Illinois AG Alleges Large Scale Unfair, Deceptive Conduct In Suit Against Countrywide, Mozilo

In Chicago, Illinois, the Illinois Attorney General's Office today announced:

• Attorney General Lisa Madigan today filed a lawsuit in Cook County Circuit Court against Countrywide, the nation’s largest mortgage lender and servicer. The complaint alleges that Countrywide Home Loans, Inc., and its parent company, Countrywide Financial Corporation, engaged in unfair and deceptive conduct on a large scale in creating, originating, marketing and servicing unnecessarily risky and costly mortgage loans for Illinois homeowners.

For the rest of the Illinois AG press release, see Illinois AG Madigan files Lawsuit Against Mortgage Giant Countrywide (Alleges Company Deceptively Sold Risky Loans Despite Borrowers’ Inability to Pay).

To read the lawsuit, see People of the State of Illinois v. Countrywide Financial Corporation, et al. (approx 3.32 MB).

Go here, Go here and Go here for more on other Countrywide lawsuits & other problems. countrywide consumer problems

California AG Tags Countrywide, Mozilo With Civil Suit Related To Shaky Loans; Seeks To Restore To Borrowers Money/Property Lost Thru Deceptive Acts

In Los Angeles, California, Reuters reports:

• California Attorney General Jerry Brown sued Countrywide Financial Corp and two top officers on Wednesday to stop the mortgage loan company from allegedly perpetrating a scheme to "mass produce loans for sale on the secondary market."

***

• Brown's office said the lawsuit, filed in Los Angeles Superior Court, also seeks unspecified restitution for homeowners(1) who were allegedly conned into risky, costly loans they did not understand by brokers desperate to meet unrealistic production goals. The suit further accuses Countrywide Chairman and Chief Executive Angelo Mozilo and David Sambol, president of Countrywide Home Loans Inc, of purposely easing underwriting standards for mortgages and home equity lines of credit in a play to double to company's share of the U.S. mortgage market.

• The Calabasas, California-based lender stands accused of deceptive advertising and unfair competition for its alleged misleading practice of emphasizing low introductory loan rates while hiding risky or costly terms and of routinely soliciting buyers to refinance shortly after their initial loans closed.

For more, see Calif AG sues Countrywide over alleged loan scheme.

From the California AG's Office:

• Read lawsuit: People of the State of California v. Countrywide Financial Corporation, et al. (approx. 1 MB),
• Press Release: Brown Sues Countrywide For Mortgage Deception.

Go here, Go here and Go here for more on other Countrywide lawsuits & other problems.

(1) California consumers who believe they have been victimized by Countrywide Consumers should file a complaint by contact the Attorney General’s Public Inquiry Unit in writing at Attorney General's Office California Department of Justice Attn: Public Inquiry Unit P.O. Box 944255, Sacramento, California or through an online complaint form: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL countrywide consumer problems

Challenging Foreclosures Could Become Large, Lucrative Area Of Practice, Say Some Attorneys; Lenders May Be Fumbling Ball On Proving Debt Ownership

In New Jersey, The Star Ledger reports:

• Most home foreclosures being processed in New Jersey are illegal, a growing group of attorneys contends, because lending institutions cannot prove they own the debt they are trying to collect.

• Judges in at least four New Jersey counties already have halted foreclosures, using a federal court ruling in Ohio as precedent. And with 48,000 foreclosures expected to be filed this year -- twice the number filed in 2006 -- some attorneys believe challenging foreclosures can become a large and potentially lucrative area of practice.

• "This is starting to creep up all over the state and all over the country as people start to realize these banks don't really know who owns the (promissory) note," said Peggy Jurow, a senior attorney at Legal Services of New Jersey, which is teaching lawyers how to represent pro bono clients in these cases. "It's scary to think how many people are losing their homes who shouldn't be."

***

• There were 34,457 foreclosures filed in New Jersey in 2007. The vast majority, 96 percent, were processed by the State Office of Foreclosure with no answer from the defendants, resulting in the loss of their homes. Lawyers say 75 percent or more of those cases could have been successfully challenged.

• "The rules have been there all along," said Rob Napolitano of Community Financial Services in Keyport, which provides information to attorneys on how to help clients avoid foreclosure. "What's changed is that people are finally making the banks follow the rules, and they can't do it."

***

• Lawyers say in the midst of all that packaging and slicing, banks got careless with their paperwork. In some cases, they lost track of who owned the original promissory note or couldn't prove how they came to possess it. In other cases, lawyers say, the formation of the mortgage-backed security created a situation in which the banks failed to maintain ownership of the promissory notes.

• "These transactions have become so complex, the banks can't even keep track of what they own and don't own," said Linda Fisher, director of the Center for Social Justice at Seton Hall Law School, which succeeded in getting a foreclosure dismissed in Essex County last month.

***

• The State Office of Foreclosure has attempted to provide some guidance, informing attorneys for lending institutions that as of May 1, it no longer would process foreclosures unless the attorneys could prove their clients were the owners of the loan and had the right to collect on the debt at the time the foreclosure was filed.

For the story, see New tactic slows rate of forfeited houses in NJ.

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

Illinois AG To Tag Countrywide, Mozilo With Civil Suit Related To Shaky Loans; Will Seek To Modify, Rescind Mortgages Made Thru Deceptive Practices

The New York Times reports:

• The Illinois attorney general is suing Countrywide Financial, the troubled mortgage lender, and Angelo R. Mozilo, its chief executive, contending that the company and its executives defrauded borrowers in the state by selling them costly and defective loans that quickly went into foreclosure.

• The lawsuit, which is expected to be filed on Wednesday in Illinois state court, accused Countrywide and Mr. Mozilo of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its heavily advertised “no closing costs loan.” Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said.

• In reviewing one Illinois mortgage broker’s sales of Countrywide loans, the complaint said the “vast majority of the loans had inflated income, almost all without the borrower’s knowledge.”

For more, see Illinois To Sue Countrywide.

See also:

• Crain's Chicago Business: AG Madigan to sue Countrywide Financial for fraud (Illinois AG is seeking a judgment that will order Countrywide to rescind, reform or modify all of its mortgages that were obtained by the company’s alleged deceptive practices. She also wants restitution for borrowers who lost their homes due to Countrywide’s practices),
• The Associated Press: Ill. AG to sue Countrywide over lending practices.

Go here, Go here and Go here for more on other Countrywide lawsuits & other problems. countrywide consumer problems

South Jersey Foreclosure Rescue Operator Gets Eight Years For Ripping Off 77 Homeowners

In Burlington County, New Jersey, CBS-TV Channel 3 (Philadelphia) reports:

• A Mount Laurel, New Jersey man was sentenced to eight years in prison Tuesday after pleading guilty to stealing from homeowners who hired him to save their properties from foreclosure. Peter Rogers was paid thousands of dollars by people that hoped he could help them save their homes. After collecting over $105,000 in all, he left the homeowners to fend for themselves.

• The 65-year old Rogers appeared in a Burlington County court room Tuesday after pleading guilty to defrauding 77 people who hired him to help save their homes from foreclosure. Victim after victim testified before Superior Court Judge John Almeida, telling how Rogers and his company, Express Consolidation Refinance and Mortgage Consultation, ripped them off.

For more, see Mortgage Fraud Defendant Sentenced.

In a related story, see Victims of scam have their say.

Go here for earlier posts on Peter Rogers.

400 Arrests In "Operation Malicious Mortgage" Only The Beginning, Says FBI Official Overseeing Probe

In Washington, D.C., the British Broadcasting Company (BBC News) reports:

• A senior FBI officer has told the BBC that more arrests will be made as part of its probe into mortgage fraud and the credit crunch. Section chief for Financial Crimes, Sharon Ormsby, said hundreds of arrests already made were just a "good start". [...] "It's a good start for us in our push to begin further investigations into corporate and mortgage related fraud" said Ms Ormsby, who is overseeing the FBI's Operation Malicious Mortgage.

***

• She refused to say how many more arrests the FBI expects to make in one of its biggest financial investigations, involving 200 full-time agents and more than 30 task forces across the US. But she confirmed that the Bureau was looking at every aspect of mortgage fraud, from the granting of individual loans to their bundling up and sale on Wall Street as investments.

For more, see FBI promises more fraud arrests.

Add Federal Fraud Indictment To Several Dozen Civil Suits Facing One SW Florida Real Estate Entrepreneur

In Southwest Florida, the Naples Daily News reports:

• [Fort Myers real estate entrepreneur Samir] Cabrera was in the spotlight last week following a federal indictment on charges related to a land flipping scheme. Those are charges to which Cabrera’s attorney has indicated his client will plead not guilty.

• Long before Cabrera was caught up in a nationwide crackdown on criminal real estate and mortgage dealings [Operation Malicious Mortgage], though, he was facing fraud allegations related to a separate set of deals. Several dozen lawsuits challenging Cabrera’s business practices — including a federal class action suit — are pending.

***

• The clusters of deals and losses that these disgruntled investors describe in their lawsuits are more extensive than the alleged scheme that led to Cabrera’s federal indictment last week on four counts of wire fraud. That indictment only focused on Cabrera’s role in deals involving two pieces of vacant land in south Fort Myers, while the lawsuits in both Lee County and federal court describe as much as $5 million in fraudulent dealings on up to 100 properties in Cape Coral and Lehigh Acres.

For more, see Federal charges just the beginning for Fort Myers real estate entrepreneur (Samir Cabrera is facing many lawsuits in addition to mortgage fraud accusations).

Go here for other posts on Samir Cabrera.

Detroit Feds Hit Big In Nationwide FBI Mortgage Fraud Probe

In Detroit, Michigan, Crain's Detroit Business reports:

• Two of the metro Detroit cases that are part of a major federal bust of mortgage fraud schemes in Michigan accounted for more than half — $25.4 million — of the $50 million in losses linked to the cases. U.S. Attorney Stephen Murphy reported Thursday that his office had charged 28 people in 15 separate criminal cases since March with mortgage fraud that led to the losses, mostly to financial institutions.

For more, see Mortgage fraud bust shows improved rules, enforcement.

Go here for U. S Attorney's press release.

California Real Estate Agent, Two Others Face Charges Of Defrauding Lenders, Clients

In Santa Clara County, California, the San Jose Mercury News reports:

• Gloria Alvarez was one of the top agents at a dominant East Side real estate company during the heady days of the recent real estate boom, but Thursday she was in jail facing multiple felony charges. Alvarez, 40, was arrested [last] Wednesday on a $1 million warrant as she was leaving a Santa Clara County Superior Court room where she was appearing in a civil suit for a settlement conference, which normally requires a defendant's appearance.

• The former star agent of the defunct Century 21 Su Casa real estate brokerage faces 11 felony counts, including grand theft involving an alleged scheme in which she and two relatives are accused of defrauding three lenders and several clients. [...] Also charged in the complaint are Alvarez's sister, Patricia Alvarez, and Gloria Alvarez's son, Ricardo Alvarez, a licensed notary, both of San Jose. [...] The three are accused of bilking Comerica Bank, Fremont Investment and Loan, and Countrywide Savings and Loan in the course of three real estate transactions valued at just over $2 million.

For more, see Former Su Casa real estate agent arrested, faces 11 felony counts (Woman, relatives Accused Of Scheme To Defraud Mortgage Lenders, Clients).

Ocala Homeowner Reports Trouble With Self-Described Faith-Based Foreclosure Rescue Operator

In Marion County, Florida, the Ocala Star Banner reports:

• Rebecca Dorobiala's house was sold on the steps of the Marion County Courthouse in April. As she looks back on that moment now, she regrets putting her trust and money in the hands of someone who pledged to save her home but didn't deliver on the promise. Dorobiala lost her job in 2006. Her husband came out of retirement to help with finances. When he was injured on the job, she began falling behind in her mortgage payments and went looking for help.

• In stepped Florida Faith Inc. and its owner, Mary Redford, who assured Dorobiala that the company could save her home for a fee. Redford even offered Dorobiala a job. Dorobiala was encouraged. But three months later, she walked out. Dorobiala says Redford never paid her for the work she did and failed to resolve her mortgage foreclosure. She said she was also becoming increasingly uncomfortable watching Redford promise other desperate homeowners that she could help them resolve their foreclosures and keep their homes.

For the whole story, see In bad faith?

Title Examiners Play "Hangman" With Clerk Of Courts' Computer System In Search Of Recording Screw-Ups In Sloppy Land Records

In Franklin County, Ohio, The Columbus Dispatch reports:

• Sloppy real-estate records in Franklin County could threaten home buyers with foreclosure and bump up the price of title insurance, title examiners say. They're nervous that they're missing liens hidden in the Franklin County Common Pleas clerk of courts' computer system.

• Errors include misplaced commas, last names entered as first names, first names entered as last names and debtors listed only by their spouse's name. It means that a routine search could fail to turn up a lien that could come back to haunt a home buyer. That happened recently when a Muskingum County family was hit with foreclosure papers because a county clerk had misspelled the former owner's name.

***

• "Everyone who has to use the system is basically playing roulette," said Dan Hritz, a title examiner for several large central Ohio companies. [...] In Franklin County, sleuthing out hidden liens has become almost a competition among title examiners, who say they play "hangman" with the computer, typing in every possible permutation of a name to find mistakes.

• "It's a title examiner's nightmare," said Debbie Howard, who works for a Cincinnati law firm that represents banks and mortgage companies. She searches the computer by last name and first name -- the correct way. Then, she runs a search by first name. Then she adds a comma behind the last name, a space behind the last name and sprinkles in "Jr." here and there.

• Dow T. Voelker, a Columbus lawyer who specializes in real-estate law, noticed the problem about a year ago. "You have to just sort of live in fear that, at some point, somebody is going to make a claim because you missed a lien because you couldn't find it."

For the story, see Errors in lien data could cost buyers (Misspellings, mistakes leave county guessing on property searches).

For a story on how a homebuyer got screwed because of an error in the local county land records, see The Columbus Dispatch: Clerk's error jeopardizes family's home (Undetected lien against seller haunts buyer).

Go here for other posts involving legal issues related to title insurance. title insurance legal issues

New R.I. Foreclosure Related Laws Await Gov's OK; Lenders To Post Upkeep Bonds, Timely Pay Taxes/Utility Bills; Copper Theft Industry Also Takes Hit

In Providence, Rhode Island, The Providence Journal reports:

• Banks that repossess foreclosed properties in Rhode Island will have to pay the properties’ tax and utility bills in a more timely fashion and post bonds for the properties’ upkeep if legislation approved by the General Assembly over the weekend is signed into law by Governor Carcieri. Lawmakers’ approval of two bills aimed at cracking down on giant out-of-state banks and mortgage companies — not to mention dealers in stolen copper — represents just a handful of the dozen or more foreclosure-related bills introduced into legislature.

For more, see Bills on foreclosures await governor’s approval.

Foe story update, see Expungement, public records bills vetoed (The Rhode Island Foreclosed Property Upkeep Act is vetoed by Gov. Carcieri).

New Maryland Law Gives Financially Strapped Residents Better Chance To Save Homes From Foreclosure

In Maryland, a column in DC Chronicles notes:

• [O]n April 4, 2008, a new law went into effect [in Maryland] that addresses several aspects of the foreclosure process. The goal of this law is to give borrowers who are in default the time and information necessary to try to save their home from foreclosure.

***

• The new law does three crucial things: it requires a real service of notice; it extends the foreclosure process to a minimum of 90 days; and it requires that the borrower in default receives the name and phone number of a specific person designated by the lender to handle loss mitigation (meaning that the borrower has a designated lender's representative with whom to discuss repayment plans or other alternatives to foreclosure).

For more, see New Maryland foreclosure laws protect homeowners.

Vacant & Abandoned Property Problem Addessed At U.S. Conference of Mayors

In Miami, Florida, The Miami Herald reports:

• Underscoring one of the chief frustrations cities face in dealing with the nation's foreclosure crisis -- collecting on liens for code violations, [mayor of Louisville, Kentucky, Jerry] Abramson kicked off a strategy session at the U.S. Conference of Mayors in Miami Sunday to tackle the growing problem of vacant and abandoned property. As the nation's cities tighten budgets amid a slowing economy, preventing vacant homes from falling into decay and dragging down property values is becoming increasingly difficult.

For more, see U.S. mayors seek solutions to vacant-homes crisis (Mayors attending their conference in Miami tackled the growing problem of vacant and abandoned properties stemming from the foreclosure crisis) (if link expires, try here).

From the U.S. Conference of Mayors, see:

• Vacant and Abandoned Properties: Survey and Best Practices (42 page report),
• Press Release: Foreclosure Crisis Adds to Existing Vacant and Abandoned Property Problems in Cities (go here for Spanish version),

Go here for other posts on code violation problem when homes in foreclosure are abandoned by the owner and the foreclosing lender either fails to complete foreclosure or fails to record its deed after foreclosure sale. responsibility code violations foreclosure

"Money Store" Scam Victims Also To Blame, Defense Attorney Says; Indecipherable HUD-1s Understandable Only By A Mathematician, Counters Judge

In addition to the news of the recent federal indictment in Maryland of eight defendants in the Metropolitan Money Store alleged equity stripping, foreclosure rescue scam, a story of a Federal court hearing that took place this past Friday in a separate, class action civil lawsuit involving the now-defunct company was recently reported by WTOP Radio 103.5 FM (Washington, D.C.). The following excerpt caught my eye:

• In federal court on Friday, an attorney for one of the title companies named in the civil suit told Judge Roger Titus that the victims were guilty of contributory negligence -- that they in essence, were also to blame. This infuriated Angele Reid of Oxon Hill, who sat in on the motions hearing.

• "I was really ready to strangle him," Reid said. "Because if you look at the documents, even a real estate attorney would have difficulty figuring out that something was going wrong." Federal Judge Roger Titus seemed to agree, pointing out that the federal forms known as HUD-1's were indecipherable. At one point Titus said only a mathematician could understand them.

For the story, see Homeowners fight foreclosure fraud with class action.

Go here and go here for other posts on the alleged Metropolitan Money Store foreclosure rescue scam.

Postscript:

Were JoyJackson and Kurt Fordham doing business in North Carolina when they were arrested? Regading their June 12 arrest in Raleigh, North Carolina, a recent story in The Charlotte Post reports:

• A source from Maryland, wishing to remain anonymous, said Jackson and Fordham relocated to North Carolina in order to conduct business [t]here. The U.S. Attorney’s Office in Maryland would not confirm details, citing the ongoing case.

For this story, see Mortgage hucksters busted in Raleigh (no longer available online). joyjackson

Colorado Judge Jams Foreclosure Attempt Due To Lender's Failure To Prove "Legal Standing"; Company Official Found Not Credible

In Douglas County, Colorado, the Douglas County News Press reports on local couple Louis and Margaret Sadler, who are assiting their daughter fight a foreclosure action that threatens the loss of her home.

• The [...] couple, who hired Castle Rock attorney Michael Robinson to handle the routine foreclosure, saw a Douglas County district court judge on June 19 put a stop to the foreclosure sale when the lender could not prove it was a party of interest in the case.

• The lender's failure to prove its interest is part of an industry practice Robinson says could impact victims of foreclosure across the state. "This is a case of first impression in Colorado," Robinson said. "This is going to wake people up and make them realize 'I don't have to take this, I can fight back.'" The fight began when Robinson embarked on his research in the time he had to respond to the original foreclosure action. His search of the publicly-filed documents disclosed something was amiss.

***

• During the June 19 trial, Lorainna Diaz, the chief of mortgage litigation for Countrywide Home Loans, was unable to identify the person whose stamped signature endorsed the note or when the note was endorsed to the Bank of New York. Diaz testified by phone from the company's Fort Worth, Texas, office but her efforts did not pay off for the Bank of New York. "I don't find [Diaz] to be credible at all," said Douglas County district court Judge Vincent White when he found in Sadler's favor. "She couldn't establish when [the transfer] occurred or that it was legitimate. I would expect someone in her position to be able to say when it was transferred and how [Sadler] was noticed."

***

• For those who find themselves in similar situations in Colorado, White's decision could open the door to great possibilities, Robinson said. "So far the problem has been that everybody surrenders [in the face of foreclosure]," Robinson said. "The message here is that people aren't going to roll over, they're going to fight."

• Robinson and his co-counsel hope others join the fight and have built a Web site, www.blockcoloradoforeclosure.com, to provide a resource for those facing foreclosure in Colorado.

In dismissing the court order authorizing the foreclosure sale, the judge indicated that the lender can re-file the case if they want, presumably if it is able to get its paperwork straight.

For the whole story, see The foreclosure fight is on (no longer available online).

See also, Fighting back on foreclosures:

• [A]ttorneys Michael Robinson and William Henry took a big step forward in that fight June 19 after a Douglas County judge dismissed a foreclosure action filed against Margaret Sadler, of Larkspur.

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

Maryland Man Charged With Pocketing Proceeds Of Forged Mortgage Loan On Ex-Landlady's Home; Property Now Faces Foreclosure

In St. Mary's County, Maryland, Southern Maryland News reports:

• A judge jailed a Park Hall man this week in lieu of $54,000 bond after the suspect’s arrest by police alleging he stole that amount through a loan application with the forged signature of his former landlady. St. Mary’s grand jurors indicted Mack Arthur Jennings, 51, on charges of uttering a counterfeit deed of trust in 2004 and stealing the money from Barbara Ann Sparks, who learned two months ago that she faces a possible foreclosure on her house and land off Indian Bridge Road in California[, Maryland].

• Sparks, a 56-year-old cancer patient, hired an attorney who successfully staved off a foreclosure hearing scheduled for last month, but future court proceedings lie ahead, her daughter said Thursday.

***

• ‘‘He went to the bank and got the loan,” detective Lt. Rick Burris said Thursday, ‘‘under the guise that the owner of the property was going to co-sign for him. He forged the signature.” The offense was not discovered, the lieutenant said, as long as Jennings paid off the loan. Sparks learned her property was the collateral when those payments ended. ‘‘She didn’t know anything about the loan until he stopped making payments and she started getting foreclosure notices,” Burris said.

For more, see Man, 51, jailed in bank fraud probe (Suspect’s alleged forgery for loan could cost ex-landlady her house).

Go here, go here, and go here for other posts related to deed theft by forgery, swindle, etc. deed theft xenon

Central Pennsylvania Attorney Groups To Mobilize Effort To Defend Poor In Mortgage, Debt Collection Suits

In Blair County, Pennsylvania, the Altoona Mirror reports:

• The Blair County Bar Association, an organization comprised of 200-plus lawyers, is teaming up with MidPenn Legal Services to address a surge in mortgage and credit card defaults. The economic woes affecting many parts of the nation have crept into the county court system in the form of lawsuits with banks and mortgage companies suing those who owe them money. The deluge of new cases has alarmed court officials, and the organization that represents county lawyers is putting together a new program to provide free and low-cost legal services to residents in crisis.

***

• Attorney Jeff Fleming, president of the bar association, and his board of governors voted to work with MidPenn, which provides aid to the poor, in obtaining a $9,800 grant from a fund known as Interest on Lawyers Trust Accounts. The state Supreme Court established the fund from interest earned by lawyers on escrow accounts, and the money is used to assist legal services statewide. The fund provides money for training attorneys and special programs.

***

• Under the new program, Mid-Penn will select the cases and assign them to attorneys who volunteer to work with the poor. Mid-Penn will train the lawyers so they know the laws concerning mortgages and other lending practices. Attorneys will be expected to handle one case for free but in subsequent cases will be paid $30 an hour.

For more, see Lawyers team up to tackle defaults (Legal action on mortgages, credit cards skyrocketing).

NY Foreclosure Legislation Expected To Pass Today; Will Establish Court Supervised Mediation Conference; Proposed 1-Year Foreclosure Moratorium Dumped

In New York, The New York Times reports:

• The bill that Gov. David A. Paterson and leaders of the State Legislature announced last week to address the subprime lending and foreclosure crisis was, for Albany, that rarest of things — an effective compromise. The legislation will change how subprime loans are made and regulated and will alter the way many foreclosures are handled by the courts, establishing protections for homeowners that had not been in place.

***

• Two of the main provisions are firsts for New York State: One requires lenders to warn borrowers in writing at least 90 days before starting foreclosure proceedings, and the other requires the courts to hold a settlement conference between the lender and a subprime borrower facing foreclosure. Both provisions are aimed at bringing lenders and borrowers together before foreclosure becomes inevitable. Supporters say the measures increase the chances of settlements that modify the terms of the loans, prevent foreclosures and allow homeowners to stay in their homes.

For more, see In Confronting the Foreclosure Crisis, a Bill Strikes a Balance.

For a formal description of a statewide program announced last week by the New York Court of Appeals intended to educate homeowners and facilitate early foreclosure negotiations and settlements, see Residential Mortgage Foreclosures: Promoting Early Court Intervention.

Horror Stories Of Financial Abuse Of Elderly Often Revolve Around Abuse Of Powers Of Attorneys

In Central Florida, the Sarasota Herald Tribune writes:

• The "power of attorney" is supposed to provide a safety net to seniors, by allowing relatives or professionals to oversee finances or medical care. But because the authority is unregulated and not monitored by either courts or law enforcement, it has huge potential for abuse, experts say.

• In cases throughout Florida, so-called "attorneys-in-fact" have taken advantage of their power by illicitly siphoning off fortunes or exploiting those they are charged with aiding. Formal statistics are lacking, but experts believe millions of dollars are stolen from seniors every year.

• "Our experience is it's a significant problem with the way power of attorney can be abused," said Elizabeth Boyle, managing attorney for Gulfcoast Legal Services Inc., a non-profit legal aid group in southwest Florida.

For more, see Struggle over legal powers can add insult to infirmity.

For a a recent story illustrating the problem, see Mother sues sons for emptying her $800k account (A Jefferson County, Texas woman claims her sons used a power of attorney to get their hands on $800,000 from her retirement account without her permission and is asking a judge to stop them and return her money.).

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

Foreclosure Mess A Boon For Two Connecticut Law Firms

In Connecticut, the Hartford Courant reports:

• [T]hese are busy days in Connecticut's foreclosure courtrooms, and for no one more than the growing stable of lawyers at Hunt Leibert and Reiner, Reiner. A record 18,000 foreclosure suits were filed in Connecticut last year, and two out of every three were brought by lawyers from those two firms. On their busiest day last year, Hunt Leibert and Reiner, Reiner filed suit against 108 property owners around the state.

***

• An analysis of cases closed in 2007 shows that foreclosure suits brought by Hunt Leibert and Reiner, Reiner moved through the courts at nearly twice the speed of suits brought by other firms and were nearly twice as likely to result in a judgment of foreclosure.

For more, see With More Loan Defaults, 2 Conn. Firms Reap Millions.

Week One Of Philadelphia's New Foreclosure Diversion Program

In Philadelphia, Pennsylvania, a column in Philadelphia City Paper describes the first week of the city's new Residential Mortgage Foreclosure Diversion Pilot Program. Reportedly, the program may have gotten off a bit slow out of the starting gate, and some of the attorneys for the foreclosing mortgage companies are expressing concern about unreasonable delays. An excerpt from the column describes the hectic nature of the first week of the proceedings:

• Lines of borrowers began to form. Extra lawyers were called in, and housing counselors found themselves taking on a flurry of new clients. The scene looked more like a social service agency than a courtroom. Judge Rizzo, who oversaw the process, was thrilled with the turnout. "It's organized bedlam," she admitted, "but that's a positive -- because at least we're getting these cases into the theater."

For more, see Changing the Rules (Can Philadelphia's bold experiment in preventing foreclosures work?).

Go here for other posts on the Philadelphia Residential Mortgage Foreclosure Diversion Pilot Program.

New Connecticut Law To Establish Foreclosure Mediation Programs To Be Conducted Through Court System

In Connecticut, a press release from the office of the Governor announces:

• Governor M. Jodi Rell [last week] signed into law a landmark bill that funds three programs to help struggling homeowners cope with the mortgage credit crunch and imposes reforms on the mortgage industry to avoid future problems. [...] The bill establishes foreclosure mediation programs to be conducted through the Judicial Branch, puts new regulations in place on the mortgage industry – including a ban on prepayment penalties – and expands the authority of the Department of Banking.

For more, see Governor Rell Signs Landmark Subprime Mortgage Assistance Bill (Governor Says Bill Sets National Model for Helping Homeowners, Preserving State’s Economic Foundation).

HOA Threatens Overseas Servicemembers With Foreclosure, Then Quickly Settles When Collection Practices Come To Light

In San Antonio, Texas, WOAI-TV Channel 4 reports:

• A San Antonio couple, serving in the military overseas, almost loses their home. Not because they failed to make their mortgage payments, but because they were behind on their homeowners association fees. This military couple was fighting a losing battle, so they asked News 4 Trouble Shooter Jaie Avila for help.

• David and Melody Gates admit they fell behind on their homeowners association fees when Melody got sick, but they say when they tried to pay what they owed, the association and its attorney kept sending their checks back and piling on more fees.

***

• The Gates say since late last year, they have sent three separate checks to the Westover Crossing Homeowners Association to pay off all the dues they owe for their home. But each time, the checks were returned, because by the time they arrived in the mail, more late fees, and attorneys fees had been added to the total. The attorney for the association refused to accept partial payment.

***

• The Trouble Shooters contacted Spectrum Management, which runs the Westover Crossing Homeowners Association, and its attorney, Tom Newton, Jr., the man who has been sending the Gates' all those intimidating letters. Newton wouldn't comment, but this isn't the first time the Trouble Shooters have come across attorney, Tom Newton. [...] Although, he wouldn't talk to us, a few days after we contacted Newton, he and the Westover Crossing Homeowners Association agreed to stop tacking on fees and settled the dispute with the Gates for $1,300. Almost $600 less than they had been demanding.

For more, see HOA Threatens Foreclosure On Couple Stationed Overseas.

Arizona Feds Score Big In Takedown Of Alleged Mortgage Scammers; Responsible For $100M In Illegal Loans, Say Authorities

In Phoenix, Arizona, The Arizona Republic reports:

• Thirty-six people(1) suspected of being responsible for $100 million in illegal home loans have been indicted in the biggest crackdown on mortgage fraud in Arizona. Most of the defendants were involved in the Valley's real-estate and mortgage industries. All were part of six mortgage-fraud rings in metropolitan Phoenix, some of which have been under investigation since early 2007, according to the indictment.

***

• Most of the six Arizona cases revolve around cash-back deals. [...] One of the biggest cases in the Arizona sting involved 23 Valley homes and a dozen players, including real-estate agents, mortgage brokers and a truck driver, according to court documents. More than half those homes were foreclosed on.

For more, see Big Arizona mortgage-fraud bust.

(1) Indicted in the Arizona takedown are Lakisha AlSaadi, Mario Bernadel, April Lucero, Amanda Adorno, Christopher Bartelmus; Marcos Branch, Brittany Ann Parrish, John Webber III, Stephanie McWilliams, Jeffrey Crandell, Jake Whitman, Kurt Holm, Erin Leastman, Fred Crum, Tyson Young, Felix Guzman Sr., Felix Guzman Jr., Fabian Guzman, Maria Guzman, Carl Rex Olson, Andrew Benjamin, Christopher Pirwitz, Mary Elizabeth Ortega Vasquez, Ana Valdez, Rodney Rohde, Daniel Morar, Gheorge Babeti, Cosmina Bunea, Dorel Irimiciuc, Samuel Dobos, Brandon Azadegan, Cipriano Ionutescu, Catherine Zebarth, Christina Mejia, Chris Nero and Roy Fife. All but six have been arrested.

California High Court Voids Tax Foreclosure Sale; Assessor's Error, Faulty Correspondence Failed To Place Owners On Notice Of Delinquency

In California, Metropolitan News Enterprise reports:

• Purported notice of a tax sale did not put the property owners on actual or constructive notice of the delinquency where the notice was sent to the correct address but misnamed the owners, who reasonably believed the notice was sent to them in error, the state Supreme Court ruled [last week]. The justices unanimously overturned a Court of Appeal ruling in favor of L&B Real Estate—described by opposing counsel as “the king of the foreclosure market in California”—which purchased a Los Angeles parcel belonging to Frank and Josie Mayer for $24,000 at the 2001 sale.

For more, see State Supreme Court Overturns Tax Sale Based on Flawed Notice (Justices Say Letter That Misnamed Owners Did Not Trigger Limitations Period).

For the decision of the California Supreme Court, see Mayer v. L&B Real Estate, 43 Cal. 4th 1231; 185 P.3d 43; 78 Cal. Rptr. 3d 62; 2008 Cal. LEXIS 6852 (2008) (available online courtesy of Findlaw.com; free registration may be required).

For another story involving questionable or improper notification to homeowners in the context of a mortgage foreclosure, see Homeowners Facing Mortgage Foreclosures Denied Constitutional Right to Proper Notification.

Go here and go here for other posts on foreclosures involving faulty notifications to property owners. foreclosure faulty notice

More On Tenants Renting From Landlords Facing Foreclosure

Some recent stories on the issue of tenants renting from landlords who are pocketing their rent, beating the bank out of its mortgage payments, and allowing the home to go into foreclosure:

• Tampa, Florida: Blind newlyweds owed money by landlord,
• Miami/Liberty City, Florida: Boom & Bust, Part 3 (In Liberty City, renters suffer more than perhaps anyone else from the foreclosure crisis),
• Boynton Beach, Florida: Foreclosure Fallout For Renters,
• Las Vegas, Nevada: Renters, soldiers feeling foreclosure pain,
• Providence, Rhode Island: Foreclosures leave some tenants high and dry (Landlords in foreclosure also failing to pay utility bills, resulting in tenants dealing with water shutoffs before ultimately facing eviction),
• Cleveland, Ohio: Area renters hit hard by foreclosure crisis (Little notice given to people, study says),
• Southern California (Inland counties): Foreclosures leave tenants out in cold, too,
• St. Louis, Missouri: Renters getting swept up in foreclosure mess.

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

Three Cop Plea In Tennessee Straw Buyer Mortgage Scam Involving 22 Luxury Homes

In Nashville, Tennessee, The City Paper reports:

• Miles Jackson Black and Jeffrey Dunn Hathcock pleaded guilty [last week] in federal court to conspiracy to commit wire fraud and bank fraud, the Office of U.S. Attorney for the Middle District of Tennessee announced Tuesday. According to testimony at the plea hearing, Stafford, Black and Harold Hathcock — a third defendant scheduled for trial Sept. 16 — engaged in a mortgage fraud scheme that involved the purchase of approximately 22 luxury homes in Hendersonville and Gallatin by unqualified straw buyers.

• All of these mortgage loans ended in default and foreclosure, resulting in losses to mortgage lenders after foreclosure totaling approximately $ 2,214,700, the U.S. attorney’s office said.

For more, see Sumner County men plead guilty in mortgage fraud scheme.

After Dealing With Homeowner's Multiple Bankruptcy Filings, Foreclosing Lender Winds Up With Trashed Home

In St. Petersburg, Florida, The St. Petersburg Times reports:

• Between 1999 and last January, [Rose] King filed for Chapter 13 bankruptcy protection eight times — a move that kept lenders from forcing the sale of her St. Petersburg bungalow. And when she finally moved out in March, she took everything, including the kitchen sink. "She lived two years for free, I can tell you that,'' says Kelly Goff, who held the most recent mortgage and had to schedule foreclosure sales four times. "I've never had anything like it, and I've had hundreds of loans. It's luck of the draw that I happened to get somebody who knew how to abuse the system and used it.''

***

• Goff says he spent more than $20,000 in legal costs before the foreclosure auction was finally held on March 14. As typically happens when property is mortgaged for more than it's worth, he bought the house with a $100 bid. And was appalled by what he found.

• The place was filthy. Everything that could be removed had been, including appliances, electrical outlets, light fixtures, even the toilet and door jambs. "It was total destruction,'' Goff says.

For more, see Chapter 13 standoff thwarts foreclosure on St. Petersburg house for years.

For another Central Florida horror story in which the bankruptcy system was arguably abused to delay foreclosure, see Thirteen times for Chapter 13, where a Palm Harbor couple reportedly together filed Chapter 13 bankruptcies a total of 13 times.

Go here for other posts on serial bankruptcy filings. SerialBankruptcyFilings

Premature Change In Locks Leaves Foreclosed Homeowners Locked Out, Pets & Belongings Locked In

In Manteca, California, KXTV News 10 reports:

• Less than two weeks after they lost their home to foreclosure, a Manteca family found themselves locked out with their pets and belongings still inside. Don and Brandi Furtado and their three children had been moving their things out of the house on Nehemiah Drive after the May 28 courthouse auction. When they returned for another load late Friday, they found the locks had been changed.

***

• Lodi attorney Robert Hardwick, who represents other lenders in eviction proceedings, said people living in foreclosed homes have rights as tenants even if they're former owners. "You've got to be careful as a lender because the lender can be subject to lawsuits if they wrongfully evict somebody without going through the proper procedures," he said. [...] A locksmith hired by [the foreclosing lender's agent] came to the house to change the locks again and give a set of keys to the Furtados. He also removed the lockbox from the front door handle.

For the story, see Family Locked Out After Foreclosure Auction (story no longer available online).

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

Clients’ Security Fund Of Ohio Doles Out Over $200K To Reimburse Clients For Attorney Ripoffs

In Columbus, Ohio, The Supreme Court of Ohio announced earlier this month:

• The Board of Commissioners of the Clients’ Security Fund of Ohio (CSF) awarded $208,188 to 25 victims of attorney theft at its meeting Friday, June 6, in Columbus. Nineteen former or suspended Ohio attorneys were found to have misappropriated client funds. More information about the disciplinary cases against some of these attorneys is available on the online docket of the Supreme Court of Ohio at:

http://www.supremecourtofohio.gov/clerk_of_court/ecms/
searchbypartyname.asp.

For the 19-member "honor roll" and brief description of the bad acts, and how much client cash each attorney (or now ex-attorney, as the case may be) improperly pocketed - listed by county, see Victims of Attorney Theft Awarded More Than $200,000 by Clients’ Security Fund (More Than $12 Million Returned to Consumers Since Fund's Inception).

----------------

If an Ohio attorney, in the course of representing you, screws you out of money or property through dishonest conduct, go to the The Clients' Security Fund of Ohio for more information.

For other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Owner's Title Insurance vs. Lender's Title Insurance: What's the Difference?

When buying a home, one of the typical expenses incurred by a homebuyer (and sometimes, a home seller) is for the purchase of title insurance. The homeowner typically obtains title insurance coverage for him/herself and, if the purchase is being financed, title insurance coverage for the motrtgage lender is also obtained.

For a basic primer on the difference between an owner's title insurance policy and a lender's title insurance policy, see Knowing your owner's title insurance from your lender's, published in a column in DC Chronicles.

Editor's Note:

In addition to being obligated to defend the insured property owner's (and/or mortgage lender's) interest in real estate (and indemnify the insured in the event of a loss) in the event there is an adverse claim against a previous owner of the subject property, a title insurance company is also obligated to foot the bill for the defense of the property title (legal fees, court costs, etc.).

For an example of how a buyer can screw himself over when purchasing real estate and tries to save on the cost of the insurance premium by not obtaining title insurance, see Clerk's error jeopardizes family's home (Undetected lien against seller haunts buyer) (In this case, not only is the homeowner on his own in defending against an adverse claim against the prior owner, but he has already shelled out about $10,000 of his own money in legal bills defending his title - money which, win or lose, he will never recover).

North Miami Home In Foreclosure A Death House For Over 50 Pets

In North Miami, Florida, WPLG-TV Channel 10 reports:

• Animal control officers removed two more mangy, malnourished and neglected animals -- this time cats -- from a woman's North Miami home Tuesday. It was the same home of Beverly Prady, who was arrested and charged with animal cruelty after 78 sick, crippled and bloodied dogs were removed from the residence Monday. Prady had close to 90 animals living with her in a dilapidated house at 990 NE 10th Ave. Animal control officers said 90 percent of those animals had to be euthanized.

***

• Neighbors said Prady might have had mental problems. Neighbors said Prady paid off the home years ago and that it simply fell apart around her. However, according to civil documents, Katline Realty was foreclosing on the property. Katline Realty owner Charlie Klar told Local10's Rob Schmitt that Prady recently ran out of money and borrowed $147,000 from him against her house.

• Schmitt asked Klar why he would approve a mortgage considering the home's condition. "I basically like to lose money," he said. "I've made so much of it." [North Miami Mayor Kevin] Burns said the city would investigate the foreclosure and whether Prady was taken advantage of possibly because she's mentally unstable.

For the story, see Most Animals Removed From Home Euthanized (North Miami Woman Charged With Animal Cruelty).

See also, Miami New Times: Dozens of Dogs Die (A tale of 78 abused pets and two peculiar people).

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

Eleven Victimized Families In Northern California Foreclosure Rescue Scam To Get Deeds Back

In Stanislaus County, California, The Modesto Bee reports:

• Eleven families will get their home deeds back, according to a restitution deal signed Thursday by convicted swindlers who prayed with some victims before duping them. Lonni Ashlock, 57, of Waterford also agreed to pay a total of $120,000 to 10 others, most of whom were evicted from their homes before they were sold to third parties. Ashlock and his partner, Ronald Buhler, 27, of Riverbank pleaded no contest in September to six fraud and grand theft felonies. [...] Their victims included an 86-year-old woman with dementia, a schizophrenic, a woman with brain lesions and several other disabled people, according to court documents and testimony..

***

• The Bee in July 2005 chronicled several lawsuits against Ashlock, Buhler and their many corporations and eventually tracked 142 properties the men had acquired.

For more, see Waterford swindler must pay victims $120,000.

Go here for earlier posts on Ashlock & Buhler.

NY Governor, State Lawmakers Announce Tentative Agreement To Alter Foreclosure Laws

In Albany, New York, The New York Times reports:

• Gov. David A. Paterson and leaders of the State Legislature announced on Thursday an agreement to overhaul state foreclosure laws, one of the few major deals that has emerged in the final days of the legislative session.

For more, see A Proposal From Albany on Stemming Foreclosures.

Feds Slam 400+ In "Operation Malicious Mortgage" National Takedown Of Alleged Mortgage Fraud Scams; Losses Estimated At $1B+

CBS News and The Associated Press reports:

• More than 400 real estate industry players have been indicted since March - including dozens over the last two days - in a Justice Department crackdown on incidents of mortgage fraud nationwide that stem from the country's housing crisis. The FBI put the losses to homeowners and other borrowers who were victims in the schemes at over $1 billion.

***

• Sixty people were arrested Wednesday as part of the three-month sting, dubbed "Operation Malicious Mortgage," [...]. People arrested include buyers, sellers and others across the wide-ranging mortgage industry. The take down focused primarily on lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes. [...] Officials have identified 10 "mortgage fraud hotspots" nationwide in California, Colorado, Texas, Minnesota, Michigan, Illinois, Ohio, New York, Georgia and Florida.

For more, see FBI Cracks Down On Mortgage Fraud (400 Real Estate Industry Players Indicted; Victims Lost More Than $1 Billion In Various Schemes).

See also, FBI Press Release: More Than 400 Defendants Charged for Roles in Mortgage FraudSchemes as Part of Operation "Malicious Mortgage" (Two Senior Managers of Failed Bear Stearns Hedge Funds IndictedToday in Separate Mortgage-Related Securities Fraud Case).

For a sampling of local stories throughout the country involving Operation "Malicious Mortgage", see:

• Arizona (Phoenix and Tucson): 36 Arizonans Swept Up In Mortgage Fraud Arrests;
• California (Sacramento): National mortgage-fraud crackdown nets five from Sacramento;
• California (San Francisco Bay Area): 13 locals charged in mortgage fraud sweep;
• California (San Diego): More than 400 indicted in nationwide crackdown (Six from San Diego real estate firm among 400+ real estate insiders swept up in nationwide crackdown);
• Florida (South Florida): Mortgage fraud initiative nets 102 arrests;
• Florida (Fort Myers): SW Florida real estate agent indicted; or go here to read the four-count indictment against SamirCabrera;
• Georgia (Atlanta): Feds indict seven in metro Atlanta mortgage fraud ring;
• Hawaii (Honolulu): Mortgage scammers caught in federal sweep ("Operation Malicious Mortgage" led to hundreds of arrests across the nation -- including several indictments in Hawaii, with more to come.);
• Illinois (Chicago): 67 from Chicago area charged in U.S. mortgage fraud probe;
• Indiana: 2 women face federal mortgage charges;
• Maryland (Greenbelt): Prince George's Woman Arrested in 'Massive' Mortgage Fraud;
• Maryland (Greenbelt): Businessman Indicted On Mortgage Fraud Charges (I-Team Investigation Uncovered Lewis's Alleged Scheme);
• Michigan (Detroit and Flint): Massive Mortgage Fraud Case Hits Home;
• Mississippi (Jackson): 11 nabbed for mortgage fraud;
• Nevada (Las Vegas): 8 Las Vegas Residents Indicted on Mortgage Fraud;
• New York (NYC): 2 former Bear Stearns execs indicted, arrested and also Q&A: Inside the Bear Stearns Indictments (two former hedge fund managers indicted on charges that they concealed problems that eventually led to the collapse of the funds.);
• Pennsylvania (Eastern PA): 4 from eastern Pa. are part of US crackdown on alleged mortage fraud;
• Texas (Dallas-Fort Worth): Eight arrested, three others indicted in North Texas mortgage fraud; or go here to read the indictment (4.97 MB);
• Texas (Houston): Mortgage fraud scheme lands 6 in jail;
• Utah (Salt Lake City): Two Utahns accused in mortgage fraud schemes;
• Washington State (Seattle): 6 from Seattle-area indicted in crackdown on mortgage fraud.

Go here for links to other local stories around the country on Operation Malicious Mortgage.

California Woman Faces Accusations Of Pocketing Fees In Alleged Foreclosure Rescue Scam That Clipped As Many As 100 Victims

In Gonzales, California, KSBW-TV Channel 8 reports:

• A Central Coast woman is accused of targeting homeowners on the verge of losing their homes and swindling them out of thousands of dollars. Gonzales police said Melissa Garcia targeted homes in foreclosure and scammed troubled homeowners out of thousands of dollars. Victims said they paid more than $2,500 to get help saving their homes and Garcia never carried through with any of her promises.

• Fred Lombardi, a Gonzales police sergeant, said as many as 100 people throughout Monterey, Santa Cruz, Santa Clara and San Benito counties may have been a victim of the scams. "They're upset," Lombardi said. "They get that final glimpse of hope, draw money together from family members and friends to get taken care of. In the end they find out the money's gone as well."

***

• Garcia was arrested last week in Santa Cruz County on [unrelated] theft charges and was released on bail. Police are still trying to identify a business associate accused of taking part in the scam.

For more, see Woman Accused Of Scamming Troubled Homeowners (Victims Paid More Than $2,800 Trying To Save Foreclosed Homes).

See also, Woman suspected of running home loan scam.

More On The New York State Residential Mortgage Foreclosures Program

New York Court of Appeals Chief Judge Judith S. Kaye announced this week a new statewide program intended to educate homeowners and facilitate early negotiations and settlements as a response to the dramatic rise in residential foreclosure filings throughout New York.

For a formal description of the program, see Residential Mortgage Foreclosures: Promoting Early Court Intervention.

Squatters, Scammers & Other Assorted Freeloaders Making Themselves At Home In High End Vacant Miami Condos In Foreclosure

In Miami, Florida, The Miami Herald reports:

• Among the decidedly low-rent problems plaguing South Florida's luxury condo market, squatters are the latest headache to arise from the glut of vacant foreclosures in some of Miami's toniest condominiums.

• At a recent meeting at the Brickell on the River North, a room full of property managers sat down to commiserate over a slew of other troubles: Impostor landlords leasing units they do not own, collecting deposits and rent from unsuspecting tenants, and a rash of vandalism and burglaries. Investor-owners, desperate to turn a dollar, are even renting to tourists by the day, undercutting local hotels at bargain rates.

For more, see Condo bust draws scams and squatters (Property managers at condos are coping with new schemes -- some criminal, others plain irritating -- arising from foreclosures) (if link expires, try here and try here).

Heavy Backlog Of Foreclosure Cases In Manatee County Only The "Tip Of The Iceberg"

In Manatee County, Florida, the Bradenton Herald reports:

• The housing foreclosure fallout carries a very real price tag for all of Manatee County. The court system's backlog of foreclosure cases has tripled in the past year. [...] "It's never been like this," [Manatee Circuit Court Judge Paul] Logan said. "I haven't seen any signs that it's getting better. In fact, I've talked to a few local attorneys who represent lenders and I've said, 'Hopefully we've seen the entirety of the problem.' But all of them have told me we've only seen the tip of the iceberg. The bulk of it's still out there. One of them told me we're at least 12 to 18 months out before we see any noticeable change."

For more, see Foreclosures create ripple effect in Manatee (Neighborhoods, courts show strains as housing crisis enters 'uncharted territory').

In a related story, see Warning: Court System Traffic Slows Ahead, which describes budget cuts and an explosion of foreclosures as contributing factors to the current strain on the Florida court system).

When Builders Go Belly Up, Recent Homebuyers In Partially Complete Developments Get Hammered

The following links are to stories of what happens to recent new-home buyers when their builders go bankrupt, leaving their developments unfinished:

• Nashville, Tennessee: Homeowners Feel Pain Of Bankrupt Builder (Corinthian Went Into Bankruptcy In February),
• Antioch, Illinois: When Builders Go Broke (Chicago-based Neumann Homes went bankrupt last November, leaving a trail of wreckage in its path. Its worst victims? Homeowners),
• Gilbert, Arizona: Unfinished subdivisions in east Gilbert grinding to a halt (Foreclosures spread to developers' vacant lots).

SW Florida Real Estate Agent Faces Federal Indictment In Alleged Illegal Flipping Deals

In Fort Myers, Florida, The News Press reports:

• The indictment and arrest of former Fort Myers real estate agent Samir Cabrera is part of Operation Malicious Mortgage, a nationwide crackdown on mortgage fraud. [...] Cabrera was indicted on four counts of wire fraud as part of allegations of a multi-million dollar real estate scheme. [...] Cabrera was involved in a scheme to defraud investors in at least two land-flipping deals involving property [...] in south Fort Myers[, according to the indictment].

For more, see SW Florida real estate agent indicted.

See also, Indictment may slow suits against Cabrera.

For the indictment, see U.S. v. Cabrera.

Go here for other posts on Samir Cabrera.

Another Maryland Foreclosure Rescue Operator Faces Federal Indictment

In Greenbelt, Maryland, The Baltimore Sun reports:

• A widespread probe of mortgage fraud resulted yesterday in grand jury indictments against four Maryland residents, less than a week after federal prosecutors here accused eight other people of bilking homeowners and banks of more than $35 million in an unrelated mortgage scheme.

• In the latest indictments, Cheryl Brooke, 51, and Michael K. Lewis, 56, of Upper Marlboro; his brother, Earnest Lewis, 59, of Takoma Park; and Winston Thomas, 42, of New Carrollton, are accused of conspiracy to commit wire fraud and wire fraud in connection with a scheme in which they offered to help homeowners stave off foreclosure. Instead, they defrauded mortgage lenders and the homeowners, the 12-count indictment says.

For more, see Jury indicts four more in mortgage fraud probe.

See also, WBAL-TV Channel 11: Businessman Indicted On Mortgage Fraud Charges (I-Team Investigation Uncovered Lewis's Alleged Scheme).

• A Prince George's County businessman was indicted on charges of bilking his customers out of their homes and their equity while they thought he was saving them from foreclosure. The WBAL TV 11 News I-Team first began investigating Michael K. Lewis last year. He was indicted Wednesday on mortgage fraud charges and he could face millions of dollars in fines and the possibility of spending the rest of his life in prison.

See also, U.S. Attorney press release: Michael K. Lewis and Three Others Indicted in Mortgage Fraud Scheme - Allegedly Targeted Victims Through Local TV Ads.

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

Court Approves Massachusetts Settlement With Lenders In Bogus Foreclosure Rescue; Case Involved AG Claims Of Equitable Mortgage, Usury, Etc.

(originally posted 6-18-08; modified 6-19-08)
From the Office of the Massachusetts Attorney General:

• The U.S. Bankruptcy Court has approved a settlement between Attorney General Martha Coakley’s Office and 10 mortgage lenders and servicers that funded or serviced loans which facilitated fraudulent foreclosure rescue transactions by Brockton attorney Alec Sohmer. The Settlement Agreement with the lenders, entered last week by Judge Joan Feeney, was reached by the Attorney General’s Office and the Chapter 7 trustee in Sohmher’s bankruptcy case. The Settlement impacts 26 residential properties that are part of Sohmer’s bankruptcy case and is designed to return homeowners to their financial position before Sohmer arranged foreclosure rescue transactions that stripped their home equity and required payment of Sohmer’s fees and high settlement costs. The settlement will also provide an opportunity for Sohmer’s victims to reacquire the legal title to their homes.

***

• Under the terms of the settlement, the lenders and servicers will provide restitution to the homeowners victimized by Sohmer’s fraudulent scheme by reducing the outstanding mortgage liens on the homeowner’s properties, and in many instances allowing the homeowners to apply to assume the loans. As a result of the foreclosure rescue scheme, 26 homeowners had transferred the titles of their homes to Sohmer. The original homeowners can now reclaim their property by paying a reduced mortgage obligation instead of the inflated mortgage loan arranged by Sohmer, and by refinancing the loans.

• The mortgage lien will be reduced to the lower of the actual amount paid for prior mortgage loans on the property, subtracting any beneficial payments to the homeowners; or 80% of the current value of the properties. In total, across 26 properties, the settlement will provide approximately $1.8 million in reduced mortgage obligations.

For more, see Massachusetts AG press release: Bankruptcy Court Approves Settlement Between Attorney General’s Office and Ten Mortgage Lenders and Servicers Involved in Foreclosure Rescue Transactions.

Go here to view the Proposed Amended Complaint filed by the Massachusetts AG's office, setting forth the allegations against the foreclosure rescue operators.

For earlier posts on this case, see:

• Foreclosure Rescue Sale Leaseback Deals Are Usurious Equitable Mortgages, Says Massachusetts AG's Civil Lawsuit, or
• Go here for all earlier posts.

Editorial Note:

As best as I can figure it, the $1.8 million hit that the lenders are taking represents the approximate home equity that the foreclosure rescue operator ripped off from the homeowners. Further, the settlement in this case appears to be a good illustration of how equity stripping, foreclosure rescue lawsuits in which a claim of equitable mortgage is made should be resolved when the financially strapped homeowners sign over the title to their homes but remain in possession thereof pursuant to some form of lease/buyback arrangement.

The homeowner's continued possession of the home after signing over the deed generally constitutes either actual or constructive notice to the foreclosure rescue operator's (or straw buyer's) mortgage lender of the homeowner's rights in the home under the equitable mortgage doctrine. This would be the case even if the mortgage lender had no actual knowledge of the arrangement between the foreclosure rescue operator and the homeowner (as any experienced real estate attorney will advise, one can be deemed to have "actual or constructive notice" of another's rights in real estate without actually having knowledge of the existence of those rights - see The Bona Fide Purchaser for Value of a Legal Estate Without Notice for a beginner's guide to actual and constructive notice, and the bona fide purchaser doctrine).

The effect, as illustrated in the Massachusetts AG's settlement, is that it is the equity stripper's lender, not the homeowner, that gets the screwing over in the deal. Of course, the lender will then have a cause of action for any damages it suffered against the foreclosure rescue operator, any straw buyer, possibly the title insurance underwriter who issued any title policy in the transaction, and anyone else who participated in the fraud.

New Jersey AG Tags Downstate Firm With Suit Alleging "Rent To Own" Rent Skimming Scam

In South Jersey, The Philadelphia Inquirer reports on one of the three civil lawsuits recently filed and announced by the New Jersey Attorney General's office alleging various forms of mortgage and real estate fraud:

• The New Jersey Attorney General filed mortgage-fraud lawsuits yesterday in three counties against 36 defendants, including a South Jersey company accused of running a "rent-to-own" housing scam.

• In that lawsuit, filed in Camden County, the attorney general said Ultimate Real Estate Solutions in Williamstown set up a scheme to acquire 18 properties through fraudulent mortgage applications. Customers with bad credit were promised they could rent the properties - and eventually own them - while Ultimate paid the mortgages. Instead, the attorney general said, Ultimate collected the rent and allowed the properties to fall into foreclosure.

***

• A phone listing for Ultimate Real Estate was disconnected yesterday. The company and its president, Halimah Prater, were both named in the lawsuit. The Camden County complaint said Prater sought "investors" with good credit who could buy houses for people with bad credit. At least 16 properties were bought in the names of two men, Herbert Coleman and Yusef Hason, according to the complaint. Prater told Coleman, who had recently moved from a homeless shelter to a group home, that the properties would be in his name for only 30 to 90 days and that he would make "a few thousand dollars" on each sale, the complaint said.

For more, see N.J. firms named in rent-to-own housing scam.

To view the NJ AG's lawsuit and read how alleged scams like this work, see Milgram v. Ultimate Real Estate Solutions, L.L.C. et al..

For more on problems with "Rent To Own" and Lease / Option real estate deals, go here and go here.

Editorial Note:

While this case has been brought in the form of a civil lawsuit by the state Attorney General's office, conduct is alleged that the complaint specifically refers to as criminal in nature. As such, it wouldn't be a surprise if the New Jersey Feds (U.S. Attorney's Office, FBI, IRS, et al.) are watching this matter and loading up for a case of their own involving criminal charges (ie. mail & wire fraud, conspiracy, racketeering, money laundering, tax evasion, etc.) against these defendants. rent to own lease purchase option scams yellowstone equity skimming unwittingly digamma

Florida Title Agency Owner, $2.5M In Escrow Funds Missing, Leaving Stiffed Customers & Employees; Insurance Underwriters Left To Clean Up Mess

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

• Before his disappearance plunged employees and customers of one of Florida's largest independent title companies into chaos last week, Flagler Title founder Roger Gamblin dipped into millions of dollars his company held in escrow for clients, according to testimony Monday. An auditor for one of the insurance companies backing Flagler Title testified in an emergency hearing that Roger Gamblin had used at least $2.5 million of escrow funds to cover shortfalls and pay property taxes and as a "personal line of credit." [...] The last anyone heard from him was a telephone call on May 29.

***

• A judge placed Flagler Title in receivership Monday at the request of its insurance underwriters, who have been left to clean up the mess. The insurers were even forced to post security guards last week at some offices to ward of looting by disgruntled employees. [...] Prospects for customers who had placed millions of dollars in Flagler Title's hands are uncertain. [...] Flagler Title employees learned in a conference call last week that the company had run out of money and that their mid-June paycheck would not arrive, a former employee said Monday. "There were some very disgruntled people on that call," said the employee, who asked to remain anonymous.

For more, see Millions missing at title company.

In a related story, see Title firm owner had been fined:

• [Roger Gamblin, t]he West Palm Beach title company owner who disappeared in late May - allegedly after making free use of $2.5 million of his clients' escrow funds - had been fined $25,000 three months earlier by state regulators who accused him of paying kickbacks in exchange for business referrals. [...] That was the second time in two years that Gamblin had been accused of wrongdoing by state officials. In May 2006, Gamblin, 59, paid a $2,500 fine to settle charges that he paid kickbacks, overcharged for insurance, failed to issue a policy and failed to submit timely payments to the insurer who was underwriting a title insurance policy.

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