NY Regulator Warns Insurers To Stop Illegal Cancellations Of Homeowner Policies When House Is Unoccupied Or In Foreclosure

In New York City, Insurance Journal reports:

• New York Department of Insurance has this advice for insurers in the Empire State: Stop canceling homeowners' policies simply because a house in unoccupied. That announcement came in the form a circular letter - essentially, an advisory bulletin to insurers - reiterating that cancellation of the policies solely on the basis of non-occupancy is illegal. The warning follows numerous complaints made to the department by consumers about cancellation notices.

***

• The circular letter also reiterated that insurers may not use the existence of a foreclosure action as a basis to cancel a homeowners' insurance policy, since filings do not constitute a willful or reckless act or omission or increase the hazard of an insured property.

For more, see New York Warns Insurers about Some Homeowners' Cancellations.

Landlord Foreclosure Forces Tenant Family Of 10 Out Into The Cold

In Chicago, Illinois, WLS-TV Channel 7 reports:

• The foreclosure crisis has forced a Chicago couple and their eight children into homelessness. [...] The Chambers family said they were renting in a [3-unit] building in Chicago's Lawndale community. They say they were forced to leave their home when it was abandoned by the landlord as it fell into foreclosure.

• After the landlord walked away, [Antoinette] Chambers says the water pipes were stolen from the building, then the drug dealers showed and began to the occupy the porch area and a vacant apartment. "I tried to get some help from charity and the city and didn't get answers," Chambers said. Chambers says the city could not help because she was never served with official eviction papers.

• To make matters worse, last week, Chambers sent some of her kids to their aunt's home in Englewood for a hot meal and place to sleep. Twelve-year-old Dishawn ended up being shot in the arm.

For the story, see Foreclosure forces family of 10 out of home.

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. ThetaTenantRentSkimming

North Carolina Family Loses Home To Foreclosure Due To Steep Decrease In Disability Benefits Attributed To Payment Error

In Davidson County, North Carolina, The Dispatch reports on the story of a local family who lost their home to foreclosure. Unlike those who lost homes through predatory loans, the family's loss has been attributed to a cut in their disability benefits that equated to a loss of half their income, leaving them unable to afford their mortgage payments. Social Security, claiming that it had overpaid benefits to the family by $8,000, abruptly cut the benefits until the amount was recouped. Attempts by the homeowner to work out an arrangement to reduce the future benefits in a way to allow them to repay the overpayment while allowing them to continue making the mortgage payments on their home failed.

For the story, see Forced out of home, family still asks why.

Foreclosures Force Central Florida HOA To Double Maintenance Fees; Fail to Give Residents Ample Notice

In Orange County, Florida, WKMG-TV Channel 6 reports:

• The foreclosure crisis has forced a Central Florida homeowners association to double its rates to more than $1,200, causing neighborhood residents to research their legal options. About 20 percent of the properties in the Woodland Lakes Preserve neighborhood in east Orange County are in foreclosure, forcing the HOA to increase its rate by $662 to make up for the lost revenue.

• Several residents told Local 6 News that they found out about the rate increase on Thursday. The bill is due Dec. 1.

For the story, see HOA Doubles Rates Amid Foreclosures (Residents Billed Extra $662).

Some Hawaii Real Estate Agents Steer Clear From Homeowners With Delinquent Mortgages As New State Foreclosure Rescue Law Has Long Reach

In Honolulu, Hawaii, Pacific Business News reports:

• Some [Hawaii] real estate agents are refusing to take listings from homeowners who are behind in their mortgage payments and trying to avoid foreclosure because of a state law that was intended to protect consumers from predatory mortgage lenders.

***

• The law(1) was intended to protect homeowners facing foreclosure from predatory “rescuers” looking to take advantage of their situation. Some real estate agents could fall under the definition of a “distressed property consultant,” which requires them to abide by a separate set of rules outlined in the law.

For more, see Anti-mortgage fraud law jams up Realtors.

(1) The Hawaii Mortgage Rescue Fraud Prevention Act, which took effect July 1, 2008.

Foreclosure Process Is "A Circus," Says Mass. Class Action Demanding Lenders Prove Note Ownership; Suit Seeks To Stop Current & Set Aside Past Sales

In Boston, Massachusetts, the Boston Herald reports:

• A class action lawsuit has been filed that could stop hundreds of foreclosures and reverse thousands of others. “The rush to foreclose has turned the process into a circus,” said Gary Klein, an attorney representing two Boston homeowners facing foreclosure. "We’re asking these lenders to prove they hold the mortgage.”

• The suit filed in Suffolk Superior Court alleges that since 2004 GMAC Mortgage, Deutsche Bank National Trust, Harmon Law Offices and Ablitt Law Offices foreclosed on properties despite the fact that they do not own or were not assigned the mortgages.

• Klein estimates that as many as 1,000 homes in Massachusetts could be affected and thousands more going forward. If the lawsuit is successful, foreclosures in the pipeline would be placed on hold until lenders can prove they own the mortgage. If a foreclosure sale has taken place without the proper authority, it could be set aside.

For more, see Lawyer to lenders: Prove you own mortgages.

See also, The Boston Globe: Lenders' right to foreclose is challenged:

• "Massachusetts' foreclosure process has become an undisciplined and lawless rush to seize homes," the suit alleged. "Many thousands of foreclosures are plainly void under statute and settled Massachusetts case law."

For posts that reference the failure of some mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, and Go Here. missing mortgage foreclosure docs gamma

Fannie, Freddie Call For Temporary Halt Of Its Foreclosures, Evictions

Bloomberg News reports:

• Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the U.S. government, will suspend foreclosures and evictions over the holidays. The six-week halt will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.

For more, see Fannie, Freddie Suspend Foreclosures Through Jan. 9.

Tennessee AG, MALS Tag Another Upfront Fee Foreclosure Rescue Operator With Lawsuits

From the Office of the Tennessee Attorney General:

• Tennessee Attorney General Bob Cooper filed suit [Tuesday] to stop another Tennessee foreclosure rescue company and its principal from charging service fees to consumers and then failing to follow through with the services promised. The lawsuit filed [Tuesday] alleges violations of consumer protection laws.(1)

***

• The State’s complaint, which was filed in Shelby County Chancery Court, also alleges violations of the Tennessee unauthorized practice of law statutes(2) and the Tennessee Credit Services Businesses Act.

• Memphis Area Legal Services also filed a lawsuit today in Shelby County Chancery Court against the defendants.(3)

For the AG's press release, see Attorney General Files Suit Against Tennessee Foreclosure Rescue Company, Requests Asset Freeze, Halt To Alleged Unlawful Activities.

For legal documents in this case, see:

• Lawsuit/Complaint - State of Tennessee v. Patrick and Patrick, LLC, et al.; and
• Motion for temporary injunction and asset freeze.

See also, Eyewitness News ABC24-CW30: Scammed into Foreclosure.

(1) According to the AG's press release, Attorney General Cooper on behalf of Mary Clement, director of the Division of Consumer Affairs, sued Patrick & Patrick, LLC doing business as Patrick & Patrick Loss Mitigation Services, and its principal, Denise Patrick, also known as Sondrette D. Patrick. The defendants are also doing business via the Internet at www.patrickandpatricklm.com. (Note: At some point after this story came out, the firm took down their website.

(2) Bringing charges of unauthorized practice of law against upfront fee loan modification / foreclosure rescue operators appears to be gaining steam - the Florida Attorney General reportedly made similar allegations in a recent lawsuit brought against a loan modification company. Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law.

(3) Last month, the Tennessee Attorney General's office and Memphis Area Legal Services also filed multiple lawsuits against another upfront fee foreclosure rescue operator, according to this press release. UnauthPractOfLawKappa

Fee-Based Loan Modification Firms Require State Mortgage Brokerage License When Working With Colorado Homeowners, Says State Regulator

In Denver, Colorado, the Rocky Mountain News reports:

• Only licensed mortgage brokers may provide home loan modifications in Colorado under the new Mortgage Broker Licensing Law, the Colorado Division of Real Estate reminded consumers on Wednesday.(1) The reminder came because of the increased number of complaints the division has received about loan modification companies.

For more, see Loan modifications require mortgage broker license.

See also, The Denver Post: Modified- loan services face scrutiny:

• "We are getting a considerable number of complaints from homeowners who are being charged high fees with no results," said Zachary Urban, division spokesman. [...] Struggling homeowners are paying $4,000 to $6,000 upfront and not receiving the services that were promised, Urban said.

Go here for the recently enunciated Colorado Division of Real Estate Position Statement on Loan Modifications.

(1) Loan modification companies purporting to assist homeowners in backing out of bad loans by analyzing mortgage documents to find errors committed by lenders in violation of Federal and state lending and consumer protection laws may also need a law license in the states they are operating in, judging by legal actions against such firms alleging, among other things, the unauthorized practice of law recently brought in a TennesseeAttorney General lawsuit, and a Florida Attorney General lawsuit.

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. ColoradoLoanModificationalpha

Unsatisfied Customer Of Loan Modification Firm Is Out $1,300, Tells Her Story

In Allentown, Pennsylvania, The Morning Call reports:

• Susan Wood needed help. She fell behind on her mortgage and her Allentown home was going to be sold at sheriff's sale. [...] Thinking she lacked the power to renegotiate with her mortgage holder personally, Wood accepted an offer of help from Uoninc of Wilkes-Barre.

• It bills itself as a ''loss mitigation'' firm, but Wood lost money by hiring it. A year later, her mortgage has been reworked, but not by Uoninc. The company did contact Countrywide about a loan modification. But when it came time to close the deal, Wood said, Uoninc disappeared with her money. Wood missed the spring deadline, then renegotiated with Countrywide on her own in August.

***

• Wood feels she didn't get anything for the $500 she paid Uoninc. And she still hasn't received a refund of $800 in ''escrow'' money she paid the firm. Wood was told Uoninc needed that for closing costs.

For more, see Mortgage 'help' only dug the hole deeper.

Bogus Loan Modification Firms Popping Up In Nevada, State Regulator Warns

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

• The state of Nevada is warning homeowners to beware of bogus loan modification specialists that have popped up with the foreclosure crisis. The Nevada Division of Mortgage Lending says it has received numerous complaints about "loan modification companies" that offer unrealistic loan modification options to unsuspecting borrowers and then end up charging them excessive fees while the borrower can often get these services for free.

Source: SCAM: Beware of Bogus Loan Modification Specialists.

Las Vegas Man Pleads Guilty In Foreclosure Rescue, Transfer Tax Evasion Schemes

In Las Vegas, Nevada, the Las Vegas Sun reports:

• A 64-year-old Las Vegas man, Mathew Marion, pleaded guilty [Thursday] morning to a mortgage fraud scam. [...] The investigation revealed that between July 2007 and November 2007, Marion falsely told homeowners facing foreclosure that he would buy their houses and land in Clark County for a price that equaled the sum of the outstanding mortgages, together with a small cash payment, and promised that he would pay off the mortgages to prevent the properties from going into foreclosure.

Reportedly, the investigation also uncovered a scheme designed to allow Marion to conceal his identity and avoid paying transfer taxes to the county.(1)

For more, see Las Vegas man pleads guilty to mortgage loan scam.

For the Nevada Attorney General press release, see Attorney General Announces Guilty Plea In Mortgage Loan Scam.

(1) According to the story, Marion was sentenced to pay a $20,000 fine to the state and ordered that he pay restitution to Clark County of $89,990.60 for property transfer taxes that were owed on properties. He was also ordered to pay restitution to the victim homeowners in the amount of $43,009.40. The total restitution payment is $130,000. He reportedly pleaded guilty to nine gross misdemeanor counts of making false representations on titles and one count of gross misdemeanor of making a fraudulent conveyance in connection with a mortgage foreclosure rescue scam, Nevada Attorney General Catherine Cortez Masto said.

Arizona Refinancing Scam Leaves Elderly Woman Facing Loss Of Home Of 45 Years; Court Orders $343K+ In Restitution To Four Seniors

From the Arizona Attorney General:

• Attorney General Terry Goddard [...] announced that a Phoenix mortgage broker has been sentenced to prison for operating a residential mortgage scam that defrauded four Phoenix seniors of more than $400,000.

***

• According to court documents, [Rick Thomas] McCullough was the president of licensed mortgage broker CactusCash, Inc. In 2005 and 2006, he used this position to persuade four seniors, two single women and one couple, to refinance their homes through him for amounts far greater than the balance of their existing mortgages.

• McCullough also convinced all four victims to invest their net refinancing proceeds with him, effectively obtaining for himself much of the equity that these elderly clients had in their homes. McCullough claimed that he would invest the victims’ funds in real estate and personally guaranteed the loans. [...] In fact, McCullough used the money to make personal purchases, including a $42,000 ring for his wife.

***

• "Because of this vicious scheme, an elderly woman may lose her home of 45 years and a 65-year-old victim must choose between a needed surgery and making the new mortgage payment," said Goddard.

For the Arizona AG press release, see Phoenix Mortgage Broker Who Defrauded Seniors Gets Prison Term.

Elderly Blind Woman Threatened With Lien On Home Over 1 Cent Underpayment On Water, Sewer Charges; Benefactor Steps Forward To Cut Check, Save The Day

In Attleboro, Massachusetts, The Boston Globe reports:

• When her daughter read her the notice, Eileen Wilbur began to sweat. Her heart raced; her blood pressure climbed. The 73-year-old blind woman could not believe that Attleboro City Hall was threatening to impose a lien of up to $48 because she had mistakenly underpaid her last water and sewer bill by a penny. She couldn't fathom why the city would pay 42 cents for a stamp to collect a penny.

For more, see Short a penny on bill, blind Attleboro woman threatened with lien (News generates outcry, generosity).

Alleged Long Island Foreclosure Rescue, Equity Stripping Scammers Among 16 Included In Two Federal Fraud Indictments

In Nassau and Suffolk County, New York, Newsday reports:

• [F]ederal officials yesterday arrested 16 people who they said were involved in two multimillion-dollar Long Island mortgage fraud schemes, including one suspected of being tied to a drug distribution ring. The schemes are believed by investigators to have bilked lenders of a total of $13.9 million through finance companies in both Nassau and Suffolk counties.

• Those arrested [in the alleged foreclosure rescue, equity stripping scheme] included Robert Guerrero, 33, who Brooklyn federal prosecutors said controlled Property Cash Inc. of Greenlawn. According to an indictment unsealed yesterday, Property Cash was nominally in the name of his girlfriend, Alison Edelman, 30, who was also charged. Federal agents also arrested Gary Jacques, 33, who according to court papers controlled Home Cash Inc. of Huntington Station.(1)

• According to the indictment, Guerrero and Jacques used straw buyers with good credit to fraudulently obtain mortgages to pay for homes in Huntington, Greenlawn, Bay Shore and Uniondale at inflated prices.

• Guerrero and Jacques gained control of the properties through use of a "foreclosure rescue scheme" in which they promised homeowners in danger of defaulting on their mortgages that they could sign their properties over to Home Cash or Property Cash, a method that stole the equity, the indictment charged.

• The various straw buyers, who were paid up to $10,000 for their participation, had their credit inflated by Guerrero and Jacques, the indictment stated. Once Guerrero and Jacques got the properties, they flipped them at prices inflated with the help of licensed appraisers, prosecutors charged. The scheme lost lenders $8.8 million, prosecutors said.

For more, including the details of the second alleged mortgage fraud case, see Feds accuse 16 in LI mortgage fraud schemes.

See also:

• U.S. Attorney (Brooklyn, NY) press release: Sixteen Defendants Indicted In Two Mortgage Fraud Schemes Involving Over $13 Million In Loans,
• Long Island Press: Feds Uncover Massive LI Mortgage Scam, Cocaine Ring.

(1) According to the U.S. Attorney press release, those charged in this alleged scam are: LAWRENCE ALBERS, 51; AL CASSIANO JR., 41; ALISON EDELMAN, 30; RONY PHILIPPE EXANTUS, 45; ROBERT ALEXANDER GUERRERO, 33; VICTOR GUERRERO, 35; ANSY GUERRIER, 29; GARY JACQUES, 33; JEFFREY JACQUES, 25; MICHAEL McENROE, 37; JOHANNY MENDEZ, 26; SANDRA SAM, 44.

Queens DA Indicts Nine In Alleged Straw Buyer Scam Using Fake Identities To Fradulently Flip Homes; Widow Has Home Sold Out From Under Her

In Jamaica, Queens, the New York Daily News reports:

• An accused sex tour operator and a high-ranking Brooklyn court official were among nine people indicted Tuesday in a $1.4 million mortgage fraud scheme that featured stolen identities and an elaborate series of masquerades.(1) In the scheme, con artists using fake IDs to conceal their participation bought and sold two Queens properties and one in Brooklyn and then took out the mortgages, authorities said.

***

• The victims included a Jamaica woman who owned her home outright and now faces foreclosure; and a New Jersey woman, whose identity was stolen and is now fighting off banks over mortgages fraudulently taken out in her name, said [Queens District Attorney Richard] Brown.

In addition to the accused sex tour operator (who is also a certified public accountant) and the now-chief deputy county clerk for Kings County (an attorney who, prior to taking his current position, was in private practice at the time of the alleged bad acts and, according to this New York Post article, the brother of a Brooklyn trial judge), a disbarred attorney who allegedly handled all the closings of the transactions involved was also among the indicted, a Queens DA press release said.

For more, see Court clerk indicted in mortgage scam.

See also:

• New York Law Journal: Court Clerk Charged in Mortgage Scheme (A solo practioner when he allegedly falsified documents, the clerk allegedly shared fees with a second, disbarred attorney),
• Queens District Attorney press release: Nine Charged In $1.4 Million Mortgage Fraud Operation That Used Stolen Identities To fraudulently Flip Properties (Widow’s Home Allegedly Sold Out From Under Her),
• New York Post: HOUSE 'ROBBERS' (JUDGE'S BROTHER WAS SWINDLER IN HOME SALES: DA).

(1) According to a Queens district attorney press release, those charged are Norman Barabash, 63, Bellerose; Shamim, a.k.a. Sam, Choudhury, 35, Jamaica, N.Y.; Gulam, a.k.a. Zack, Chowdhury, 22, Lawrence; John D’Emic, 59, Brooklyn; Daisy Guzman-Saavedra, 38, Yorktown Heights; Nazrul Islam, 23, Jamaica, N.Y.; Alan Morris, 58, New Hyde Park, N.Y.; Boris Nektalov, 23, Flushing; Rajendar Persaud, a.k.a., Rommel Persaud, 35, Verbank, N.Y.

Central Florida Foreclosure Conciliation Program Begins In December

In Central Florida, the Bradenton Herald reports:

• With foreclosure cases swamping local courts, the area’s top judge is planning a novel approach: Forcing lenders to talk with borrowers. Saying he wants to break “the wall of silence” between lenders and homeowners, 12th Circuit Chief Judge Lee Haworth soon will require them to discuss possible ways of avoiding foreclosure before it actually happens.

• “Forcing the parties to slow down and discuss possible solutions is a good thing,” he said Monday. The new Homestead Foreclosure Conciliation Program likely is the first of its kind in Florida, Haworth said. The program applies to foreclosure suits filed on or after Dec. 1 against homesteaded residential properties in Manatee, Sarasota and DeSoto counties.

For more, see Local judge says borrowers, lenders must see eye to eye.

Go here for more on Florida's 12th Circuit Homestead Foreclosure Conciliation Program:

• Attorney's Certificate of Compliance With Twelfth Circuit Homestead Foreclosure Conciliation Program,
• Chief Judge's Letter Summarizing New Foreclosure Procedures & Administrative Orders.

Go here for other posts on the foreclosure mediation program in Florida's 12th Judicial Circuit (Manatee, Sarasota, and Desoto Counties).

Feds Indict Two In "Cash Back" Flipping Scam; Biggest Mortgage Fraud Scheme To Ever Hit SE Missouri, Says Prosecutor

In Cape Girardeau, Missouri, KFVS-TV Channel 12 reports:

• Two men are accused in what the U.S. Attorney calls the biggest mortgage fraud scheme ever to hit southeast Missouri.

***

• [Todd] McBride and [Bob] Wrolstad are accused of recruiting investors through Century Mortgage. At the same time, the two men allegedly picked up properties on Sikeston's west side, got inflated appraisals on them and then arranged for bank loans based on those phony appraisals. McBride and Wrolstad then allegedly sold the overvalued properties to the investors and directed the mortgage loan money straight into their personal bank accounts.

For more, see Housejacked: Men Charged in Mortgage Scheme in Federal Court.

From the U.S. Attorney's Office (Eastern District - Missouri):

• Major Mortgage Fraud Scheme Indicted,
• Indictment - USA v. McBride, Wrolstad.

Go here for earlier posts on KFVS-TV "Housejacking" Investigation.

WaMu, Freddie Mix-Up Lands Foreclosed Homeowner On The Street Without Formal Eviction

In Tampa, Florida, The Tampa Tribune reports on a homeowner in foreclosure who, while in the process of attempting a loan workout with Washington Mutual Bank, found that the locks on her home had been changed, her belongings were gone, and the lawn and windows were blanketed with realty signs advertising the home for sale.

• It turns out the lender [homeowner Natalie] Fuentes had been dealing with no longer owned her loan. Without her knowledge, it had been sold to mortgage finance giant Freddie Mac. Washington Mutual remained the servicer of the loan. In a surprise to both Fuentes and the Washington Mutual officials she was working with, Freddie had moved forward with selling the home.

For more, see Who Owns Your Loan? It's Time To Find Out.

Go here for other posts on foreclosure screw ups involving improperly changed locks, removal of belongings, etc. ForeclosureLockOuts

Illinois AG Continues Putting The Hammer On Upfront Fee Foreclosure Rescue Operators As Seven More Lawsuits Are Filed

From the Office of the Illinois Attorney General:

• Attorney General Lisa Madigan [yesterday] announced that she has filed seven new lawsuits(1) against so-called mortgage “rescue” companies and warned consumers about an alarming rise in these scams that prey on vulnerable homeowners on the verge of foreclosure.

***

• In each of the lawsuits filed late [Monday], Madigan alleges that con artists targeted homeowners who have fallen behind on their mortgage payments and promised that, for an upfront fee, the scammers could negotiate with the mortgage lenders to reduce the payments and save their homes.

• However, according to Madigan’s complaints, after these “consultants” collected the upfront fees, they failed to negotiate or perform any services on behalf of the homeowners, leaving consumers at risk of losing their homes to foreclosure.

• This tactic violates Illinois’ Mortgage Rescue Fraud Act, which prohibits mortgage rescue companies from requiring payment from consumers prior to completing all the terms of a rescue contract. [...] With these new filings, Madigan has brought lawsuits against 22 mortgage rescue fraud companies.

For more, see Madigan Sues Seven Companies For Mortgage Rescue Fraud (Attorney General Urges Consumers to Resist “Rescue” Schemes and Seek Reputable Assistance).

(1) Those companies sued, according to the Illinois AG press release (and links to copies of the lawsuits), are:

• National Foreclosure Counseling Services, 7954 Baymeadows Way, Jacksonville, Fla.,
• Foreclosure Solutions, 488 Pine Street, Burlington, Wis.,
• Homestead Protection Services, 151 Southhall Lane, Maitland, Fla.,
• Home Foreclosure Solutions, 17550 South Williamsburg Drive, Plainfield, Ill.,
• Foreclosure Experts, 220 S. State Street, Chicago,
• Mason Capital Group, 18375 Ventura Blvd., Tarzana, Ca.,
• StopMyForeclosure.net, 3914 Abbotsford Road, Rockford, Ill.

Colorado AG Foreclosure Rescue Crackdown Hits 15 Firms

In Denver, Colorado, the Rocky Mountain News reports:

• [Colorado Attorney General John] Suthers [...] said he has taken action to protect homeowners who are in foreclosure from “rescue” firms that are not following Colorado’s Foreclosure Protection Act, which he supported and saw passed during the 2006 legislative session. So far, his office cease and desist agreements with 15 companies to prevent them from operating in Colorado until they follow this law.(1)

• Many distressed homeowners in foreclosure are bombarded with solicitations from companies that offer to help save their homes. Under the Foreclosure Protection Act, homeowners enjoy many protections against abusive tactics. Rescue firms cannot accept an upfront fee and must provide the homeowner with a contract that specifies the services to be performed. Rescue firms are also prohibited from taking a lien or interest in the title to the home unless they provide certain disclosures.

For more, see Suthers cracks down on mortgage fraud.

(1) Under the cease and Desist agreements, seven rescue firms have agreed to cease operations in Colorado until they comes into compliance with the Foreclosure Protection Act. Companies that have agreed to cease & desist during 2008 include: Crisis Management, LLC, in Glendale, Arizona; Davis Foreclosure Assistance, Englewood, N.J. Debt Advocacy Center; Cleveland; Franklin Equity, Santa Ana, Calif.; HomeAssure, New York, N.Y.; National Foreclosure Counseling Servicesl Jacksonville, Fla.; and New Hope Modifications, Bellmawr, N.J. An additional eight companies have previously reached cease and desist agreements with the attorney general since the Foreclosure Protection Act was enacted, including one Colorado company, Denver Home Rescue. ColoradoLoanModificationalpha

Maryland State Lawmaker's Bankruptcy Filing Stalls Completion Of Sale Leaseback, Foreclosure Rescue Court Case

In Annapolis, Maryland, The Capital reports:

• Del. Tony McConkey filed for bankruptcy [Monday], delaying a jury trial that was set to begin today in a civil case in which he is accused of scamming a woman out of her home. A judge ruled in September that the Severna Park Republican violated state law when he bought the home of a Pasadena woman facing foreclosure.

• The jury was set to rule on additional allegations of fraud, misrepresentation and determine final damages, but Mr. McConkey's bankruptcy filing puts a halt to that process. He filed for bankruptcy under Chapter 7 yesterday in U.S. Bankruptcy Court of Maryland.

***

• Circuit Court Judge D. William Sampson ruled in September that Mr. McConkey violated the Protection of Homeowners in Foreclosure Act [Sec. 7-301 to 7-325] in 2006 by acting as a foreclosure consultant to Ms. [Teresa] Milligan and then buying her home. Judge Sampson declared Mr. McConkey's deed to the house null and void, but did not decide how much Ms. Milligan should receive in damages.

For more, see McConkey's bankruptcy filing delays foreclosure case.

See also, WBAL-TV Channel 11: Delegate Facing Lawsuit Files For Bankruptcy (Delegate Accused In Foreclosure Fraud Scheme).

Loan Modification Firm Renegs On Money-Back Guarantee, Say Customers, Company Sales Rep

In San Diego, California, KGTV-TV Channel 10 recently ran a story in which it interviewed two unsatisfied customers and a former sales representative of a local company that reportedly took upfront fees (about $4,000) in exchange for money-back guaranteed promises to help lower loan payments, principal amounts on loans, and interest rates on the customers' home mortgages.

According to the story, the firm failed on its promises to the two customers, the customers haven't gotten their refunds, the sales rep quit after a couple of his clients didn't receive their promised refunds, and court records show the company has been already been sued by dissatisfied customers.

For more, see Company Accused Of Using Housing Crisis For Profit, and the Channel 10 I-Team Investigation blog on People’s First Financial.

Go here for the KGTV Channel 10 video report.

S. California Group Claiming "Sovereign" Immunity From Laws Seize Vacant Foreclosures & Rent Them Out, Leaving Authorities Scratching Their Heads

In Southern California, The Press Enterprise reports on a local outfit claiming to be a religious orgainization with "soverieign" immunity from federal and local laws that, according to some local real estate agents, is going around seizing vacant foreclosed houses by recording legitimate looking deeds with the county recorder, and then turning around and renting the vacant homes to squatters.

For the story, see Would-be homebuyers find themselves in ownership limbo.

For story update, see San Diego Union Tribune: Man accused of filing bogus grant deeds pleads not guilty.

Investors In Countrywide MBS Cry Foul In Bank Of America $8.4B Loan Modification Settlement With State AGs

The Wall Street Journal reports:

• Bank of America Corp.'s decision to embark on an $8.4 billion home-loan-modification program to settle charges brought by state attorneys general against Countrywide Financial Corp. was hailed as a milestone when the deal was announced this fall. But apparently nobody talked to one group that will shoulder much of the settlement's costs: investors who hold securities backed by Countrywide mortgages.

***

• Bank of America didn't seek investor approval before agreeing to the settlement "because the design of the program was based in large part on the delegated authority" in the contracts, [a Bank of America spokesman said].

• But some investors believe they should have been contacted first. [...] Other investors said Bank of America is moving much of the cost of the settlement to investors when it should be paying those costs itself. [... T]hey said that many of these loans violated representations and warranties made when the mortgages were packaged into securities. As a result, they said, Bank of America should repurchase the loans before modifying them.

• "This is literally an attempt to settle a dispute with state attorneys general on predatory lending claims with someone else's money," said one money manager. "In 10-plus years in the market, I've never seen anything as outrageous as this."

For more, see Investors Hit BofA Loan Modifications.

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

Hawaii Feds Probe Alleged "Bogus Bond" Foreclosure Rescue Scam; Homeowners Clipped Out Of $300K+

In Hawaii, The Honolulu Advertiser reports:

• The FBI is investigating several local companies that allegedly bilked homeowners out of more than $300,000 on O'ahu, the Big Island and Maui with false promises to help them avoid foreclosure, according to local lenders and law enforcement officials.

• The families, many of which are Native Hawaiian, were charged between $2,500 and $10,000 to attend seminars or counseling sessions on avoiding foreclosure, and were told they would receive bonds worth $1 million(1) that could be used to pay off the outstanding balance of the mortgage. Officials said the bonds were bogus and no mortgages were paid off.

For more, see Homeowners targets of scam (Bogus bonds sold as mortgage relief landed many in foreclosure).

See also:

• Scam came wrapped in rhetoric (Bond scheme targeted homeowners, spoke of 'Hawaiian nation'),
• KGMB-TV Channel 9 video,
• Copy of a fraudulent bond.

(1) According to the story, after attending the seminars, families are told that a $1 million "Royal Hawaiian Treasury Bond" will be sent to the homeowners' bank with a letter explaining that it will cover the outstanding balance of the mortgage. The companies tell the homeowner that because they are members of the "Hawaiian nation," the bank will no longer be able to demand money from them because they are the land's "rightful owners," the story states.

N. Virginia Man Cops Plea In Fraud Case; Allegedly Pocketed Refinancing Proceeds Intended To Pay Off Existing Liens, Sold Same Loans Multiple Times

From the U.S. Attorney's Office (Eastern District - Virginia):

• Vijay K. Taneja, age 47, of Fairfax, Virginia, pleaded guilty to one count of conspiracy to commit money laundering in connection with a mortgage fraud scheme involving his company, Financial Mortgage, Inc., (“FMI”), which originated and sold mortgages on residential properties in the Washington, D.C., metropolitan area.

According to the press release, the allegations against Taneja contained in court documents supporting the guilty plea include:

1. creating fictitious loans with bogus loan closings,
2. selling the same legitimate loan to multiple investors, and
3. pocketing the proceeds generated from refinancing loans, when the bulk of those proceeds were intended to payoff prior mortgages on the same properties.

Court documents also state that for at least part of the scheme, Taneja conspired with the owner of TitlePro, a now-defunct Fairfax, Virginia title company, the press release states.

For the U.S. Attorney's press release, see Fairfax Man Pleaded Guilty in $33 Million Mortgage Fraud Case.

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

Upstate NY Developer Faces Felonies For Allegedly Using Buyers' Deposits For Costs Unrelated To Building Their Homes

In Saratoga Springs, New York, the Schenectady Gazette reports on once-thriving homebuilder James McLagan who, once the real estate market tanked, now finds himself facing six felony grand larceny counts and a misdemeanor charge of scheming to fraud along with a number of civil lawsuits:

• [P]ublic records show that McLagan’s mortgage company and other creditors say he stopped paying his bills sometime last year, after he had already racked up hundreds of thousands of dollars in mechanic’s liens from contractors and creditors.

• That may mean he used housing deposits from customers to pay other bills rather than for supplies and contractor labor costs for their houses, which is illegal, [Saratoga County District Attorney James Murphy III] said.

• “In these particular criminal charges, we’re alleging that he intentionally stole money and didn’t use the money he was given by the homeowner for materials or products that were to be used specifically in the home that was being built,” he said.

• [DA Investigator Rich] Martin noted that state law requires builders who take money up front to put it into an escrow account and only draw on it for expenses for that home.

For more, see Boom times over for arrested developer.

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta

Should You Keep Paying Your Mortgage?

A recent column in the San Francisco Chronicle discussed the possibility of homeowners deciding to stiff their lenders in order to qualify for one of the bailout programs that are currently being floated.

• Should you keep paying your mortgage? If you have significant equity in your home, absolutely. If you don't, it's getting harder to answer that question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay.

***

• Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.

• "This is a once-in-a-lifetime opportunity," Schiff says. "People are going to feel like complete morons if they don't participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn't afford."

***

• Schiff predicts that loan agents "will be cold-calling people trying to get them into it. Just like they encouraged people to overstate their income to get a bigger loan in the first place, now they will encourage them to understate their income to qualify for a smaller loan."

For more, see Are you an idiot to keep paying your mortgage?

Sloppy Foreclosures Continue As Florida Homeowner Faces Actions From Two Different Plaintiffs Each Claiming To Own The Same Note & Mortgage

The Law Blog at The Wall Street Journal reports:

• [F]or the legal beagles at so-called foreclosure “mills,” which do assembly-line lawyering for lenders and other mortgage owners, the crisis has meant lots of work but also woes, including sanctions and stern lectures from judges (examples here, here and here). Why are judges so frustrated? The increased volume is leading to mistakes and irregularities, which we’ve chronicled before.

• Now comes the foreclosure case of Joanne Fredenburg, a widowed homeowner in Lehigh Acres, Fla., where real estate prices have plummeted. Last month Ms. Fredenburg was served with not one but two foreclosure lawsuits from two different plaintiffs that both claimed to own her promissory note and mortgage and said she owed them each more than $276,000. That, of course, is impossible. (Click here and here for the two complaints.)

For more, see Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage.

Go here for other posts on sloppy foreclosures and assembly line lawyering. SloppyForeclosuresAlpha

Another "Rent-To-Own" Program, Another Horror Story For Tenants

In Killeen, Texas, the Killeen Daily Herald reports on two families who paid $2,500 and $5,000 upfront to enter into rent-to-own real estate purchase arrangements with Robert "Bob Buys Houses" Alford III, a local operator.

• In early 2007, two Killeen couples moved into homes they hoped to raise their families in. Now they are out thousands of dollars and desperately counting on people who were strangers just a few weeks ago to help save their dreams.

***

• Both families were satisfied with the experience until the original homeowners knocked on their doors. They say now that Alford scammed them out of thousands of dollars and their dream of owning a home.

According to the initial story, Alford originally acquired possession of the homes through agreements with the original owners in deals where, rather than pay off the existing mortgages, he agreed to continue making the payments. He then entered into the rent-to-own deals with the tenants. Now, the original owners are also complaining, saying that the mortgage payments are not being made. According to a subsequent story:

• Alford said he never intended to defraud anyone. However, his business model resembles scams documented by the FBI and mortgage lenders in the past. The scam operates by a person agreeing to take on mortgage payments on a property to sell. Instead of selling the property, they rent the property, ask for a large up-front down payment, stop paying the mortgage and leave the homeowner or lenders to clean up the mess.

For more, see:

• Real estate woes hit home,
• More residents worry about mortgage fraud.

For more on problems with "Rent To Own", "Lease / Option" and "Contract for Deed" real estate deals, go here and go here. rent to own lease purchase option scams yellowstone

Obtaining Deficiency Judgments Against Foreclosed Homeowners Not A Pratical Option for Big Lenders

In Fort Myers, Florida, The News Press reports:

• [T]he big news is that at present very few large institutional lenders are even bothering to seek deficiency judgments in foreclosure suits. The main reason is that lenders figure that if someone cannot pay his or her mortgage, then he or she probably cannot pay a deficiency judgment either, and the lender could waste money on an attorney chasing a deficiency judgment and not collect a dime. Instead, lenders focus on getting title to the real estate in a foreclosure suit so they can resell the property and recoup some of their losses. (Note though, that a few smaller banks and hard money lenders are regularly seeking deficiency judgments).(1)

For more, see Lenders don't seem to be pursuing deficiency judgments.

See also, Most lenders not seeking deficiency judgment (Florida often seen as 'debtor friendly').

(1) The article points out that, at least in Florida, deficiency judgments are only available if "personal service of process" has been made when serving the homeowner with notice of the foreclosure action. If the homeowner has already bolted from the home, can't be found, and thereby causes the lender to rely on "constructive service of process" (ie. taking a legal notice out in the local newspaper) to legally serve the homeowner with notice of the foreclosure, deficiency judgments are not available to foreclosing lenders in those cases.

Tanking Market Makes It Tougher To Split As Divorcing Spouses Now Fight Over Who "Doesn't" Get The House

In South Florida, The Miami Herald reports:

• During the real-estate boom, couples who divorced would fight over who got the house, betting that the winner could get rich from rapidly escalating prices. [...] Now, in a twist on the classic divorce dispute, houses have become hot potatoes for couples divorcing during the downturn. 'It's like, `You take the house!' 'No, You take the house.' 'I don't want it, you take it,' '' said Drew Sheridan, a veteran divorce lawyer in Kendall.

***

• ''Instead of an asset where they used to fight for occupancy, possession and ownership, they're now fighting to abandon their personal interest,'' said William Koreman, a divorce lawyer in Hollywood. "Neither of them wants the property because they would be accepting a huge liability.''

• In extreme cases, a homeowner has used the mortgage as a weapon of spite, deliberately sabotaging his or her own credit to destroy the credit of the former partner, said Adam Franzen, a Fort Lauderdale family lawyer. Even when couples try to play nice, their disintegrating financial condition turns an amicable split into a war of the roses.

For more, see When couples split, the home is a hot potato (In this period of a declining housing market and negative equity, there's a different kind of divorce battle for custody of the house -- neither spouse wants it).

Mass AG Files Housing Discrimination Suit Against Landlord Alleging Violations Of Lead Based Paint, Section 8 Rules

Last month, the Massachusetts Attorney General announced the filing of another housing discrimination lawsuit, alleging that the landlords violated state antidiscrimination laws by pursuing eviction proceedings against a tenant with a Section 8 housing voucher shortly after an infant joined the household.

• According to the [lawsuit], the tenant, who had been living in the [...] residence since 2006, informed the landlords that a newborn baby was joining the household and that the family needed a lead-safe unit. [...] The complaint further alleges that the landlords learned in May 2008 that the apartment would need to pass a lead inspection in order for the landlords to continue receiving payments under the Section 8 program. Shortly thereafter, in June 2008, the landlords initiated eviction proceedings [without abatement of the existing lead based paint condition in the apartment].(1)

For more, see AG Coakley Sues Hyde Park Landlord for Lead-Based Housing Discrimination.

(1) According to the press release, the Massachusetts Lead Paint Statute requires landlords who rent to families with children under the age of six to abate lead hazards in the unit in order to prevent lead poisoning. It is illegal for landlords to discriminate against families with children in order to avoid compliance with the lead paint law. It is also illegal in Massachusetts to discriminate against families with Section 8 vouchers because of requirements of the Section 8 program, including any requirements concerning lead paint inspection and abatement. This is the sixth lead paint discrimination and 17th housing discrimination case that Attorney General Coakley has filed since taking office in January 2007.

Toxic Mold Problem In Brand New Home Forces Family Into Foreclosure

In Knoxville, Tennessee, WVLT-TV Channel 8 reports:

• A West Knoxville family says mold has ruined their health, home, and finances. So much so, the House family says it's forced them into foreclosure. [...] The House family bought a brand new home nearly two and half years ago, and they say they've battled mold problems just about ever since.

• [Cherie House] says mold grew and so did her family's health problems, including headaches, loss of vision, joint pain, and upset stomachs. "The toxicology report found we had four of the most dangerous molds," House said. House blames Developer John Luttrell for the problems.

For the rest of the story and link to the video report, see Mold forces home foreclosure. meth lab yak

NH Bar's "Reduced Fee" Legal Services Program Available For Those Earning Too Much To Qualify For Non-Profit Firm Counsel

In New Hampshire, Foster's Daily Democrat reports:

• Legal help may be just a call away for people making too much for free legal services and too little to afford standard legal fees. The New Hampshire Bar Association's Reduced-Fee Referral Program helps people in these difficult economic times by matching qualified applicants with participating private attorneys who charge approximately half their customary rates. [...] Issues range from foreclosure, debt collection and bankruptcy to family law and landlord-tenant issues.

For more, see Reduced fee legal help available for people financially in-between.

Legal Aid Firms Getting Hammered By Budget Squeeze, Skidding Economy

The failing economy is causing budget squeezes for the non-profit law firms who represent the poor throughout the country, and is expected to result in these firms having to turn away even more people in need of services than it already is, as reflected by these two stories:

• Legal aid to low-income Mass. residents drops,
• Hard Times For Legal Aid Agencies (Layoffs are imminent as funding drops drastically).

Judges Feel The Pinch As Budget Cuts Put The Squeeze On Florida Judiciary

In Manatee, Florida, the Bradenton Herald reports:

• Florida State Supreme Court Chief Justice Peggy Quince told an audience of local attorneys Friday that the judicial system is a branch of government, not an agency, as the Legislature treats it during budget time. “The most critical issue facing the judicial branch is funding,” Quince told the more than 200 members of the [local] bar associations attending the annual Bench-Bar Conference at the Manatee County Judicial Center.

***

• Last year about 280 positions were eliminated statewide to meet the judicial branch’s budget goals. This year 240-250 more people may have to be laid off to reach Gov. Charlie Crist’s request, she said. Without these non-judge position, judges will not be able to hear as many cases.

***

• She said because of the economic downturn, this is the wrong time to cut court budgets. "During these hard times domestic violence incidents and economic crimes increase,” Quince said. “Also, the foreclosure rate is going up.

For more, see Chief justice asks lawyers to call about budget cuts.

Budget Squeeze Causes County To Stop Publishing Required Legal Notice Of Local Properties With Delinquent Real Estate Taxes

In Fremont, Ohio, the Toledo Blade reports:

• Sandusky County Auditor Bill Farrell expressed frustration yesterday, a day after county commissioners told him he must cut $102,000 from his department's budget. [...] Included in those cuts is $30,000 the county pays in October to publish the names of residents with delinquent land tax notices(1) in the Fremont News-Messenger newspaper. Mr. Farrell said the notice is required by state law, but [county commission president Brad] Smith said the price of the annual four-page spread is too expensive and "ridiculous."

***

• Mr. Smith said rather than pay the money to put the information in the newspaper, the county can post the notice on its Web site. "If someone wants to view it, it can be readily available," he said.

For more, see Sandusky County auditor told to cut $102,000 from budget.

(1) The quality of tax titles purchased at county delinquent tax auctions are notoriously dubious as it is. For the county to disregard the required legal process for advertising delinquent taxes will make buying tax titles a worse crap shoot than it already is.