Jr. and Evan M. Koizumi illegally obtained more than $400,000 from lenders after securing mortgage loans under false pretenses. They have been charged with conspiracy to commit mail fraud, wire fraud and making false statements on loan applications.

***

• The [alleged] schemes began when Mendoza and unidentified co-conspirators found homeowners in financial trouble facing possible foreclosure, the indictment said. According to the indictment, the defendants pitched the distressed homeowners a plan that would allow them to stay in their home while making money in exchange for "the owner's acquiescence in a sham real estate sale." The owners agreed to transfer the deed of the properties to the defendants.

• Separately, Mendoza allegedly recruited "straw buyers" of the properties, promising them cash if they would agree to fill out fraudulent mortgage applications. The indictment defines straw buyers as "a third party who is willing to purchase a property without any intent to occupy the property." Alimoot and Koizumi agreed to act as straw buyers and lied on loan applications by misrepresenting their income, the indictment said.

For more, see Five indicted in Hawaii mortgage scam (Suspects get $400K in mortgage scheme; FBI gets 5 indictments).

See also:

• KHON-TV Channel 2: Mortgage scammers caught in federal sweep,
• Star Bulletin: Mortgage fraud crackdown (More than 80 people in Hawaii's mortgage loan industry are under FBI investigation. Five have already been indicted).

To view the charges, see Indictment - U.S. v. Mendoza, et. al.

Lying On Loan Application Not A Bar To Mortgage Debt Discharge Where Negligent Bank Fails To Follow Its Own Lending Guidelines, Says Bankruptcy Judge

In Oakland, California, The Wall Street Journal reports:

• In a ruling that backs borrowers even when they have lied on loan applications, a federal bankruptcy judge held that borrowers who inflated their income to get a loan don't have to pay back a bank because the lender should have noticed a "red flag" about the deceit. The case, which the Oakland, Calif., judge called "a poster child for some of the practices that have led to the current crisis in our housing market," places responsibility on the lender for vetting information in loan applications.

With respect to the falsely inflated income figures contained in the borrowers' loan application:

• [T]he judge said that the income figures "would alert the reasonably prudent lender of the possibility that the information was inaccurate" and that the bank didn't follow its own guidelines, which required that it "evaluate the reasonableness of the stated income based on job type, tenure, and geographical location among other things."

For more, see Are Borrowers Free to Lie? (Lender Held Responsible for Vetting Data on Home Loan); (If the link doesn't go to the full story, then go here - then click link for the full story; you may also have to click the "Refresh" button on the web page to get to the story).

For the judge's written decision, see National City Bank v. Hill (in re Hill), Case No. 07-41137; A.P. No. 07-4106 AT (May 23, 2008).

Arizona Foreclosure Rescue Operator Ordered To Pay $1.2M In Home Sale, Leaseback Program

In Phoenix, Arizona, KTAR-Radio 92.3FM and 620 AM reports:

• A Phoenix company and its owner have been ordered to pay $1.2 million in restitution and penalties for violating the Arizona Consumer Fraud Act by claiming they could help homeowners who were behind in mortgage payments avoid losing their homes. Maricopa County Superior Court Judge Edward Burke ruled against Virtual Realty Funding Co. and Kenneth D. Perkins in a consumer protection lawsuit filed in 2005 by the Arizona Attorney General's Office.

***

• ''This case represents the worst in our community,'' said [Arizona] Attorney General Terry Goddard. ''This company took advantage of homeowners desperate to save their homes from foreclosure and deceived them into turning over their homes.''

***

• According to court documents, although neither VRF nor Perkins were licensed by the Department of Financial Institutions as mortgage brokers or bankers, VRF loaned money to more than 60 homeowners facing foreclosure or in need of money. VRF designed its loans, which it called reverse sales, to evade laws protecting mortgage borrowers by structuring them as an outright sale of the property by the borrower, who then rented back the home with an option to repurchase it. [...] If homeowners were late on a rental payment or unable to repay the loan and funding fee within two years, they could lose their homes and any equity in them.

For more, see Realty firm ordered to pay $1.2 million for mortgage scam.

From the Arizona Attorney General's Office:

• Court Judgment - State of Arizona v. Virtual Realty Funding Company LLC, et al.,
• Court Orders Realty Firm to Pay $1.2 Million for Violating Fraud, Banking Laws,
• Terry Goddard Files Fraud Suit Against Virtual Realty.

Bankruptcy-Based Foreclosure Rescue, Fractional Interest Deed Transfer Scams Finding Their Way Across The Country

In Kansas City, Kansas, The Kansas City Star reports:

• Federal investigators in Kansas are trying to derail a foreclosure scam that began in California and is sweeping the United States using bogus bankruptcies to dupe homeowners and lenders. The scams take advantage of the fact that a bankruptcy automatically delays home foreclosures, which are at record levels.

***

• The Department of Justice is investigating at least nine suspicious bankruptcies filed recently in bankruptcy courts in Kansas City, Kan., Topeka and Wichita, The Kansas City Star has learned. Kansas officials confirmed the federal investigation but declined to discuss it in detail. Bankruptcy officials in Missouri said they were aware of the scam and were reviewing court filings carefully. So far, they have not seen signs of the fraud. But legal experts said the phony filings also are turning up in Maryland, Nevada and Texas. They suspect it is just a matter of time before more are discovered in other states.

***

• Generally, the fraud works like this: Scammers approach people facing foreclosure and offer to save their property for an upfront or monthly fee. They persuade the homeowner to assign them a legal interest in the property. Then the scammers — often without the homeowner’s knowledge — transfer fractional shares in the property, often 5 percent or less, to third parties. These third parties are usually fictional, investigators say, although in some cases the scam artists have recruited homeless individuals. They then file bankruptcy petitions in the names of these third parties. Sometimes, as in the Kansas cases, it is in courts thousands of miles from where the property is located.

For more, see Foreclosure rescue scam makes its way to Kansas.

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.

Northern Florida Attorneys Form Group To Assist Homeowners Facing Foreclosure Due To Dishonest Lending Practices

In Nassau County, Florida, the Fernandina Beach News Leader reports on the efforts of local attorneys Dan McCranie and John Taylor in setting up a free program to help homeowners victimized by mortgage fraud.

• [I]n an effort to educate other attorneys in Nassau County on how to identify victims of mortgage fraud, McCranie contacted Lynn Drysdale, a Jacksonville consumer protection attorney. Along with Taylor, they have been putting together a program that will offer free services to people who are in foreclosure due to dishonest lending practices.

***

• McCranie said the free foreclosure program would be "a primer on what attorneys should look for, and what to look at." There are now at least 15 local attorneys on board with the program, McCranie said, a large number of them specializing in real estate. [...] "I think quite frankly they've seen our enthusiasm and want to be part of it," he said. "There's a hell of a lot you can do with foreclosures."

According to the story, McCranie, a personal injury attorney in Fernandina Beach, was unfamiliar with real estate law when he initiated the effort when an 83 year old woman, suffering from glaucoma and cataracts and who was nearly blind, walked into his office and informed him that her home of close to sixty years was scheduled for foreclosure sale in less than a week. A review of her documents indicated to him that the woman had been the unknowing victim of unscrupulous lending practices. McCranie called in Taylor and, together, they stayed the foreclosure sale, sued the mortgage company and the broker who falsified the loan documents, and are now efforting an attempt at settling the case.

For more, see Keep foreclosure at bay from the unscrupulous.

Recent Seminar Guides New York Attorneys On "Truth In Lending" Issues In Home Foreclosure Defense

In Poughkeepsie, New York, a legal seminar in defending home foreclosures was held last week by a senior consumer attorney at the Empire Justice Center in Albany, that covered some of the legal tools provided by the federal Truth in Lending Act. For more, see Seminar for lawyers addresses foreclosure.

Minnesota Governor Vetoes Bill Providing One-Year Moratorium On Home Foreclosures

In Minnesota, My Fox TV Channel 9 reports:

• As forewarned, Gov. Tim Pawlenty vetoed the Minnesota Subprime Borrower Relief Act Thursday, citing a negative impact on the credit market and a potential clash with the constitution.

For more, see As Warned, Pawlenty Vetoes Mortgage Relief Bill.

Network Of Recruiters With Connection To Organizations Of Trust Used To Target Scam Victims

Last week, law enforcement officials in California arrested a five person ring on charges of conspiracy and grand theft for allegedly running a foreclosure rescue scam.

The North County Times reports that, according to division chief for economic crimes Michael Groch at the county district attorney, scam artists often operate in organizations of trust; and officials are trying to piece together a network of recruiters used to net the troubled homeowners allegedly targeted by this group.

• Groch, the district attorney division chief, said fraudulent schemes routinely employ a network of recruiters who will use organizations that people feel comfortable with, such as churches, baseball teams or Boy Scout troops, to ensnare victims. "Oftentimes they will utilize their trust, and for a lot of people, that's their faith," Groch said. "There's plenty of good services promoted at church. But just because you hear about something in a church environment, you shouldn't give it any additional credence."

For more, see Churches used to ensnare foreclosure victims, officials say (One recruiter says scheme was legitimate).

States With Laws On Foreclosure Rescue On The Increase

Stateline.org reports:

• States are leading the effort to help homeowners avoid these scams; at least 18 states have laws banning foreclosure-rescue scams by limiting some of practices that lead to them, and six of them — Idaho, Maine, Nebraska, Oregon, Virginia and Washington — enacted laws just this year, according to the National Conference of State Legislatures.

For more, see States act to stem foreclosure scams.

A Connection Between World Savings' Bad Loans & Bay Area Blight?

In Oakland, California, CBS 5 reports:

• It was one of the Bay Area's most trusted banks. Now some consumer advocates question its lending practices in certain East Bay neighborhoods. The bank was World Savings, bought by Wachovia in mid-2006. They were a popular lender. But now some advocates want to know why so many of their loans were made in some of Oakland's low-income minority neighborhoods.

• "It's very frightening, it's upsetting," said Annie McKenzie. "Our neighborhoods are becoming blight because of all the foreclosures," said Diane Busby. Welcome to zip code 94621, where homes are going vacant and residents are uneasy.

For more, see Bank Facing Questions Over E. Bay Mortgage Lending.

City Of Fort Lauderdale Accused Of Race-Based Selective Code Enforcement Against Homeowners

In Fort Lauderdale, Florida, the South Florida Times reports:

• A controversial program that fines and forecloses on unkempt properties in poor, predominantly black neighborhoods continues to draw fire from the homeowners and their attorneys. A lawsuit filed earlier this month alleged that the city violated the constitutional right of a property owner to due process under the law.

***

• City officials have said in published reports that they are simply enforcing laws designed to improve the appearance of neighborhoods in the city. [...] Legal Aid [Service of Broward County, Inc.] and the plaintiffs in the latest lawsuit, [...] , say the city unfairly targets black homeowners. The suit argued that the city’s foreclosures for unpaid code-enforcement fines are really an effort to remove people from their homes and make way for redevelopment.

For more, see Legal Aid challenges foreclosures. race bias predatory lending

Tenant Stuck In Middle Of Dispute Between Landlord Facing Foreclosure & Homeowners' Association; Refused Pass To Access Front Gate

In Palm Beach County, Florida, WPEC-TV Channel 12 reports:

• A Riviera Beach woman is caught in the middle of a dispute between a homeowners association and the condo owner she rents from. Kateshia Johnson is a single mom with four small kids. She rents a condo from a private individual at Thousand Oaks, a gated community [...]. She says the person who owns the condo at Thousand Oaks is going through foreclosure, and has stopped paying the association dues and mortgage.

• Because of that, Kateshia says the homeowners association won't issue a bar code decal for Kateshia's car to access the front gate. That means they won't let her car in and she and her kids have to park it outside the gate at Thousand Oaks and walk to and from their condo everytime they want to go somewhere. She has four children between the ages of twelve and three, and they live about three blocks from the gate.

For more, see Tenant Caught in the Middle.

19 Elderly Residents Face Threat Of Eviction As Lender Forecloses On Michigan Assisted Care Home

In Traverse City, Michigan, the Traverse City Record Eagle reports:

• Fears of eviction prompted tears and uneasiness for some local elderly assisted-living home residents, as well as for their friends, family and caretakers. French Manor Inn on Seventh Street was foreclosed this week after Irwin Union Bank rejected the business' restructuring plan under Chapter 11 bankruptcy. Owner Trish Gilroy hopes an interested buyer will purchase the facility and prevent it from closing. "I'm worried about how they're going to adjust to transition," Gilroy said of the 19 residents. "These people are fragile; there are a lot of women here in their 90s."

For more, see Assisted-living residents may face eviction.

June 1, 2008 update:

For story update, see WPBN-TV Channels 7 & 4: Assisted living home remains open (French Manor was set to close but after an emergency hearing on Friday, it's doors will remain open). Assisted Living

Some Homeowners In Foreclosure Loot Fixtures, Improvements Before Walking Away

Phoenix Business Journal reports:

• Some homeowners facing foreclosure are selling everything they can in their houses before the bank comes calling -- even the kitchen sink. Distressed, cash-starved homeowners are hawking everything from cabinets, kitchen and bathroom fixtures, and hardwood flooring to pool pumps, air conditioning units and water heaters before they lose their houses to foreclosure.

• Dozens of ads for such sales are posted on Internet classifieds such as Craigs­list. One ad from Goodyear offers 1,600 square feet of hardwood flooring for $500 and cherry cabinets for $10,000. Other ads ask $5,000 for maple cabinets that the seller says are worth $14,000, and $225 for a water heater.

Source: Pre-foreclosure homes gutted by owners seeking cash.

The Stresses Of A Housing Counselor On Front Lines In Foreclosure Fight

In Philadelphia, Pennsylvania, Philadelphia Weekly reports on the stresses experienced by a newly trained housing counselor who is working for a national non-profit group helping people save their homes from foreclosure.

• [O]fficially, the job of a housing counselor is to mediate between lenders and homeowners, always with the goal of averting the foreclosure. Unofficially, they’re part therapist, part best friend, part rescue worker. A day’s work involves calming down panicked homeowners, asking uncomfortable questions about finances and making pleading phone calls to unsympathetic lenders—knowing all the while the clock is ticking toward every foreclosure’s final destination, a sheriff’s sale.

For more, see “I’m All They’ve Got" (Dealing with the stress that comes with counseling people who could lose their home).

Military Town Foreclosure Rate Increase Quadruple U.S. Rate?

Bloomberg News reports:

• In the midst of the worst surge in mortgage defaults in seven decades, foreclosures in U.S. towns where soldiers live are increasing at a pace almost four times the national average, according to data compiled by research firm RealtyTrac Inc. in Irvine, California.

***

• Foreclosure filings in 10 towns and cities within 10 miles of military facilities, including Norfolk, Virginia, home of the Navy's largest base, rose by an average 217 percent from January through April from a year earlier. Nationally, the rate was 59 percent in the same period, according to RealtyTrac, which tallies bank seizures, auctions and default notices.

***

• The Servicemembers' Civil Relief Act protects soldiers and sailors from losing homes for nonpayment of mortgages only while on active duty and for 90 days after they return home. Members of Congress, including Senator Johnny Isakson, a Georgia Republican, and Representative Bob Filner, a Democrat from California, are trying to extend that to a year, saying three months isn't enough. Another flaw in the current law is it puts the burden on the soldiers, sailors or the families they left behind to come up with the paperwork and notify the bank, said Sullivan of the Washington Veterans' group. Unlike in other wars, members of the military often are able to telephone home or receive e-mails, creating a "morale problem" as they try to deal with foreclosure notices, he said.

For more, see Foreclosures in Military Towns Surge at Four Times U.S. Rate.

Go here for posts on the Servicemembers Civil Relief Act.

Editorial Note:

As I understand this story, it's not the foreclosure rate that's quadrupled, it's the foreclosure rate increase that's quadruple.

Fire-Damaged Home A Thorn In The Side For Community As Both Last Titleholder, Mortgage Holder Disclaim Ownership

In Rockford, Illinois, the Rockford Register Star reports on a:

• [s]ingle-family home that was destroyed when a garage on the property caught fire in May 2007. The grass stands about a foot high. The front yard is littered with debris, a fence around the backyard is falling apart, and neighbors say the backyard and rear porch are strewn with soiled clothes and fire-damaged items from the house.

Both the last owner of record and the mortgage company holding the loan deny being the current owner of the property, each claiming that the other is the current owner. The last owner claims that the bank has already foreclosed on the home; the bank denies the claim. Consistent with their claims, neither have stepped up to maintain the home.

For more, see Ownership squabbles prevent yard maintenance.

More On The Abandoned Home Decimation Of Slavic Village

In Cleveland, Ohio, National Public Radio reports:

• In Cleveland's Slavic Village, a neighborhood on the southeast side of the city, "termites" have decimated a house once occupied by a couple. The intruders haven't chewed through the wood or even destroyed the carpets. These termites, as Cleveland City Councilman Tony Brancatelli calls them, are vandals who've stripped the recently foreclosed house of its fixtures, plumbing pipes, windows and wiring.

For more, see In Cleveland, Foreclosures Decimate Neighborhoods.

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

Abandoned Homes A Problem In KC As City Bulldozes At Least Three A Week

In Kansas City, Missouri, The Kansas City Star reports:

• A front-loader loudly punches a huge hole through the old house. The structure shudders. In seconds it’s reduced to rubble, another victim of the nation’s vacant house epidemic. [...] “This is typical,” said Dalena Taylor, an officer with Kansas City’s dangerous buildings department. “It happens more than not — people abandoning a home when they can’t care for it anymore.” City officials estimate there are 6,000 abandoned homes, many of them in the urban core. But experts say the number is more likely twice that high.

***

• [W]hile the city demolishes at least three houses a week, Pare said, inspectors find hundreds more. If they have to be torn down, the cost and environmental cleanup can rise to $8,000 per structure — money the city tries to recover from the owners, if they can be found.

For more, see KC tackles problem of vacant homes (for story on one web page, try here). neighborhood destruction from foreclosures kappa

Abandoned Foreclosed Homes Keep Some Contractors Busy

In Jacksonville, Florida, The New York Times reports on a story featuring David Law and Trey McCallister, two local contractors who have had their hands full with business as a result of the ongoing Florida foreclosure mess. From the story:

• Mortgage companies hire contractors like these men to inspect and maintain houses that once-proud owners can no longer afford and no one else wants. These days, business is brisk.

• These contractors and thousands like them see first hand the detritus of the subprime era: peeling paint, gutted interiors, family dogs left behind to starve, overgrown lawns infested with snakes.

• In Florida, the crisis can seem overwhelming at times. It can take months, even years, for some homes to wind through foreclosure in the backlogged local courts. The longer a home sits vacant, the more vulnerable it becomes. After a few months, the Florida weather starts to takes a toll. Mold and mildew creep. Algae chokes forsaken swimming pools. Sometimes vandals strike. And sometimes wiring or plumbing just give out.

For more, see Abandoned Houses Are Keeping Contractors Busy. neighborhood destruction from foreclosures kappa

Vacant, Foreclosed Northern Virginia Homes A Boon For Local "Animal Kingdom"; As Weather Warms Up, "Opportunistic Wildlife" Get "Rocking & Rolling"

In Northern Virginia, The Washington Post reports:

• [I]t was a pastoral scene Carl Berry could do without. He lives two doors down from the [foreclosed] house, which he said was abandoned about six weeks ago by a family that used to keep the property tidy. Now there's a real estate agent's lockbox on the door, rain-sopped newspapers in the driveway and, until repeated complaints brought it down, uncut grass so unruly it was attracting other occupants. Such as rats. [...] He and his wife have seen snakes in the reedy thicket, too.

***

• As more people move out, the grass grows taller, the water puddles up and the wild things move in. Mosquitoes thrive in the empty swimming pools and junk piles that have been filled and refilled by the recent rains. Ticks flourish in the tall grass. So do rodents, which also like the shelter of dry, empty houses and whatever garbage they might contain. Then come the snakes, with the rest of the animal kingdom not far behind.

***

• "Anything that is not maintained creates a potential attraction for a lot of opportunistic wildlife," said Scott McCombe, general manager for Critter Control of Northern Virginia, an animal-removal agency that specializes in nonlethal methods. "And this is typically the season when things start to get rocking and rolling."

For more, see Shuttered Homes, Thriving Wildlife. neighborhood destruction from foreclosures kappa

Maricopa Public Health Officials Beg Delinquent Borrowers Abandoning Homes To Drain Pools Before Leaving In Battle Against Disease-Carrying Mosquitos

In Maricopa County, Arizona, The Arizona Republic reports:

• County health officials are bracing for an unprecedented surge in mosquito-infested swimming pools this summer, as home foreclosures and temperatures continue to rise. Complaints to the county about algae-laden "green pools" behind vacant or abandoned homes have leaped almost 250 percent since a year ago, increasing to 2,069 during the first five months of 2008 compared with 597 during the same period in 2007, said Johnny Dilone, spokesman for Maricopa County Environmental Services.

***

• Public-health officials are urging delinquent borrowers to drain swimming pools before surrendering their house keys to the bank. "It's easier for us to treat it if it's drained," said John Townsend, manager of the Vector Control Program in Maricopa County. Townsend's department is doing its best to respond to the foreclosure-fueled surge in green pools, which provide a handy nest for mosquitoes to lay their eggs.

For more, see Foreclosures lead to Valley health risks (Foreclosed-on homes lead to Valley health risks). neighborhood destruction from foreclosures kappa

Swarming Bees In Vacant Foreclosure Terrorize Tucson Neighborhood; Family Pet Succumbs To Injuries From 250 Stings

In Tucson, Arizona, KOLD-TV News Channel 13 reports:

• In one local Tucson neighborhood when the humans moved out, the bees moved in. These pests have become well established and are creating serious problems for the neighborhood. The owners walked away from their house a year ago. The bees are now terrorizing the entire area. The residents in the neighborhood say they feel helpless; they believe the homeowners association has just made it worse.

• Brandi Comeau was hit extra hard by the bees infesting her neighborhood, "my dog Stubby was here by the door covered in bees and being attacked. He died last night at 10:30 p.m. with over 250 stings."

For more, see Bees Buzz Tucson Neighborhood.

See also, Couple cites vacant home in fatal bee attack on dog.

For more on bees and foreclosures, see:

• Don't Let The Bees Be! (Charlotte County, Florida),
• Tens Of Thousands Of "Squatters" Swarm Into Vacant Foreclosed SW Florida Homes. neighborhood destruction from foreclosures kappa

Tenant Foreclosure Evictions Make No Distinctions In Economic Status

CNN reports on the individual stories of Southern California two tenants, each on different ends of the economic spectrum, who both face eviction on homes they are renting. In each case, their respective landlords have been pocketing their rent while stiffing their mortgage lenders out of their mortgage payments, thereby allowing the homes to go into foreclosure.

1. Charles Nelson has paid about $30,000 in rent since moving into a spacious four-bedroom home in August. He was stunned when a real estate agent knocked on his door recently and said the home was in foreclosure. His landlord had not paid the mortgage since he moved in and the bank is now demanding the house back. Nelson will also lose his $7,700 security deposit. [...] Nelson, the owner of PCH Auto Sales, lives in the upper-middle class enclave of Laguna Hills, south of Los Angeles, with his girlfriend and two sons from previous marriages.
.

2. More than 100 miles away in the working-class city of Palmdale, Fai Nomaaea -- a 35-year-old mother of eight -- can relate. The single mom was cleaning the yard when a man handed her a notice of foreclosure. Like Nelson, she had been paying her rent on time every month. She now lives in fear every day. "I don't know what's going to happen the next day," she said. "I don't know if they're going to come to the door and tell us that we have to move, and I don't have anywhere to go." For Nomaaea, getting booted from the home presents another hardship: She lives on a fixed income and can afford about $1,200 a month in rent. It also means finding a new school for her children.

For more, see Man pays $30K in rent, faces eviction.

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

Ohio Women Cop Pleas In Theft Of $65K From 81-Year Old Woman's Bank Account; Scam Disguised As Phony Land Sale

In Hamilton, Ohio, the Middletown Journal reports:

• Middletown sisters accused of bilking an elderly woman out of 64,900 in September have entered pleas to felony crimes in Butler County Common Pleas Court. Penny Shepherd, 45, and Christina Hensley, 35, were charged with theft, forgery, securing writing by deception and tampering with records.

• The victim, Orneda Hale, 81, wasn't aware the money was gone until her bank sent her a canceled check made out to Shepherd's husband, Harmon, along with an offer to purchase 7.6 acres of land south of Lexington, Ky., in September.

***

• Hale told police she is an elderly woman with no use for land in Kentucky and had not agreed to buy the property. She said Shepherd, who lives next door, sometimes came to her house to help care for her, according to police reports. Frank Schiavone, the sisters' lawyer, said Hale was competent and decided to purchase the property.

For more, see:

• Sisters admit stealing from elderly woman,
• Sisters' attorney: Land sale no scam (Women accused of bilking 81-year-old out of $64,900 in fradulent real estate transaction).

For story update, see Bilking elderly woman gets one sister 7 years in prison. elder financial abuse valedictorian

Gov. Crist Signs Florida Foreclosure Rescue Fraud Bill Into Law

From the Office of the Florida Attorney General:

• [Florida] Attorney General Bill McCollum [yesterday] applauded Governor Charlie Crist for signing The Foreclosure Rescue Fraud Prevention Act of 2008 into law. The legislation, which passed this session as HB 643 and was developed in part by members of the Attorney General’s Mortgage Fraud Task Force, will ensure that homeowners are properly informed about their rights before signing a contract with a foreclosure rescue entity in addition to other protections.

With regard to transactions involving repurchase agreements (ie. sale leaseback arrangements and the like that include a buyback right, option to repurchase, etc.):

• The repurchase price cannot exceed a certain threshold and the repurchase agreement is presumed to be a loan.

The Foreclosure Rescue Fraud Prevention Act of 2008 will go into effect October 1.

For more, see Attorney General McCollum Applauds Signing of Foreclosure Rescue Fraud Prevention Act into Law (New law provides important safeguards to help protect homeowners facing foreclosure).

Editorial Note:

While the Florida AG's press release enumerates all the nice things that foreclosure rescue operators now have to do to comply with the statute, the most powerful provision in the new statute (and that may initially go unnoticed) is found in Florida Statute Sec. 501.1377(6) which creates a rebuttable presumption that any foreclosure rescue transaction involving a lease option or other repurchase agreement is an equitable mortgage. See New Florida Law Treats All Foreclosure Rescue Deals Containing A Buyback Right As An Equitable Mortgage Unless Otherwise Rebutted.

In my view, this provision will treat practically every foreclosure rescue transaction involving a sale leaseback with a buyback right attached that otherwise falls within the scope of the new statute as a secured loan. No matter how well the Florida foreclosure rescue operators comply with all the other requirements of the law, if they can't overcome this rebuttable presumption (and based on the Florida case law, it's going to be tough, in my view), the deals will simply be treated as secured loans / equitable mortgages, subject to the Florida usury statutes, and subject to the same rules on foreclosure as any standard mortgage.

Congratulations to the able drafter of the new law who successfully slipped this provision into the statute.

Stiffed Mortgage Investors Look To Force Banks To Buy Back Bad Paper

The Wall Street Journal reports:

• Already burned by bad mortgages on their books, lenders now are feeling rising heat from loans they sold to investors. Unhappy buyers of subprime mortgages, home-equity loans and other real-estate loans are trying to force banks and mortgage companies to repurchase a growing pile of troubled loans. The pressure is the result of provisions in many loan sales that require lenders to take back loans that default unusually fast or contained mistakes or fraud.

***

• Many recent loan disputes involve allegations of bogus appraisals, inflated borrower incomes and other misrepresentations made at the time the loans were originated. Some of the disputes are spilling into the courtroom, and the potential liability is likely to hang over lenders for years.

For more, see Investors Press Lenders on Bad Loans (Buyers Seek to Force Repurchase by Banks; Potential Liability Could Reach Billions) (if full story is unavailable, go here - then click link for the story; you may also have to click the "Refresh" button on the web page to get to the story).

Brooklyn Feds Indict Eleven In Alleged Straw Buyer, Contract Flipping Mortgage Fraud Scam; $14M Fraudulently Obtained, Say Cops

In Brooklyn, New York, Newsday reports:

• Brooklyn federal prosecutors charged 11 people yesterday in a mortgage fraud scheme that ripped off more than $14 million from banks and mortgage companies using fake buyers, officials said. The 11 defendants include real estate agents, mortgage brokers and two attorneys, as well as a number of so-called "straw buyers," who were used as fronts to buy rundown properties through fraudulent mortgage applications, investigators said. According to the indictment unsealed in federal court in Brooklyn, the straw buyers were recruited by the alleged organizers of the scheme, Vijay Anand Khemraj, 29, and Robert Rodriguez, 28.

***

• The straw buyers did not make mortgage payments on the houses or even take possession of the dwellings, according to the indictment. [...] The indictment identified Frantz Metellus, 36, and Robert B. Baker, 41, as the two attorneys who allegedly allowed their trust accounts to receive the mortgage proceeds.

For more, see 11 people charged in $14M mortgage fraud scheme.

See also, U.S.Attorney Press Release.

Before Mailing In The Keys On A Home With An Unaffordable Mortgage, Make 'Em Produce The Note!

A recent article in Forbes reported that borrowers are increasingly viewing voluntary foreclosure (ie. walking away from the home) as a practical financial decision (see Deadbeat Homeowners Hit The Road). Such action would typically take place when the payments become unaffordable and /or when the homeowner owes more on the mortgage loan than what the home is worth.

Keep in mind that there is a decent chance that the mortgage lender or company servicing the home loan has lost the actual promissory note that was signed on the date the loan was closed. So, to anyone considering taking a hike and mailing in the keys, before you bolt (even if you are not yet in foreclosure), contact the lender and make 'em produce the note.

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

Mortgage Company Informs Borrower Current On His House Payments That It Lost The Promissory Note; Is The Lender Up To Something?

One reader recently wrote that he received a letter from his mortgage company saying that it lost his promissory note in connection with his home loan. The reader stated that he never missed a payment on his mortgage, and wonders whether this is something to be concerned about.

I can only think of two possibilities (arguably unlikely, but then again, maybe not) that a lender might be up to by placing the borrower on notice that the promissory note has been lost. Assume that the borrower does nothing to assert any legal rights that may arise in connection therewith and simply keeps making the mortgage payments. It may be that, in a possible future legal action to foreclose the mortgage, the lender might attempt to say that:

1. the borrower's inaction in asserting any rights that arose at the time he was placed on notice of the loss of the promissory note constitutes a "waiver" of those rights, thereby preventing the borrower from raising the issue, and


2. the borrower's continued payments on the mortgage loan after being placed on notice that the promissory note was lost possibly operates as an "estoppel" against the borrower (the borrower is estopped, or precluded, from raising the lost note as an issue).

Could the lender be laying the groundwork for a defense against having lost the promissory note in a possible future foreclosure action against the reader (and all other borrowers that it placed on similar notice)?

The only other possibility I can think of is that the reader was simply pulling my leg and never received a letter from the mortgage company in the first place.

Thoughts anyone??? missing mortgage foreclosure docs beta

Minnesota Lawmakers Pass One Year Moratorium On "Some" Home Foreclosures; Governor Has Until Monday To Sign Or Veto

In Minnesota, The Wall Street Journal reports:

• The Minnesota legislature's passage of a housing bill has created a dilemma for the man who could veto it: Gov. Tim Pawlenty, a Republican seen as a potential running mate for John McCain. The Minnesota Subprime Borrower Relief Act would allow borrowers to defer foreclosure sales until one year after the measure takes effect. It applies to some subprime and negative-amortization loans.

***

• The governor has criticized the plan to defer foreclosures and has said he would be inclined to veto it. He has until Monday to decide. If he doesn't sign the bill by then, it won't go into effect.

For more, see Foreclosure Bill Puts a Governor on Hot Seat (Pawlenty May Veto Minnesota Measure; On McCain Ticket?) (if full story is unavailable, go here - then click link for the story; you may also have to click the "Refresh" button on the web page to get to the story).

Repeated Attempts By Lenders At Collecting Discharged "Zombie" Mortgage Debt Forces Texas Consumer To Sue

In League City, Texas, the Houston Chronicle reports:

• Bankruptcy is supposed to get rid of bad pennies. Prince Ella Green thought so. She and her husband, James, who live in League City, fell on hard times and filed bankruptcy in 1995. The case was a Chapter 13, meaning the Greens submitted a plan for repaying most of their debt, which they did during the next five years.

• Some debt, including a mortgage on a home in Texas City that the Greens bought as an investment property and later lost to foreclosure, was discharged as part of the bankruptcy, according to court records. In other words, a judge ruled that the mortgage was debt the Greens were not legally responsible for paying.

• Tell that to Cenlar Federal Savings Bank and several other companies that have been trying to collect the debt ever since.

***

• Tired of battling the zombie debt for more than a decade, the Greens went on the offensive. In February, they sued all three mortgage companies that had attempted to collect the debt, accusing them of, among other things, deceptive trade practices and violating federal bankruptcy and debt collection laws.

• "I decided I'm not going to take this lying down," Green said. "It's not just me. It's happening all over America." As more Americans struggle with mounting debt, they're finding that, like bad pennies, sometimes the debt never goes away.

For more, see Zombie debts refuse to die.

Go here for other posts on zombie debt. zeta

Michigan Appeals Court Rules That Ownership Rights Under Unrecorded Equitable Mortgage Defeat Rights Of Subsequent Purchaser

A February 14, 2008 decision of the Michigan Court of Appeals provides an illustration of how the bona fide purchaser doctrine operates in the context of an equitable mortgage in a given case. For more, see Ownership Interest Under Equitable Mortgage Defeats Interest Of Subsequent Buyer; Lack Of Knowledge Not Enough To Sustain Bona Fide Purchaser Status, posted on the other blog.

For the court decision itself, Vernier v. Sipe, No. 276037, Mich. Ct. App. (February 14, 2008).

Group Seeks $1B To Buy, Recast, Refinance Delinquent Mortgage Debt

Bloomberg News reports:

• Lewis Ranieri, the mortgage bond pioneer trying to salvage a Texas bank crippled by faulty real estate loans, is seeking $1 billion in a separate venture to buy residential mortgages. Selene Residential Mortgage Opportunity Fund LP raised $151 million from investors in New York, Ohio and Pennsylvania as of April 15, according to a regulatory filing.

***

• "Our plan is to raise $1 billion and buy delinquent mortgages that we will recast and refinance and try to keep the borrower in the house without a foreclosure," said David Creamer, a Selene managing partner and former GMAC executive, in an interview.

For more, see Ranieri, Ex-GMAC Execs Plan $1 Billion Home-Loan Fund.

The Bellyaching Continues About NY AG Appraisal Agreement/Legal Settlement With Fannie, Freddie, OFHEO

Bloomberg News reports:

• Fannie Mae and Freddie Mac's agreement to restrict banks from using in-house appraisal companies may violate federal law, U.S. Comptroller of the Currency John C. Dugan said in a letter to the companies' supervisor.

• The two companies, which own or guarantee about 45 percent of the $12 trillion in U.S. home loans, made a deal in March with New York Attorney General Andrew Cuomo and the Office of Federal Housing Enterprise Oversight to stop buying mortgages from lenders that use in-house home appraisals for their loans.

• The agreement and new appraisal code "violate or conflict with federal law in fundamental respects" and should be withdrawn, Dugan said in a letter to Ofheo Director James Lockhart.

For more, see Fannie, Freddie Appraisal Agreement May Violate Law.

See also, The Associated Press (story appearing in The New York Times): Regulator Criticizes Appraisal Agreement.

Go here for other posts on the now-terminated investigation by NY AG Cuomo of Fannie Mae and Freddie Mac.

Formation Of NYC Lawyers’ Foreclosure Intervention Network Announced

In New York City, Crain's New York Business reports:

• The Federal Reserve Bank of New York and the City Bar Justice Center are joining forces to help New Yorkers in danger of losing their homes to foreclosure. The two organizations [yesterday] announced the formation of the Lawyers’ Foreclosure Intervention Network, a pro bono pilot program that will marshal the resources of the city’s legal community to assist residents facing foreclosure.

• The program aims to narrow the gap between the number of legal aid lawyers trained to deal with foreclosures and the growing number of distressed homeowners.

***

• Private lawyers rarely take on foreclosure cases because clients usually don’t have enough money to pay. The mounting crisis has stretched thin the few lawyers who work for nonprofit organizations that will take on such cases. The program will provide training to lawyers on ways to prevent unnecessary foreclosures. Lawyers will assist homeowners in assessing their options, negotiating with creditors and will represent them in court — if necessary.

***

• Training sessions will be held June 18 and 19 at the City Bar [1.5 Days of Free CLE Training]. The program is one of many sprouting up across the city to help struggling homeowners, including the Center for New York City Neighborhoods, a nonprofit organization started by the city and partners.

For the story, see New legal aid program to protect homeowners (The Lawyers’ Foreclosure Intervention Network, a pro bono pilot program created by the Federal Reserve Bank of New York and the City Bar Justice Center, will assist residents facing foreclosure).

See also, New York Fed press release: New York Fed Announces Formation of the Lawyers' Foreclosure Intervention Network.

Go here for other posts on the Lawyers’ Foreclosure Intervention Network.

Alleged Equity Stripping, Refinancing Scam Has California Real Estate Agent Facing Grand Theft, Forgery Charges As Victim Loses Home In Foreclosure

In Contra Costa County, California, the Contra Costa Times reports:

• Elias Escobedo, 41, lost his house earlier this month when it was foreclosed on, but not because he didn't pay his mortgage. Instead, he's the victim of a real estate agent who is accused of forging the deed to his home and embezzling $40,000 in a scheme to raise his credit score and pay his monthly mortgage payments, according to the Contra Costa County District Attorney's office.

***

• His agent was the same real estate agent that sold the home to Escobedo in 2004. Escobedo said that Bullard told him his credit was bad and he could come up with a way to clean it up and invest the money, he said. Using a straw buyer to hold the property, or someone paid to park the deed, they would refinance the home, take money out and pay the mortgage.

• The agent, Rodney Alonzo Bullard, has been charged with grand theft and two felony counts of forgery by the Contra Costa County district attorney's office.

For more, see Suffering From Foreclosure Scams.