Using "Straw Buyers" In Short Sales As A Way To Lower House Payments A New Way To Screw Lenders? Local DA Says The Crime Has Low Priority

In Southern California, this excerpt buried in a recent story in The Press Enterprise reports on what may be a new scam that may be taking hold to screw lenders holding mortgages on "upside down" homes(1):

• In another scam on lenders, homeowners have been lowering their mortgage payments by arranging fraudulent "short sales" at prices less than what they owe their lenders.(2) The buyer whom the seller chooses, who may be a relative or friend or a "straw buyer" paid for his service, agrees to transfer ownership back to the seller, who winds up with a smaller mortgage on the same house and never has to move. In such a short sale, the seller commits fraud by having a side arrangement with the buyer that he does not disclose to the lender.

***

• A borrower who takes part in one of these scams can be sued by the lender or criminally prosecuted. The real estate agent involved can be prosecuted and lose his or her license.(3)

***

• However, neither the lending industry nor law enforcement has aggressively punished such offenders. Larry Roberts, who leads the real estate fraud unit of the San Bernardino County district attorney's office, said lying on a mortgage application is a prosecutable crime, but it has low priority. He said the office is more eager to prosecute scammers who profit by deceiving consumers into believing they can help them avoid foreclosure than it is in catching consumers who defraud a lender with the intention of buying or keeping a home.(4)

For more, see Homeowner fraud exacerbates mortgage crisis.

(1) Homes having a current value that is less than the current balance owed on the existing mortgage loans.

(2) According to the story, a local lawyer who specializes in recovering losses from mortgage fraud for lenders, estimated that one-quarter of the "short sales" in this market would fail to meet the criteria of arm's-length transactions.

(3) According to the story, real estate agents and brokers can be held liable, said John Giardinelli, a lawyer who represents nine Southern California real estate associations. Reportedly, Joe Cusamano, broker/owner of Pro-One Investments in Riverside and president-elect of the Inland Valley Association of Realtors, said he knows he has clients who have lied to lenders to "buy and bail" and done short sales between parents and children. He said he tells them what the law requires but still works with them because he believes they are good people caught in a collapsing market who are not getting sufficient help from either lenders or the federal government.

(4) Reportedly, wrongdoers might be further insulated by California law, which, according to the story, greatly restricts a lender's ability to sue borrowers to collect the money they've lost in a foreclosure or short sale (ie. obtaining deficiency judgments).

Final Suspect In Home Improvement/Mortgage Scam Resulting In Ripped Off Home Equity Involving 130 Loans & $13M Convicted By Florida Jury

From the Florida Attorney General's Office:

• Attorney General Bill McCollum [last week] announced that the final participant in a multi-million dollar mortgage fraud scheme has been convicted by a Polk County jury after only 45 minutes of deliberation. Samuel Green faces up to 60 years in prison for his role in the scheme which spanned more than two years and involved loans in Hillsborough, Lee, Pinellas and Polk counties.

***

• The three-year investigation began when victims filed complaints about incomplete or substandard construction work being performed by construction companies affiliated with co-defendant Scott Almeida.(1) Almeida and his associates secured mortgages for homeowners to finance the home repair projects by submitting fraudulent documents to Argent Mortgage Company. Co-defendant Orson Benn,(2) as vice president of Argent, approved or oversaw the approval of the fraudulent loan applications. Green also worked for Argent as an account manager and a regional production manager and assisted with the approval of the loans.

• Investigators followed the trail of fraudulent applications back to the organized criminal operation which submitted nearly 130 loans to Argent that were funded for approximately $13 million.(3)

For more, see Participant in $13 Million Mortgage Fraud Scheme Convicted by Polk County Jury.

Go here for links to earlier media reports on this story.

(1) Almeida pleaded guilty last October and will serve 10 years in prison for the crimes he committed. He received statewide publicity in the recent Miami Herald investigative report on convicted felons running rampant in the Florida mortgage origination industry.

(2) Benn was convicted by a jury in July; and was sentenced in September to 18 years in prison.

(3) Co-defendants Frank Giffone, Adrienne White and Bradford Peck have all pleaded guilty to similar charges; Giffone and White will be sentenced at a later date and Peck was previously sentenced to eight years in prison. Green will be sentenced in October.

Rhode Island Closing Attorney Disbarred For Pocketing $2.5M+ In Loan Proceeds From Real Estate Transactions; Matter Referred To Law Enforcement

In Providence, Rhode Island, The Providence Journal reports:

• A Cranston lawyer who handles real-estate closings has admitted to stealing more than $2.5 million from homeowners who were refinancing or buying new homes, the state’s chief disciplinary counsel said yesterday. The Rhode Island Supreme Court disbarred lawyer Pasquale A. Scavitti III on Wednesday, less than half an hour after his lawyer disclosed that Scavitti had stolen money from a total of 12 homeowners — in amounts ranging from $80,341 to $490,290, said David D. Curtin, the Supreme Court’s chief disciplinary counsel.

• Scavitti, 46, of Cranston, has not been charged with a crime, his lawyers said. But Curtin said he has contacted the state police and the attorney general’s office, providing them with a package of information about Scavitti.

***

• The money came from 12 homeowners and involved 13 transactions, Curtin said. Most of those homeowners are Rhode Islanders, and most of the transactions involved mortgage refinancing, he said. Curtin declined to identify the homeowners, saying he had not contacted all of them yet.

***

• Curtin urged “anyone else who may have been a victim of Mr. Scavitti” to call his office at (401) 222-3270. Also, he mentioned that the Rhode Island Bar Association has a fund to reimburse clients when lawyers have stolen from them.

For more, see Lawyer admits taking $2.5 million from clients.

Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

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If a Rhode Island attorney, in the course of representing you, screws you out of money or property through dishonest conduct, go to the Rhode Island Bar Association Lawyer's Fund For Client Reimbursement 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. sneaky slick escrow agents gamma

Bankruptcy Court Disallows Creditor Claim, Voids Mortgage Lien Due To Lender's Screw Up In Establishing Chain Of Title

On the Bankruptcy Law Network blog, Massachusetts attorney L. Jed Berliner comments on a 2006 case in which a bankruptcy judge disallowed a mortgage lender's secured claim for a loan it held and voided the lien of the mortgage:

• Foreclosures are being stopped because the purported mortgage holder cannot prove it holds rights to the mortgage. Those cases do not remove the mortgage entirely, but only stop the foreclosure. More can be done.

• Section 506(d) of the Bankruptcy Code will permanently void a mortgage [lien](1) if the claim is disallowed. This can be easier than you think. With so many mortgages being sold and resold, the electronic transfer of the funds moves much faster than the papers. Sometimes the paperwork is never completed.

• In In re Long, 353 B.R. 1 (Bankr D MA 2006) (Somma, J.), the bankruptcy court permanently voided a mortgage where the holder could not prove it held rights to the mortgage.(2)

Source: Missing Assignment Voids Mortgage.

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.

(1) In contrast to voiding the actual debt secured by the mortgage lien.

(2) According to the bankruptcy judge hearing the case, the existence of two critical gaps in the mortgage loan's chain of title from the initial mortgage holder to the last mortgage holder was fatal to the secured creditor's bankruptcy claim (See: In re Long, 353 B.R. at 16-17):

• Portfolio contends that it holds title by virtue of two assignments: the first from Astrum to Union Mortgage Company, and the second from Resolution GGF OY “as successor in interest to Union Mortgage Company” to Portfolio. The first assignment has been well established: the assignment from Astrum to Union Mortgage Company, having been made and signed by Astrum itself, appears to be valid and in order.

• The second assignment, however, was not executed by Union Mortgage Company, the assignee under the first mortgage. Rather, it was executed by “Foremost Servicing Company, Inc., by Power of Attorney for Resolution GGF OY, Successor in Interest to Union Mortgage Company, Inc.”

• The assignment is effective only if (1) Resolution GGF OY was in fact the successor in interest to Union Mortgage Company with respect to ownership of the promissory note and mortgage and (2) Foremost Servicing Company, Inc. held a valid power of attorney for Resolution GGF OY.

• The assignment itself is not evidence that either of these necessary conditions was satisfied when the assignment was executed. (my emphasis added) Proof that these conditions were satisfied requires evidence extraneous to the assignment. Portfolio submitted no such evidence either with the proof of claim or at the evidentiary hearing.22

• Hence, there are two critical gaps in the Portfolio’s proof that it holds title (my emphasis added). In view of these gaps, I conclude that the Debtor has rebutted the prima facie evidence of the proof of claim, that the burden of proof was thereby shifted to Portfolio to prove that it is the holder by assignment of the promissory note and mortgage, and that Portfolio has failed to carry this burden. Portfolio has failed to establish that it is the holder by assignment of the second mortgage. The Debtor’s objection to the secured claim of Portfolio must therefore be sustained, the claim disallowed, and, in accordance with 11 U.S.C. §506(d),23 the mortgage declared void. missing mortgage foreclosure docs gamma

Foreclosure Defense Law Seminars Coming To Miami, Cleveland

In Miami, Florida, The Florida Bar News reports:

• April Charney, a Jacksonville Area Legal Aid lawyer and nationally recognized foreclosure defense expert, is the featured speaker at a September 12 seminar in Miami---designed for all attorneys interested in learning how to handle defense of foreclosure cases. [...] Registration for the seminar begins at 8:30 a.m., and the seminar begins at 9 a.m. on Friday, September 12, at the Dade County Courthouse, Courtroom TBA, 73 W. Flagler Street, Miami.

Topics include:

1. Federal laws that govern mortgage originating and servicing;
2. Laws and regulations that govern mortgage lending and servicing;
3. Understanding loan documents, origination, and closing process;
4. Servicing problems and post origination issues;
5. Common law/state law causes of action and affirmative defenses;
6. Drafting discovery/motion practice.

For details and contact information, see Defending Foreclosures in Florida.

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In Cleveland, Ohio, the Institute for Foreclosure Legal Assistance has their mortgage foreclosure defense Intensive Training Session scheduled for September 4, 2008 at Cleveland Marriott Downtown at Key Center, 127 Public Square, Cleveland.

This session coincides with the National Association of Consumer Advocates' 2008 Mortgage Lending Litigation Conference on September 5-7, to be held at the same location in Cleveland. Go here for the Beginning Track Agenda, and go here for the Advanced Track Agenda.

Elderly Facing Foreclosure Rely On Housing Non-Profits To Save Homes

Two recent stories report on the efforts of community housing non-profit groups to help the elderly save their homes from foreclosure:

1) In Irvington, New Jersey, The Star Ledger reports on the efforts of one group to help 83-year old Annie Anderson from losing her home of 30 years after it was sold at a foreclosure sale and the local sheriff's office showed up at her front door to evict her:

• CDC Properties, an affiliate of First Baptist Community Development Corporation, has a housing recovery initiative that helps families facing foreclosure. Under the program, CDC Properties will make an offer to buy Anderson's home, then rent it back to her or sell it to her when she qualifies for a mortgage. The Rev. DeForest "Buster" Soaries Jr., senior pastor of First Baptist Church of Lincoln Gardens, said Anderson's case needs to be investigated to determine if there was fraud. "Somebody got over on Mrs. Anderson," said Soaries, who also is chairman of CDC Properties.

For more, see A pillar of town gets vital support.

2) In Columbus, Ohio, NBC 4 reports:

• [I]t isn't much of a house to look at on the outside, but inside, it's Oneida Street's home. It has been since 1959 and she's hoping to keep it that way. However, she is in the middle of a foreclosure. [...] For more than 80 years, she's been playing the organ for her Methodist church, saying it keeps her going. At an age when most people would have their home paid off, she's still making payments. There has been a series of bad loans, unemployment and the dead and cancer bills of her late husband, all of which has had her paying a mortgage for nearly half a century. Recently, Street got in touch with the Columbus Housing Partnership, which has helped her reduce her payments.

For more, see Local Resident Depends On Group To Keep Her Home.

Rochester Considers Selling Delinquent Tax Liens In Response To Slow Revenue Collections

In Rochester, New York, the Rochester Democrat & Chronicle reports:

• More than $20 million in delinquent city property tax liens could be sold to a private firm later this year — not uncommon for governments locally and elsewhere but a first for Rochester. The bulk sale of tax liens is the city's latest attempt to raise cash by selling off assets. Mayor Robert Duffy has said such actions are necessary, though not preferable, given tough budget times.

***

• Several council members remain uncertain. Others in the community are skeptical. "The devil is always in the details," said Ruhi Maker, senior attorney with the Empire Justice Center in Rochester. "I would be deeply disturbed. Why such a program, particularly right now with the crest of the foreclosure crisis about to hit us?"

For more, see Rochester split on selling delinquent tax liens.

Property Tax Assessor Takes Heat From City Officials Claiming To Be Blindsided By Lower Than Expected Tax Revenue

In California, Contra Costa (County) Times reports:

• Contra Costa cities hardest hit by the foreclosure crisis say the county assessor has made their fiscal situations worse with wholesale downgrades of property values. Just doing my job, says Gus Kramer. The outspoken elected official tasked with adjusting homes' assessed values has been confronted by three East County leaders questioning what they see as overly aggressive slashing of property values.

***

• Kramer met with Antioch, Brentwood and Oakley city leaders in early July. They said that they were blindsided by lower than anticipated property tax revenue.

For more, see County assessor takes heat for downgrades.

Wisconsin Court Rules Against Home Improvement Company For Violations Of State Consumer Protection Laws

The Wisconsin Attorney General's Office announced last month:

• The Wisconsin Department of Justice ("DOJ") obtained a judgment on Tuesday holding Middleton company, Asphalt Specialists, L.L.C., and its owner Jace McDonald liable for violating state consumer protection laws. The defendants provide various home improvement services including asphalt and cement paving, deck sealing and gutter cleaning. After an investigation and referral by the Wisconsin Department of Agriculture, Trade and Consumer Protection, DOJ filed suit against the defendants in October, 2007.(1)

For the press release, see Middleton Company Violated State Consumer Protection Laws, Court Rules.

(1) According to the press release, the lawsuit alleged that the company, under the direction of McDonald engaged in misleading and deceptive behavior to solicit home improvement services and then failed to comply with state home improvement laws in conducting services by, among other things:

• failing to provide home improvement contracts;
• substituting products or materials used in conducting its services;
• misrepresenting it was licensed and bonded to conduct work;
• failing to provide customers with lien waivers following payment; and
• deceptively advertising its services by promoting gift cards that the company failed to honor.

Slow Sales Force Massachusetts Condo Developers To Let Customers "Test Drive" Units Thru "Rent/Option To Buy" Arrangements To Unload Excess Inventory

In Massachusetts, The Boston Globe reports:

• The Carruth, a mix of affordable apartments and market-rate condominiums in Dorchester, opened earlier this year, as the market for condos had turned sharply downward. Sales of the 42 condos in the building languished, with only three sold to date. So, developer Trinity Financial Inc. of Boston decided to offer the units as a variation of rent-to-own - leases with an option to purchase at a potential discount.(1) "We've had great success with it so far," said Abby Goldenfarb, project manager for the developer, noting that nearly all of the 20 new renters have signed up for the purchase option.

***

• Economic Development Financing Corp., also known by its initials EDFC, is using rent-to-own(2) in three projects now under development. They are the 82-unit downtown Brockton Renaissance Village on the site of two former shoe factories; a downtown Worcester development with more than 150 units on South Main Street; and the 275-unit Residences at Riverview in Mattapan, next to the Massachusetts Bay Transportation Authority's Mattapan station.

For more, including some of the pros and cons of rent-to-own arrangements, see In slow market, developers offer 'test drive' of condos (Rent-to-own results can be mixed, but backers point to filled units and buyers' rebuilt credit).

(1) The Carruth has reportedly advertised its rent-to-own units as "test drives."

(2) According to the story, the deals offered by both Trinity Financial and EDFC are not pure rent-to-own. Renters are not legally bound to purchase, and portions of the rent are not earmarked for down payments. At the Carruth and the EDFC projects, the arrangements are that renters have the option to purchase their units later at a pre-determined price.

Lenders May Be Choking On Foreclosures As Some Homeowners Admit To Stiffing Lenders For 6-8 Months Without Receiving Default Notice

In Southern California, North County Times reports:

• Some homeowners in the area have gone months without paying their mortgages and have yet to receive a foreclosure notice ---- a development that suggests banks are overloaded and that also might mean foreclosure reports are understating the region's housing crisis.

***

• Several homeowners in the area interviewed last week said that they stopped paying their mortgages six to eight months ago and still have not received a notice of default, which typically comes by the fourth month of nonpayment.

For more, see Banks waiting longer to foreclose (Homeowners report not paying mortgages for eight months with no foreclosure).

Home Sold Out From Under Owner Due To Loan Servicer Screw-Up; Channel 5 ConsumerWatch Comes To Rescue

In Pleasanton, California, KPIX-TV Channel 5 reports:

• Friday would have been more than the start of a holiday weekend for Martha De Jesus and her three kids. "I was going to be homeless," De Jesus said. "I was going to have to put my kids in different homes." Her home was sold out from under her because of a mortgage mix-up. De Jesus had an automatic mortgage pay, but when Wells Fargo Bank switched mortgage sites in the summer of 2007, De Jesus says she didn't receive a notification. She assumed her mortgages were coming out of her account as they always had. "I discovered while I was Christmas shopping that in my statement my account looked a little bigger. I called Wells Fargo," said De Jesus. But it was too late. "It consisted of months of re-faxing, of calling," said De Jesus.

***

• De Jesus called CBS5 ConsumerWatch, which called Wells Fargo. "I saw results in one or two days, in contrast to seven months," said De Jesus.Wells Fargo told ConsumerWatch that they would rescind the sale, and, in a statement, said, "In reviewing the documents she provided us just prior to the foreclosure sale, we have been able to identify a loan payment solution that would allow her to remain in the property."

For more, see Mix-Up Nearly Costs Pleasanton Family Their Home (read story) (watch video).

California Tenants In Foreclosed Homes Now Get To Live Free For 60 Days After Sale While Looking For Another Rental

For tenants in California, a blurb buried at the end of a recent article in the Visalia Times Delta serves as a reminder on a new state law protecting tenants in foreclosed homes:

• [A] new state law, however, gives renters 60 days after a foreclosure sale to move out. During that time, tenants are not required to pay rent and landlords have no right to ask for it, said Suzanne Swenk, a supervising attorney with the Visalia-based Central California Legal Services, which advises low-income tenants in rental disputes.

California tenants are well advised to research the local ordinances of their cities or towns to determine if those ordinances give even greter protections than the new state law.(1)

For the story, see Renters rocked by foreclosure evictions (Landlords who default on mortgages leave tenants without homes).

(1) For example, reportedly under San Francisco laws, foreclosure is not grounds for a tenant eviction in building covered by the local rent control law. Unless tenants have stopped paying rent or otherwise have misbehaved, generally a tenant in a rent-controlled building can be forced out only when a new owner plans to demolish the property, has secured the necessary approvals to convert into it condominiums or plans to move in family members or him or herself, according to the city's rent ordinance. Even then, the owner typically must provide several months' notice and thousands of dollars in relocation costs. For more, see San Francisco Chronicle: Foreclosure's hidden victims. TenantRentSkimmingAlpha

Anxious Seller Tries "Rent To Own" Approach To Unload Home; Ends Up Getting Stiffed & Now Faces Foreclosure With Trashed House

In Springfield, Massachusetts, WGGB-TV Channel 40 reports:

• Finding a buyer in this housing market is tough. So Springfield homeowner Rosemarie Rosado decided to try a rent-to-own approach. [...] She took the appropriate steps and drew up a legal agreement. For about six months the buyers paid their monthly fee. That stopped three months ago. Rosemarie had no choice but to evict the family. When she got inside her home again she found it trashed. [...] Rosemarie is now facing foreclosure again.

For more, see Rent To Own To Foreclosure (read story) (watch video).

"Teed Off" Consumer Activists Plan Pickets At Bay State Deutsche Bank Golf Tournament

In Norton, Massachusetts, the Boston Herald reports:

• Activists plan to picket the Deutsche Bank Championship golf tournament in Norton today, saying they’re teed off about the sponsor’s role in the Bay State foreclosure crisis. “Deutsche Bank was the biggest forecloser and evicter in Massachusetts last year by quite a bit,” charged Steve Meacham of protest organizer City Life. “We feel we can’t have them sponsor a high-profile golf tournament without saying something to them.” Protesters intend to rally outside the PGA event, which features Phil Mickelson, V.J. Singh and other top golfers.

***

• Deutsche Bank counters that it’s just a mortgage middleman, with little power over home seizures even though its name often appears on foreclosure papers.

For more, see Activists to protest at golf tourney.

Vacant 10-Unit Foreclosed Building Goes Up In Smoke; Authorities Blame Arson

In Western Pennsylvania, the Pittsburgh Tribune Review reports:

• A fire that destroyed an abandoned Jeannette row house early Friday morning was arson, fire officials said. "Someone lit them. It was an arson," said Jeannette fire Chief Mike Bertolino. "There's no power, no gas, no nothing to it." [...] No injuries were reported. Bertolino said the two-story row house containing 10 units was vacant for several years. It is in foreclosure, he added.

***

• The structure was demolished after the fire was extinguished, Bertolino said. Officials will contact the bank that foreclosed on the building to get the company to clean up the debris, he said.

For more, see Jeannette row house fire ruled arson.

For other stories on fires & foreclosures, go here, go here, go here, go here, and go here. ArsonForeclosureAlpha

Ex-Homeowner Charged With Ripping Off $42K+ From Foreclosing Lender's Attorney's Bank Account

In Farmington, Connecticut, The Bristol Press reports:

• Police said a former Colchester man found a creative way to get back at the company who foreclosed on his home - he stole its account number during the proceedings and used $40,000 of their money to pay off his other bills. Arthur Bruce, 31, [...] turned himself in Tuesday to face a charge of first-degree larceny.

• Local police began investigating Bruce after a law firm with accounts at Farmington Savings Bank noticed someone had racked up thousands in fraudulent transactions. [...] In all, Bruce was able to transfer by wire more than $42,000 from the law firm's account to generate 39 fake transactions from early June to late July. The scheme unraveled when police realized he had received a letter in May from the law company about the foreclosure that detailed wiring instructions to their account to make delinquent loan payments.

For the story, see Man gets even with mortgage company.

Foreclosure Filings A Handy Tool For Job Site Thieves In Identifying Easy Targets

A recent story in The New York Times on the increase in thefts at construction sites included this blurb on the use of foreclosure notices by some thieves in locating targets:

• “Builders in Chapter 11 and lenders foreclosing on properties still under construction aren’t as diligent about security,” said Mark Ouimette, managing director at Beecher Carlson, an insurance company based in Atlanta that underwrites policies for homebuilders. Indeed, police officials from Tucson to Miami report that thieves often peruse foreclosure filings to find idle and unsupervised projects. Insurers like Beecher Carlson said that theft has forced them to increase homebuilders’ insurance rates by 10 percent to 15 percent in the last two years.

For the story, see Boom Times for Job Site Thieves.

Alabama Man Nearing Foreclosure Charged With Having Home Torched To Pocket Insurance Cash

In Pell City, Alabama, The Daily Home reports:

• A man was arrested and charged with the July 21 arson of his mobile home. Authorities identified the man as Sheldon Dale Franklin, 47, [...]. He was charged with the second-degree arson of his home.

***

• [St. Clair County Sheriff Terry Surles] said the sheriff’s department received a tip that authorities needed to take a closer look at the July 21 house fire, which destroyed the double-wide mobile home Franklin resided. Surles said the mobile home was about to go into foreclosure, and Franklin allegedly paid some people to burn his home down to collect the insurance money. “He already received some insurance money,” Surles said.

For the story, see Man charged with arson of his mobile home.

For other stories on fires & foreclosures, go here, go here, go here, go here, and go here. ArsonForeclosureAlpha

Florida Feds Obtain Indictment In Alleged Mortgage Scam Involving 79 Homes, $24M In Fraudulently Obtained Loans, $5M In Lender Losses

The U.S. Attorney for the Southern District of Florida (and others) announced yesterday that:

• Magile Cruz, a/k/a “Maggie Cruz,” a/k/a “Magile Cruz-Rodriguez,”a/k/a “Magile Araujo,” a/k/a “Ros Rodriguez,” was charged in a multi-million fraud scheme that resulted in more than $24,000,000 in fraudulent mortgage loans, and losses of more than $5,000,000 to lenders. Cruz was charged with conspiracy to commit mail fraud and wire fraud, [...] and with substantive counts of mail and wire fraud, [...].

According to the U.S. Attorney press release:

• Between 2005 through 2007, Cruz was engaged in a scheme to obtain fraudulent mortgage loans for the purchase of 79 properties in Miami-Dade and Broward Counties. To execute the scheme, Cruz would identify residential properties for sale through [two of her companies]. Cruz and other co-conspirators would recruit and pay straw buyers for the selected properties. Cruz and her co-conspirators would then prepare and cause to be prepared fraudulent mortgage loan applications on behalf of the straw buyers. The applications included false employment verifications, pay stubs, verification of income and funds on deposit, and IRS Forms W-2.

For the rest of the story (ie. alleged identity theft, bogus / double HUD-1s, "cash back" transactions, multiple mortgages on the same property), see De Facto Owner Of Mortgage Companies And Title Agencies Charged In Multi-Million Mortgage Fraud Scheme.

Next Door Neighbor Threatened With Jail For Sprucing Up Vacant, Abandoned Home In Foreclosure

In North Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• The foreclosure crisis has left thousands of homes in Clark County sitting empty. Those vacant properties soon become eyesores. A North Las Vegas man is doing his part to try to prevent an abandoned home from becoming a neighborhood nuisance. Now, he says he was threatened with jail time. The owners abandoned the place a few weeks ago because they couldn't afford it. The grass was overgrown and the pool collecting debris. The man next door had enough, so he decided to spruce up the place. But the bank that owns the home threatened him with jail.

***

• The home will likely sit empty for months. [Said the alleged serial criminal trespasser living next door trying to maintain the neighborhood:] "There are three houses right around there that are. Their yard has been that way for two years -- no landscape, broken windows, and I don't want this house to turn out like that."

For more, see Foreclosed Homes Create Messy Eyesore (read story) (watch video).

"Operation Family Tree" Busts Network Of 18 Marijuana Grow Houses In Central Florida; All Said To Be Rental Homes

In Pinellas County, Florida, The Tampa Tribune reports:

• After a months-long investigation prompted by an anonymous tip, authorities [last week] swooped down on 18 marijuana grow houses they say were coordinated by one man. Eighteen people were arrested and about $31,000 was seized, said Pinellas County Sheriff's Office spokeswoman Marianne Pasha. Detectives also dismantled the operations, confiscating more than 850 plants along with humidifiers, air conditioners, lamps and filtration systems used to grow them. [...] The operation was given the name Operation Family Tree because many of the suspects are related by blood or marriage or were friends.

***

• Rental homes were used for the grow operations, he said. Some were found today to contain as few as 23 plants; some had up to 100. Investigators say the coordinated effort annually could have produced a harvest worth more than $4 million.

For more, see;

• Pinellas Drug Sting Nets 18 Grow Houses, 18 Arrests,
• Pinellas County Sheriff's Office news release.

For a recent story on marijuana grow house busts in neighboring Hillsborough County, Florida, see Sheriff's Grow House Crackdown Bears Fruit. Go here for Hillsborough pot farm map for Marijuana grow houses busted by the Hillsborough County Sheriff's Department.

Go here for Suburbs the New Hot Spot For Pot Growers, a story originally published in the Daytona Beach News Journal of a Central Florida pot farm operator who set up his operation using dozens of suburban homes rented from landlords before ultimately landing in the slammer.

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

Georgia Lawmakers Close Class Action Loophole On Little Known Law Allowing Homeowners To Hammer Sloppy Lenders After Paying Off Mortgage

In Atlanta, Georgia, The Atlanta Journal Constitution reports:

• Here's an obscure law that mortgage lenders would probably rather you didn't know about: Georgia statute 44-14-3. The reason is, it can cost mortgage lenders $500 or more if they didn't properly finish the paperwork for a homeowner who paid off his or her loan. The law has been on the books for decades, but because of a recent amendment, more folks are likely to be hearing about it as they pay off their mortgages, refinance or sell their homes.

***

• Under Georgia law, lenders are required to notify the county clerk within 60 days after a mortgage is paid off. But about a third of the time, they don't, estimates [title insurance agency president Michael] Watkins, which means his company's employees often see deed records that falsely indicate a property has more than one loan outstanding.

***

• As the result of an amendment enacted in May, lenders are now required to notify homeowners who pay off their mortgage that they can collect $500 if their lender doesn't send the proper paperwork to clear up their property title within 60 days. The amendment, to forestall class-action lawsuits against lenders, also requires the homeowner to make that demand in writing after waiting at least 60 days.(1) Georgia law has long allowed homeowners and other real estate owners to demand $500 in damages from lenders who didn't meet the deadline, but most people didn't know about the law, [Atlanta attorney Jennifer] Fitzgerald(2) said.

***

• Joe Brannen, president of the Georgia Bankers Association, said the trade group sought the amendment to remove the threat of several class-action lawsuits, agreeing to the extra notification as "part of the negotiation."

For the story, see Little-known law can snag lenders.

(1) Prior to the law's amendment, homeowners weren't required to send a formal written notice demanding that the lender record the satisfaction of mortgage prior to commencing a lawsuit. The requirement of first sending a lender a a written demand before bringing a lawsuit will obviously make the lenders less likely to screw up when complying with their obligations post-mortgage payoff, thereby making it tougher for:

• homeowners to sue the mortgage lenders for their 500 bucks, and
• homeowners' attorneys to obtain court-ordered attorney fee awards, the bill for which has heretofore been footed by the lenders.

(2) Reportedly, Fitzgerald said she has filed "several hundred" lawsuits on behalf of homeowners in recent years. In addition to the $500 the homeowner is entitled to, lenders that fail to comply with the law are also liable for homeowners' legal fees.

Northern Indiana Legal Services Firm Launches Foreclosure Defense Project

In South Bend, Indiana, the South Bend Tribune reports:

• [W]ith funding from the IFLA [Institute for Foreclosure Legal Assistance(1)], Indiana Legal Services Inc. has launched its new Indiana Foreclosure Legal Assistance Project to provide free legal help to eligible Northern Indiana homeowners who face losing their homes through foreclosure. Indiana Legal Services was awarded a $240,000 grant over three years from IFLA located in Washington, D.C.

• The Indiana not-for-profit organization was one of 27 legal aid offices throughout the country to receive funds from the national competition. "The mortgage foreclosure issue is significant throughout Indiana, but also in northern Indiana and in the general South Bend area," said Ron Gyure, resource development director for Indiana Legal Services.

***

• ILS' new project will initially target the South Bend area and northwest Indiana, where there are a high number of subprime mortgages, many of which are predicted to go into default. In the grant's first year, ILS will have two attorneys in its South Bend office and one attorney in its Gary office to perform foreclosure defense work.(2) [...] In the grant's latter stages, ILS expects to expand its foreclosure work into the Fort Wayne area.

***

• ILS can provide direct legal representation to homeowners by reviewing their mortgage documents to see whether they include provisions that are abusive or predatory, negotiate new terms with their lenders or take other appropriate legal actions.

For more, see Project to aid homeowners (Indiana Legal Services program in South Bend aims to avoid foreclosures).

For information on upcoming foreclosure defense training:

• September 4, 2008 IFLA Intensive Training Session, which coincides with the
• NACA 2008 Mortgage Lending Litigation Conference on September 5-7th (for foreclosure defense topics to be covered, go here for Beginner Track Agenda, and here for Advanced Track Agenda).

(1) The Institute for Foreclosure Legal Assistance, a project of the Center for Responsible Lending and managed by the National Association of Consumer Advocates, made the awards to nonprofit groups that demonstrated that they already had successful foreclosure prevention programs but needed more resources.

(2) The ILS South Bend Regional Office serves clients in St. Joseph, Elkhart, Fulton, Kosciusko, Lagrange, LaPorte, Marshall, Noble, Pulaski and Starke counties. From its Gary office, the ILS legal staff serves Lake, Porter, Jasper and Newton counties.

SW Florida Real Estate Broker Hit With Eight New Federal Fraud/Money Laundering Charges

In Lee County, Florida, WZVN-TV Channel 7 reports:

• New charges have been filed against commercial real estate broker Samir Cabrera. He was indicted by a grand jury Wednesday afternoon on eight new charges on top of four charges filed two months ago. The new charges include two counts of wire fraud, one of mail fraud and five counts of money laundering. [...] Federal prosecutors allege Cabrera recruited investors, acquired their money, bought land, and then sold the land, on the same day, to another company that he controlled. The investors say Cabrera never told them about his interest in the deal.

For more, see Broker facing additional federal charges.

For the newly filed superceding indictment, see U.S v. Cabrera.

In related stories, see:

1) Stilwell received checks in indictment of son-in-law (One commissioner expects county manager to be indicted also):

• Two of the money laundering charges now facing real estate agent Samir Cabrera involve payments to Lee County Manager Don Stilwell. In the spring of 2006, two checks — one for $76,731.24 and one for $50,000 — went to Stilwell, who is Cabrera’s father-in-law.

2) Daniels View investors not happy with settlement:

• A [civil court] settlement was made for investors in the controversial Daniels View Project - the Lee County land deal that spawned an investigation of County Manager Don Stilwell. The deal was organized by his son-in-law, real estate broker Samir Cabrera, who has been federally indicted and accused of misappropriating investors funds in other deals.

Go here for earlier posts, and any available updates, on this ongoing story.

Fannie, Freddie Imposter The Subject Of BBB Warning

From The Better Business Bureau of Southern Arizona:

• The Better Business Bureau (BBB) of Southern Arizona is warning consumers to be cautious of an organization posing as Fannie Mae and Freddie Mac mortgage lending companies. The scammers are sending letters nationwide announcing a lottery that gives people who lost a home a bogus chance to buy another. According to the letter, the F & F Equity Draw has $50 million to give away, and recipients “have emerged a winner…of $5 million.”

• When a BBB representative contacted the phony Fannie Mae and Freddie Mac, he was told to use Western Union to wire $850 to a Las Vegas location. Individuals who fall for this scam will lose the money they send in, and will receive nothing in return.

For the rest of the news release, see BBB Warns of Latest Mortgage Lottery Scam.

12 Families In Milwaukee Rental Building Avoid Boot As Foreclosing Lender Turns On The Gas

In Milwaukee, Wisconsin, WTMJ-TV Channel 4 reports:

• An orange notice is tacked up on the main entrance to 6372 N. 89th Street. It informs tenants of the 1970’s era apartment building they must be out by September 5. [... Oscar] Jordan said he has always paid his rent on time. His gas is supposed to be included in that rent, but eight days ago, the gas was shut off. Seems the landlord, embroiled in foreclosure proceedings, stopped paying the gas bill. Without gas coming into the building, the city deemed the structure uninhabitable. “A lot of people in here got kids,” Jordan said of the eleven other families sharing the building. “You can’t buy school clothes and then turn around and relocate, pay rent, security deposit.”

***

• Late Tuesday, tenants may have earned a reprieve. A representative of Waterstone Bank, which holds the note on the property, told Jordan the institution is taking over the property and indicated the gas would be turned back on.

For more, see 12 Families Facing Eviction.

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

Hialeah Housing Authority Employee Facing Foreclosure Charged With Stealing Tenants' Rent Checks

In Hialeah, Florida, Miami New Times reports on Hialeah Housing Authority employee/rent collector Delma Mercado, who allegedly came up with a novel attempt avoid foreclosure of her home:

• As media across the county reported last week, the 54-year-old Puerto Rican got nailed for forging her signature on 40 Hialeah Housing Authority checks and pocketing almost $14,000 in poor residents' rent payments.

• What nobody has reported is the reason: Mercado divorced her husband in March 2007, inheriting the mortgage on their $161,000 home near Miami's Sewell Park, public records show. Her bills weren't adding up, apparently, because the bank moved to foreclose on the house in June.

• Even in adversity, she found opportunity. Mercado's job involved collecting rent checks from poor and elderly Hialeahans. Sometime before March, Mercado began scratching her name onto the checks, taking them to a check-cashing shop, and keeping the change. The residents, in turn, were entered into the system as having missed a rent payment.

Reportedly, the alleged scam was caught early enough so that none of the tenants got screwed. As for Mercado, in addition to her mortgage problems, 82 counts of forgery, fraud, and grand theft have reportedly been added to her legal problems.

For the story, see Hialeah Woman Delma Mercado Steals from the Poor to Pay Her Mortgage.

Raise The Red Flag On Craigslist-Advertised Rentals Too Good To Be True

In Seattle, Washington, KOMO-TV Channel 4 reports:

• Here's a word of warning for anyone looking to rent a house or apartment: some of the ads you see may be planted by scammers. The houses are real, but the rest is smoke and mirrors. As high as rent is getting around Seattle, when you see a nice place that's reasonable, you have to jump on it. Just make sure the person you're dealing with is really the landlord. It could be slick trick in the name of God.

***

• The imposters pose as missionaries or other devout Christians forced to transfer to West Africa. They say they had to leave on short notice and as a result, have to handle the rental themselves, long distance. They're looking for an honest tenant who they can trust to take care of their home.

For more, see Too-good-to-be-true rentals featured on Craigslist are usually just that (read story) (watch video).

Go here and go here for posts on tenant victims of rent hoaxes. unwitting tenant rent scam yacht

Code Enforcement Program To Clip Lenders For Fines On Vacant Property "Not Going Well" In One Town

In Hollister, California, the Hollister Free Lance reports:

• Hollister Code Enforcement Officer Mike Chambless [...] said a program to make overseas banks more accountable for neglected properties "is not going well." Chambless had told the Free Lance in May officials were starting the program to heighten accountability of banks, based in places such as Japan and Germany, which own unkempt properties here. Officials had been responding to increased reports of such homes falling into dangerous levels of disrepair, while others were being broken into for drug use and other criminal activity.

• The city sent letters in April and May warning that a $1,000 a day fine could result if compliance is not met by owners. The maximum penalty is $100,000, but securing any fines from overseas banks has been problematic.

For more, see Program to target neglectful, overseas banks 'not going well'.

New Ohio Law Aimed At Preventing Lenders From Keeping Deteriorating Foreclosed Homes In Legal Limbo

Buried in a recent article in the Mansfield News Journal is this blurb on a new Ohio law requiring the prompt recording [14 days after the balance due on the foreclosure sale is paid] of foreclosure deeds after public auctions, thereby precluding some foreclosing lenders from dragging their feet when recording the title to property, thereby keeping homes in legal limbo for the purpose of avoiding code enforcement hassles on deteriorating homes.

• [Sheriff Steve] Sheldon, civil division deputy sheriff Kathy West and Clerk of Courts Lin Frary [...] discussed House Bill 138, which requires sheriffs to file deeds for foreclosure sales. The law that goes into effect Sept. 11 was designed to help properties from being in limbo if deeds aren’t filed. It gives local governments more tools to get control of vacant tax-delinquent parcels.

Source: Jail, foreclosures keep sheriff’s office busy.

Go here for other posts on homes in legal limbo; when a foreclosing lender is reluctant to complete a foreclosure action, or to record a foreclosure deed after taking title at a foreclosure sale, to avoid getting clipped with housing fines. responsibility code violations foreclosure

Feds Warn Thrifts In Response To Complaints From Hot Homeowners Feeling Screwed Over By Frozen HELOCs

In Washington, D.C., a syndicated article from the McClatchy Newspapers reports:

• After a rash of consumer complaints, the federal agency charged with regulating savings and loans warned lenders that they cannot arbitrarily change the terms of home-equity loans.

***

• The Office of Thrift Supervision issued a six-page letter of guidance to the institutions, called thrifts, spelling out their obligations on home-equity lines of credit [HELOCs]. These revolving lines of credit were popular during the housing boom of 2001 to 2005, when people could easily borrow against the equity in their homes to pay for college tuition, build a garage or remodel a kitchen. [...] Now, many borrowers own homes worth less than the value of their loan, and home-equity lenders are tightening up amid rising defaults.

• As national housing problems worsened, the federal agency began fielding complaints that some of the 830 thrifts under its supervision were freezing the credit promised to borrowers and altering rules for accounts that weren't supposed to be changed.

For more, see Thrifts told not to alter loans (Complaints rise as lenders freeze home equity lines of credit).

See also: The Washington Post: A Wake-Up Call on Home Equity Loans.

For the six-page OTS letter of guidance, see Home Equity Line Of Credit Account Management Guidance (discusses violations of Truth in Lending Act (TILA) / Regulation Z ); fair lending issues under The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B; a Fair Credit Reporting Act issue, and possible allegations of Unfair or Deceptive Acts or Practices).

Go here for other posts on Frozen HELOCs.

NYC Condo Developer Opts Against Marketing Units; Unloads Entire Building To Columbia University; Students, Faculty To Live In Luxury

In The Bronx, New York, The Wall Street Journal reports:

• Thanks to the slowdown in the New York City condo market, some Columbia University students and faculty will be bunking in high style. Columbia recently bought 127 high-end condos from a developer and has converted the building, called The Arbor, into housing for graduate students and faculty. The building is located in Riverdale, an affluent section of the Bronx not far from Columbia's uptown Manhattan campus.

• L&M Development Partners decided to unload the entire building to Columbia for about $69 million, a 20% discount from what the developer had hoped to obtain by selling the condos individually, says Vincent Carrega, executive managing director, at Grubb & Ellis Co., which represented L&M in the deal.

For the story, see From a Doorman to Dorm Rooms.

Ex-EMC Employee Spills The Beans On Loan Servicing Secrets

Consumer Warning Network has a video on YouTube of an interview with a former loan servicing employee with EMC Mortgage Corporation, who spills the beans on what was once an industry secret servicers didn't want the public to know.

• The secret mortgage servicers don't want you to know is they can make MORE money off of homeowners when they keep your loan in default. A former employee of loan servicer EMC tells the inside story why so many people can't get their loan out of default.

For the video, see Mortgage Servicers' Secret.

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

Inability To Unload Excess Inventory Forces Condo Developers To Rent Units To Avoid Foreclosure

In Des Plaines, Illinois, the Daily Herald reports:

• Real estate sales in the suburbs are so bad that developers of condominium buildings - as well as owners of existing units - are renting apartments to avoid foreclosure. In Des Plaines, a developer whose for-sale building is almost finished is negotiating to restructure his construction loan and switch the units to rentals.

***

• The 60-unit building [...] in Des Plaines owned by Sphinx Chicago Properties is 90 percent finished, said Kymn Harp of the Chicago law firm Robbins, Salomon & Patt Ltd., which represents the developer. Fifth Third Bank has filed a foreclosure suit in Cook County Circuit Court, and the developer is negotiating to extend the loan so the building can be finished as rental apartments.

***

• Another example is marketing announcements from Residential Homes of America. Fifteen new townhouses are available for rental at Alleghany Trail at Village Station in Grayslake, the builder said. Rent-to-purchase options are also available there as well as at the Residences of Fountain Square condominiums in Lombard.

For more, see Condos going rental amid housing downturn.

In a related story, see Des Plaines mayor wants answers from condo developer.

Real Estate Investor Sues Lender For Dragging Feet In Failed Short Sale

In San Diego County, California, North County Times reports:

• A North County real estate company has sued a lender for a failed short sale, a transaction that has become increasingly popular while home prices tumble. [...] The buyer in the stalled short sale, Ribsy Productions, a real estate company based in Solana Beach, filed suit on Friday against Aurora Loan Services, a Littleton, Colo., mortgage lender, for not following through on a short sale. The lawsuit seeks suspension of any foreclosure proceedings on the Arizona property and other reparations.

***

• The Solana Beach company is suing Aurora for breaking a contract and several other charges after the lender did not respond to requests from the buyer, Ribsy Productions, for an approval letter. "We don't have to prove intent. They have responsibilities on the contract, and they didn't follow through on those obligations," said Ajay Gupta, the lawyer representing Ribsy Productions. "This is a straight breach-of-contract case." [...] Aurora holds a $587,000 loan on the Tucson, Ariz., home and accepted the short sale offer of $158,000, a 73 percent drop in value, according to the lawsuit.

For more, see Buyer sues lender over short sale (In an apparent first, a lawsuit comes from the frustrating type of purchase).

Victim Or Suspect: NBA Player Finds Himself At Center Of Detroit Cash Back Mortgage Fraud Investigation

In Detroit, Michigan, The Detroit News reports:

• A Waterford Township man says veteran Detroit Pistons guard Lindsey Hunter was a key figure in a mortgage fraud that left him broke, ruined his credit rating and wrecked his marriage. "If this had been anybody else, you know I wouldn't have gone for this," Bruce McClellan said of a deal in which he said he was promised a $350,000 profit for signing documents in connection with the purchase of a pricey home in Bloomfield Hills. "I just figured he wouldn't do anything like this," said McClellan, who was interviewed by the FBI in July.

• Hunter, who could not be reached for comment Monday, has complained to the Wayne County Sheriff's Department that he was a victim -- not a perpetrator -- of fraud, a Sheriff's spokesman and Hunter's attorneys said Monday. "We do have an open investigation that involves some business dealings that involve Lindsey Hunter as a potential fraud victim," spokesman John Roach said. The complaint was made in February by either Hunter or someone representing him, Roach said.

For more, see Hunter: Mortgage fraud victim or suspect? (Conflicting reports place Detroit Pistons guard at center of FBI investigation into questionable deal).

See also The Detroit Free Press: FBI probing Lindsey Hunter's role in real estate deal (Waterford man charges he was duped into buying house).

Illinois Cops Nab California Deed Theft Suspect On Outstanding Warrants; Man Shipped Back To Face Multiple Felony Charges

In Southern California, San Bernardino County District Attorney Michael Ramos announced last week:

• In May 2008, felony charges were filed against John Christopher Foster, 50, formerly of Rancho Cucamonga, involving several felony counts of Real Estate Fraud related offenses. In 2005 and 2006, Foster forged the victim's signature on a Grant Deed and Deeds of Trust for property located in the city of Fontana. Subsequently, Foster sold the Fontana residence for $675,000.

• Investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit found that Foster had fled California in January 2008. On August 14, 2008, Illinois State Troopers arrested him while driving through Douglas County, Illinois. Foster was arrested on the outstanding felony warrant, which included charges of: Forgery, identity theft, and filing forged documents with the County Recorder’s Office.

• On Wednesday, August 20, 2008, DA Investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit extradited Foster, via airplane, back to California from the state of Illinois.

For the DA's press release, see Rancho Cucamonga Man Extradited From Illinois on Real Estate Fraud Charges.