State Officials Yank Tax Benefit Derived From Bogus Homestead Claim By Bronx Congressman On Maryland House

The New York Post reports:

• Maryland officials have yanked a tax credit from Bronx Rep. Eliot Engel, who has avoided thousands in taxes on his nearly $1 million home there by improperly claiming it as his primary residence. The officials told Engel he doesn't qualify for the homestead exemption, a tax credit only state residents can apply for, because he and his wife Patricia's primary residence is in The Bronx.

***

• State officials say Engel won't be required to pay back any savings accumulated over past years because the family's homestead exemption was approved - even if erroneously.

For more, see BX. POL GOT A SLICK 'RANGEL' TAX BREAK.

Maine Chief Justice: Task Force To Develop Foreclosure Diversion Program

The Maine Public Broadcasting Network reports:

• [C]hief Justice [Leigh] Saufley told a joint session of the House and Senate that that the court system will create a task force to develop what she calls a foreclosure diversion program "aimed at helping Maine people who are facing the loss of their homes. I'm pleased to report that the Justice Action Group and Maine banks and credit unions are working with us in this effort, giving us reason to hope for real effective solutions." The project will be led by Supreme Court Justice John Levy. Levy chairs the Justice Action Group, a coalition that includes the judicial branch, the bar association, the University of Maine Law School, and legal aid providers, including Pine Tree Legal Assistance.

For more, see State Supreme Court Backs Program to Reduce Foreclosures.

More On Forensic Loan Audits In Connection With Loan Modifications

A recent story in the San Francisco Chronicle contained the following excerpt describing how one company involved in the loan modification process operates:

• Nasim Pakmanesh, production manager at Help-U-Mod in Walnut Creek, said his company's business model is to provide "forensic loan audits" for $1,500, then to refer clients to affiliated attorneys who charge about $1,000 to pursue a loan modification. He said the audit looks through the original loan documents to discover errors made when the loan was originated.

• With the audit, "the attorney has more ammo to work with to negotiate for their clients," he said. "Instead of going in and saying, 'My clients can't afford the home and have a hardship,' they're saying, 'You guys approved a loan you shouldn't have - so what can you do for my clients?' Our audit will definitely increase the chances" of getting a loan modification.

For the story, see Desperate homeowners easy prey for scammers.

Postscript:

It may be a good idea for The State Bar of California (as well as state bar associations in other states) to issue an advisory that specifically addresses whether the marketing and performing of a forensic loan audit by a non-attorney directly to and for a consumer-homeowner constitutes the unauthorized practice of law.(1)

Currently, the Florida Attorney General has a civil lawsuit pending against a loan modification firm alleging, among other things, that this precise conduct constitutes the unauthorized practice of law under Florida law. See Florida AG lawsuit (paragraphs 27-28).

Likewise, the Tennessee Attorney General filed a civil suit in November against a loan modification firm in which he alleges, among other things, that the firm engaged in the unauthorized practice of law. See Tennessee AG lawsuit (paragraphs 78-81).(2)

******************

(1) However, The State Bar's professional responsibility committee has recently issued an alert offering guidance to California lawyers thinking about signing up and working with loan modification firms.

(2) Last week, a Nevada couple filed a class action lawsuit against a loan modification firm in which they assert that the firm engaged in the unauthorized practice of law in violation of Section 7.285, Nevada Revised Statutes. See class action lawsuit (paragraph 23).

Chico Homeowner's Foreclosure Eviction Stopped; Files Suit Requesting Cancellation Of Alleged Predatory Loan

In Chico, California, the Chico Enterprise Record reports:

• To prevent a Chico woman from losing her home, several lawyers filed suit against three firms they accused of engaging in a "predatory lending scheme." "We're hoping this is going to help this woman out. She certainly deserves it after what she's been through," said Evanne O'Donnell, managing attorney of Legal Services of Northern California.

• Jan Poythress, 53, was within days of being evicted from her northeast Chico home last month when the attorneys intervened. The eviction was put on hold, and Poythress remains in the house while a new trial is scheduled to decide the legality of requiring her to move.

• In a separate case, the lawyers, on March 5, sued Instant Mortgage Lending Corp. of San Diego, ForeclosureLink of Fair Oaks and Expedia Home Loan of San Diego, demanding, among other things, that Poythress' loan and the foreclosure on her home be canceled. "When you read this complaint, you see how sinister this is," O'Donnell said in a phone interview.

***

• O'Donnell said she was grateful for the help of several attorneys — experts on foreclosures and evictions — who donated their time free of charge. They include Doug Jacobs of Chico, Wayne Silver of Sunnyvale and Maeve Elise Brown of Oakland.

For more, see Lawsuit filed to save disabled Chicoan's home.

For earlier Chico Enterprise Record articles on this story, see:

• Lawyers hope to halt woman's eviction.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here. UndoMortgageLoans TILAdelta

Scammer Convicted Of Elder Expoitation Now Accused Of Swiping Mom's Home Equity, Resulting In Foreclosure; Other Victims Come Forward

In Great Falls, Montana, the Great Falls Tribune reports:

• When Tina Palagi was sentenced in court on charges of elder exploitation in December, she got a suspended sentence and a strong warning to stay out of trouble.(1) Now the Great Falls woman is accused of stealing from her own mother while her mother was ill, causing the elderly woman to lose her home to foreclosure just months before it should have been paid off.(2)

***

• According to charging documents, [a Great Falls Police] detective learned Palagi had been trusted to manage her mother's finances while her mother was seriously ill. The older woman bought her house in 1973 and should have made the last payment in 2003. Instead, she learned her home was in foreclosure when sheriff's deputies told her she was being evicted and had 30 minutes to vacate the house, according to court documents.

• The charges say Palagi took out a loan against the house in 2000 and failed to pay back the loan, causing the house to go into foreclosure. Palagi had been authorized to govern her mother's affairs, but her mother did not know about the loan, according to the charges. Palagi also is accused of stealing her mother's retirement benefits while her mother was sick.

For more, see Woman convicted of elder exploitation now charged with bilking mom.

For story update (April 3, 2009), see Parole violations land woman in state prison:

• A woman convicted of at least two financial scams and accused of many more will spend at least 10 years in Montana Women's Prison. [...] Judge Dirk Sandefur handed down the prison sentence Thursday after determining Palagi had violated the conditions of two previous suspended sentences.

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

(1) According to the story, Palagi was given an eight-year suspended sentence in December for borrowing $54,000 from a 78-year-old family friend and failing to repay the money. District Judge Dirk Sandefur said he only let Palagi stay out of prison so she could pay the woman back. "I want you to understand very, very clearly that this is the end of the line for you," Sandefur said at the time. Palagi also reportedly has a previous conviction for a scam involving phony money orders.

(2) Palagi, 42, made her initial appearance Monday in Cascade County District Court on the newest charge of elder exploitation. That charge comes on the heels of a host of other new charges filed last week, accusing Palagi of other counts of elder exploitation and felony theft, according to the story. DeedGammaTheft FinancialAbuseOfElderlyAlpha

Dozens Of Tennessee Mobile Home Owners Face The Boot As Landowner Faces Foreclosure

In Catoosa County, Tennessee, WTVC-TV Channel 9 reports:

• Dozens of people in Catoosa County are wondering if they will lose their homes after seeing a foreclosure notice this week. They live in the Pine Forest Mobile Home Park who's owners, David and Sandra Ott of California, are facing foreclosure. Right now it's a waiting game because on one hand the property is scheduled to be auctioned in less than a month from now.

***

• It's home to dozens of families, retirees and people with disabilities. Wednesday [resident Anthony] Lance saw in the Catoosa County local paper's foreclosure section a notice that the nearly 40.85-acre property is about to be foreclosed with a public auction scheduled for April 7 at the Catoosa County Courthouse.

***

• Many residents own their mobile home but pay $170 a month to rent property with water and trash services. Residents say it costs $2,500 to $4,000 to move their home to another park plus they have to get a $500 permit. "I'm retired and it would be impossible for me to move my trailer, I'd have to lose it and it's paid for," Jerry Doss said.

For more, see Dozens Unsure If They'll Keep Homes.

Massachusetts Loan Modification Firm Accused Of Scamming Homeowner Out Of $995

In Boston, Massachusetts, WCVB-TV Channel 5 reports:

• As the foreclosure crisis grows so does a cottage industry of loan modification companies that promise to work with lenders and lower monthly mortgage rates. But Team 5 Investigates found the practices of many of these companies are not only unethical, they are illegal.

• Donna Warren's back injury forced her to stop working. Before too long, she fell behind on her mortgage payments. She went online and found Oceanview Investments. "Oceanview did nothing. They took my money and did nothing," said Warren. Donna paid Oceanview $995 to work with her lender on her behalf. "They promised that I wouldn't have to deal with my mortgage company at all, and to ignore any calls I got from them," said Warren.

***

• The company's Web site says they are no longer accepting clients. Florida's attorney general has launched an investigation after getting 40 complaints in less than a year. [...] Glenn Russell is a mortgage attorney who has seen loan modification companies popping up more frequently. "They promise we'll cut your mortgage in half, or we'll knock that interest rate down," said Russell. "They are targeting people that are the most vulnerable."

For more, see Mortgage Predators Take Money and Run (Many Companies Charge Up-Front Fees Illegally).

In a related story, see The Associated Press: It's boom time for foreclosure scam artists (Only in a few states are attorneys general offices willing and able to seek criminal charges and jail time against foreclosure con artists) (If link expires, try here).

Florida Attorney General vs. Outreach Housing - A Different View

Regarding the pending lawsuit by the Florida Attorney General's Office against loan modification firm Outreach Housing, the company has one or more supporters who have started blogs in which they paint a picture that is much different than the one described in the AG's lawsuit.

For those blogs, go here and go here.

Locksmith Takes A Bullet From Renter While Changing Locks At A Foreclosed Home

In Phoenix, Arizona, KTVK-TV Channel 3 reports:

• The Valley foreclosure problem turns violent when police say a man shot a person who was sent by the bank to change the locks. The man living in the home was renting and authorities say the owner did not tell him the home was under foreclosure. Jeffrey Harrison, 40, was arrested on charges of aggravated assault.

For more, see Renter shoots locksmith changing locks on foreclosed home. DeputyEvictionTheta

Queens Widow Fights Off Lender's Attempt To Foreclose Predatory Loan With Help From ACORN "Home Defender" Campaign

Writer and producer Joseph Huff-Hannon reports:

• The community organization ACORN launched its nation-wide "Home Defender" Campaign on February 19 with a series of actions across the country. In New York the campaign was kicked-off with a rally at the house of Myrna Millington of Laurelton, Queens. Millington, a 74-year-old retiree and widow, currently faces eviction from her home of 38 years after falling victim to predatory lending. The property went into foreclosure in September 2008, but ACORN has thus far been able to stay the auction.

For more, including a video of the rally at Ms. Millington's home, see Home Defense 101: Home defenders save homes from foreclosure.

Loan Officer Wins Race To Prosecutor's Office In Equity Stripping Foreclosure Rescue Case; Cuts Deal w/ Feds, Will Sing Against Now-Former Associates

In Honolulu, Hawaii, the Honolulu Star Bulletin reports:

• A former loan officer with a local mortgage brokerage company is cooperating with the government in its prosecution of his former boss. Vance Yukio Inouye, 31, pleaded guilty yesterday in federal court to one count each of wire fraud and conspiring to make false statements on loan applications and commit wire and mail fraud.

***

• Inouye pleaded guilty as part of a plea deal with the government. The agreement requires him to pay restitution and testify for the prosecution against other defendants. In exchange, the government promises not to prosecute him for various other crimes and to recommend a sentence lighter than what he would qualify for. In U.S. District Court, in front of U.S. Magistrate Judge Barry Kurren, Inouye said, "John Dimitrion approached me with a foreclosure bailout deal I thought was legitimate."

• Dimitrion is the owner and principal broker of Mortgage Alliance. A federal grand jury returned an indictment last month charging him, his wife, Julie Ann Baldueza Dimitrion, and employees Rick Kealoha Pa Jr. and Benjamin Yoshito Thompson with mortgage fraud crimes involving three homes. Their trial is scheduled for next month.

For more, see Former mortgage officer pleads guilty, makes deal.

To view the indictment, see U.S. v. Dimitrion, et al.

Go here for other posts on this case.

Clipping Homeowners For Improper, Unexplained Fees A Common Practice For Some In Mortgage Servicing Industry

In St. Cloud, Minnesota, the St. Cloud Times reports:

• Charging improper or unexplained fees is a common practice for some mortgage servicing companies and is a larger part of the national foreclosure crisis than most people realize, experts say. Questionable property inspections, late fees when payments aren’t late, forcing homeowners to buy insurance even when they already have it — all occur nationwide and often go unchallenged by consumers, they say.

• “It’s really a major problem, and it’s been around for a long time,” said O. Max Gardner III, a North Carolina attorney who teaches bankruptcy boot camps for other lawyers.

• A mortgage servicer is responsible for collecting monthly loan payments and crediting the homeowner’s account. The servicer also handles escrow accounts for taxes and insurance. The servicing companies don’t actually own the loan, so they may not have a strong interest in providing good customer service. In fact, they may have an incentive to force a homeowner into foreclosure. “The more defaults they have, the more fees they collect, the more money they make,” said David P. Leibowitz, a Chicago-based foreclosure defense attorney.

For more, see Experts: Improper fees play part in crisis (Servicers may benefit from loans in default).

In a related story, see Couple blames fees in loss of home (Residents say dream of raising a family in their first home drowned in a flood of questionable mortgage charges).

For earlier posts on the alleged mortgage servicing practice of padding fees with phony charges, see:

• Countrywide Padded Legal, Other Fees When Servicing Mortgages, Says Suit; Class Action Status Sought,
• Wall Street Journal On Investigations Of Possible Phony Claims By Mortgage Servicers & Lenders In Homeowners' Bankruptcy Cases,
• Homeowners In Foreclosure Being Clipped For Illegally Inflated Legal & Appraisal Fees, Says Lawsuit.

Go here, go here, go here, and go here for posts on questionable mortgage servicing practices. QuestionableServicingTacticsSigma

Jacksonville Foreclosure Rescue Operator Dodges Another Bullet As Prosecutors Drop Criminal Charges

In Jacksonville, Florida, The Florida Times Union reports:

• Prosecutors have dropped mortgage fraud charges against a man accused of skimming home equity from distressed homeowners. The case against Thomas Cuomo could not stand in the wake of an e-mail and paper trail showing the mortgage company he was working with wasn't the victim of fraud - but instead the possible cause of it.

• Cuomo, who once was a housing counselor for the Jacksonville Urban League, bought homes from people in foreclosure. At one time, he was suspected of skimming out what equity had been built up and renting them back to the original owners, promising them a chance to buy the houses back.(1)

***

• April Charney, an attorney at Jacksonville Area Legal Aid and one of the nation's experts in foreclosure law, is defending one of the foreclosures on behalf of the tenant, Lester Thomas, who sold his house to Cuomo. Thomas still lives there because the bank has not been able to prove it has the right to foreclose on it.

For more, see Charges against man accused of fraud dismissed (He was suspected of skimming equity from distressed homeowners).

(1) Reportedly, he was first charged in 2007 with money laundering and mortgage fraud after state investigators found similar stories from nearly a dozen people in Duval and Clay counties. That case was dismissed on a technicality. In 2008, he was charged again, this time accused of taking out fraudulent loans.

Kansas AG Probes Firm's Activities For Possible Deception In Buying Up Redemption Rights From Foreclosed Homeowners

In Witchita, Kansas, The Witchita Eagle reports:

• The Kansas Attorney General's Office is investigating complaints alleging "unconscionable business practices" by a Wichita company that buys and sells homes in foreclosure. Attorney general spokeswoman Ashley Anstaett said she couldn't say more about the complaints against Liberty Asset Management. But Liberty's critics, including some of its competitors, accuse it of taking advantage of people in foreclosure.

• One instance they cite involves Liberty buying property rights for $10, allowing it to claim almost $20,000 in equity that would have gone to a deceased resident's heirs. The issue centers on Liberty's methods in getting people to sell so-called redemption rights to their property.

For more, see Kansas attorney general investigates home buyer-seller's foreclosure practices.

Washington State Officials Shut Down Adult Home; Accuse Owner Of Leaving Country While Facility Faced Foreclosure; Residents Left "In Imminent Danger"

In Kent, Washington, the Kent Reporter reports:

• The Washington State Department of Social and Health Services has announced the suspension of the license of a Kent Adult Family Home due to "numerous violations that jeopardized the safety and well-being of residents," according to paperwork from the state agency.

• The suspension means the home [...] must stop admitting residents and that the residents living at the home must be moved to other "settings," or care facilities. Those residents have been moved, according to dshs officials. The suspension went into effect March 5.

• According to a letter sent to home operator Stevan Bachici, a Feb. 18 inspection of the facility determined that "residents are in imminent danger." The Feb. 20 DSHS letter outlined three "serious deficiencies" as well as seven "significant deficiencies." At the top of the state's "serious deficiencies" was the ability of the facility to provide care and service. According to the letter, Bachici left the country while the home was in foreclosure, and the staff in charge did not have the "skills, ability or authority to ensure residents remained safe."

For more, see Safety violations: DSHS suspends license of Kent adult home.

Landlord's Financial Distress Causing Stress, Confusion For Tenants Around The Country

msnbc.com reports on Irvine, California-based landlord Bethany Holdings Group, which is reported to have abandoned a dozen apartment complex in the Phoenix, Arizona area as well as a number of buildings in other states after defaulting on hundreds of millions of dollars in loans.

Reportedly, Bethany complexes have been threatened with gas or electricity shut-offs due to non-payment of bills; and employees at many of the Phoenix area properties say they have been stiffed out of their paychecks for a month or more before courts began appointing receivers to assume control of the complexes. Tenants are also facing a loss of their security deposits.

Courts in Arizona, California, Colorado and Florida are said to have become involved in the appointment of receivers to maintain and preserve Bethany's holdings which serve as collateral for the delinquent loans.

For more on the story, see Corporate meltdown leaves renters in limbo (Large apartment complexes abandoned to receivership and unruly weeds).

For other media reports on Bethany Group complexes in foreclosure in other states, see:

• Virginia: Receiver named for Portsmouth apartment complexes,
• Georgia: Management Company Deliquent On Rent, Power,
• Arizona: Court-appointed receiver takes over Bethany communities.

Go here for other posts on Bethany Group buildings in foreclosure.

Possible Victim Of Alleged New Jersey Loan Modification Scam Found In Wisconsin

In Green Bay, Wisconsin, WGBA-TV Channel 26 reports:

• On[e] viewer [...] emailed NBC26 saying she sent "New Hope Modifications", a company based out of New Jersey, $1,500 so they could help with a mortgage payment she was falling beyond on. "They made it sound like they could help us out by re-modifying the loan, or getting a lower payment," said Tina. The company didn't help Tina make her payment, and now not only is she out the money, but her house is going up for foreclosure sale in June.

• On Thursday, the New Jersey Attorney General filed a lawsuit again New Hope Modifications of Bellmawr saying the company took inflated fees from homeowners who expected them to help with their mortgage payments. Attorney General Ann Milgram says New Hope scammed 80 people out of $98,000.

For more, see Foreclosure "Help" Scams on the Rise.

For more from the New Jersey Attorney General's Office on its legal action against New Hope Modifications, see:

• Lawsuit: Milgram v. New Hope Property LLC d/b/a New Hope Modifications,
• NJ AG press release: Attorney General Announces Three New Mortgage Fraud Complaints - Disbarred Lawyer, Son Sued for Racketeering; Loan Modification Businesses Charged.

Alarm Bells Warn Of New Wave Of Mortgage Fraud As "Quick Defaults" On FHA Loans Begin To Spike

The Washington Post reports:

• [T]his decade's housing boom rendered the agency irrelevant. Americans raced to aggressive lenders, seduced by easy credit and loans with no upfront costs. But the subprime mortgage market has crashed and borrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit. The agency's historic role in backing mortgages is more crucial now than at any time since its founding.

• With the surge in new loans, however, comes a new threat. Many borrowers are defaulting as quickly as they take out the loans. In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency's overall growth in new loans, according to a Washington Post analysis of federal data.

• Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers and most notably, foul play among unscrupulous lenders looking to make a quick buck.

• If a loan "is going into default immediately, it clearly suggests impropriety and fraudulent activity," said Kenneth Donohue, the inspector general of the Department of Housing and Urban Development, which includes the FHA.(1)

For more, see The Next Hit: Quick Defaults (More FHA-Backed Mortgages Go Bad Without a Single Payment).

(1) According to the story, the Palm Hill Condominiums project near West Palm Beach, Fla., exemplifies the problem. The two-story stucco apartments built 28 years ago on former Everglades swampland were converted to condominiums three years ago. The complex had the same owner as an FHA-approved mortgage company Great Country Mortgage of Coral Gables, whose brokers pushed no-money-down, no-closing-cost loans to prospective buyers of the condos, according to Michael Tanner, who is identified on a company Web site as a senior loan officer. Eighty percent of the Great Country loans at the project have defaulted, a dozen after no payment or one. With 64 percent of all its loans gone bad, Great Country has the highest default rate of any FHA lender, according to the agency's database. It also has the highest instant default rate.

Watch Out For Loan Modification Scams Using Forged Documents Simulating The Letterhead Of Lenders, Government Agencies

From the Office of the California Attorney General:

• California Attorney General Edmund G. Brown Jr. [Thursday] warned that scam artists have "sunk to a new low" and have used the forged letterhead of major lenders to con worried Californians into paying thousands of dollars for non-existent loan modification services.

• "Scam artists have sunk to a new low and are using the forged letterhead of lenders to con worried Californians into handing over their hard-earned money," Attorney General Brown said. "Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home."

***

• [Thursday]'s warning comes on the heels of the arrest Wednesday of Anna Santos, 22, of North Hills - a key player in a loan modification scam using forged letterhead - on charges of money-laundering, conspiracy, and four-counts of grand theft. Ms. Santos joined with members of the defunct First Gov loan modification ring in a separate criminal enterprise with a disturbing twist. They used forged mail and envelopes that appeared to be from victims' lenders.

• Ms. Santos obtained a fictitious business permit through the City of Los Angeles for "Payment Processing Department." She opened several bank accounts and two post office boxes under that name. She and other members of the ring mailed flyers that appeared to be from victims' lenders or a government entity. The flyer used a large, bold header that read "Final Notice" and advised homeowners that they qualified for a special program to save their home from foreclosure.

For more, see Brown Warns Homeowners that Scam Artists are Using Forged Letterhead of Lenders to Con Californians.

Go here for more on the alleged First Gov loan modification scam.

For more from the California AG on its criminal action against the First Gov group, see:

• Felony Complaint: People v. Santos, et al.,
• Affidavit in Support of Arrest Warrant: People v. Santos, et al.,
• Felony Complaint: People v. Amador, et al.

NAACP Targets Wells Fargo, HSBC In Separate Class Actions Alleging Violations Of Fair Housing, Civil Rights, Equal Credit Opportunity Acts

The NAACP announces:

• [Friday], the NAACP filed separate lawsuits in U.S. District Court in California against two of the country’s largest lenders, Wells Fargo, and HSBC. These lawsuits allege systematic, institutionalized racism in sub-prime home mortgage lending.(1) The remedies being asked for in the lawsuit include measures for increased accountability and transparency.

For more, see NAACP Files Landmark Lawsuit Today Against Wells Fargo and HSBC (Remedies would benefit millions of potential borrowers).

For the lawsuits, see:

• NAACP v. Wells Fargo Bank & Wells Fargo Home Mortgage,
• NAACP v. HSBC Mortgage & HSBC Bank.

Go here, Go here, and Go here for other posts on alleged discrimination in real estate transactions.

(1) According to the NAACP press release, these two new lawsuits raise the same claims as pending litigation by the NAACP against other mortgage industry leaders. Lenders named in this pending litigation include Accredited Home Lenders, Inc., Ameriquest Mortgage Co., Bear Sterns Residential Mortgage Corp. d/b/a Encore Credit, Chase Bank USA, Citimortgage, First Franklin Financial Corp., First Tennessee Bank d/b/a First Horizon National Corp., Fremont Investment & Loan, GMAC Mortgage Group, LLC, GMAC ResCap, Long Beach Mortgage and SunTrust Mortgage. DiscriminationPredatoryLendingAlpha

Loan Modification Issue Has State Bar's Phone Lines Burning; Lawyers Seek Ethics Guidance As Homeowners' Complaints Flood In

Buried in an article in the March, 2009 issue of the California Bar Journal was this excerpt on how the phone lines over at the State Bar offices are burning up due to the loan modification issue:

• [T]he bar’s Ethics Hotline, a free confidential research service for attorneys, has been receiving between one and two dozen calls a day for the last six months dealing with the residential mortgage crisis and loan modification — about 15 to 25 percent of its daily call volume.(1)

• Scott Drexel, the bar’s chief prosecutor, says that for the last three months, the bar has received 50 complaints each day — about 950 complaints a month — about lawyers involved in some way with the foreclosure crisis. While the complaints run the gamut, Drexel said the most common concerns lawyers who lend their name to a loan modification operation but non-lawyers do most of the work. The non-lawyers get fees upfront through the lawyer and either do not complete the modification or do it incompetently. As a result, he said, the client loses his or her money.(2)

• Calling the number of complaints “shockingly high,” Drexel said his office is “quite concerned. We’re especially concerned with attorneys allowing their names to be used by non-attorneys in some of these loan modification schemes or scams.”(3)

• The Department of Real Estate reports complaints about lawyers involved in loan modification programs who act as fronts or work inhouse. “We’re not certain if they are practicing law or just lending their names,” said chief counsel Wayne Bell.(4)

For more, see Bar issues foreclosure ethics alert.

(1) Reportedly, so many have contacted the State Bar for ethics advice that its professional responsibility committee issued an alert last month offering guidance to lawyers thinking about signing up with loan modification firms. “The most important thing is for lawyers to understand this area is fraught with danger from an ethics point of view,” said Jon Rewinski, a Los Angeles litigator who drafted the ethics alert.

(2) California's malpractice lawyers should have a field day with this issue, at least those who have no problem suing their wayward colleagues.

(3) For an example of a recent action by The State Bar of California involving an attorney allegedly providing a front for non-attorneys who were accused of practicing law involving the handling and settling of personal injury cases, see State Bar Uses Authority To Prosecute Non-Attorneys Running Law Office And Settling Cases.

(4) According to the article, Bell said when consumers who are in desperate financial straits see the word lawyer, “they somehow believe they’re going to get a higher level of care.”

NH Couple Beats Back Debt Scavenger's Attempt To Collect On Zombie Debt From Old Foreclosed Mortgage

In Manchester, New Hampshire, the New Hampshire Sunday News reports:

• [S]even years after they lost their home to foreclosure in 1994 -- during the last recession -- Daniel and Diane Lessard started getting calls from a company they'd never heard of, telling them they owed thousands of dollars. "I thought it was a scam," said Diane Lessard, who said she hung up each time.

***

• Over the years, the calls from Cadle representatives continued sporadically, according to the Lessards. "They would call maybe once a year and harass us, and we would tell them we didn't owe them any money," Diane Lessard, Dan's wife of 21 years, said. Then, in mid-2001, they got a letter from the company, stating they owed approximately $28,000. That led them to call St. Mary's Bank, where they had taken out their 1989 mortgage, but they were told they didn't owe the bank anything.

• Then in 2007 came the lawsuit from Cadle Company, which 13 years earlier had purchased a bundle of bad debts from St. Mary's, including the Lessards' loan deficiency, according to court documents.

***

• It turned out that Cadle had purchased the original note from St. Mary's Bank in 1994, but had not been assigned the mortgage until 2006. As a result, [director of clinical programs at Franklin Pierce Law Center Peter] Wright successfully argued that the loan was unsecured debt and thus the pertinent statute of limitations was only six years, not 20 years as is the case with mortgage debt. [...] In addition to dismissing the case against the Lessards, Judge Gillian Abramson also awarded them legal fees and $1,200 in damages.

***

• The judge also agreed with Wright's argument, under a legal doctrine known as a "Laches" defense, that Cadle had waited to try to collect the debt so that interest and late fees would pile up. The original loan deficiency on the Lessards' note was about $14,000, but Cadle was trying to collect nearly $30,000 by the time the lawsuit was filed.

For more, see NH foreclosure victims may still face trouble.

Go here for other posts on zombie debt. zeta

Distressed Owner Transactions: Common Questions

Thomas A. Glatthaar, senior vice president and senior underwriting counsel with Fidelity National Title Insurance Company, recently wrote in The New York Law Journal and addressed eight common questions, the answers, and the justification for these answers that attorneys may have when dealing with financially distressed real estate located in New York.

For more, see Distressed Owner Transactions: Common Questions.

Countrywide To Argue In NH Lawsuit That It Has No Legal Obligation To Modify Loans Despite Assurances To The Contrary

In Merrimack County, New Hampshire, the New Hampshire Sunday News reports:

• With more and more folks hoping for loan modifications to save their homes, what obligation does a lender have to work with borrowers in good faith? That's the crux of a case coming up in Merrimack County Superior Court tomorrow. Gary and Jessica Raymond have sued Countrywide Home Loans Inc., alleging the company "violated the implied covenant of good faith and fair dealing by failing, refusing or neglecting to provide workout assistance."

***

• Countrywide's lawyers are asking the court to dismiss the case, arguing the company has no contractual obligation to modify loan agreements.(1) But that's not the point, Jessica Raymond told the New Hampshire Sunday News. "We're not saying they owed us a loan modification," she said. "Our lawsuit is saying, when they entered into the whole loan-modification process with us, then at that point they should least have treated us fairly, instead of roping us around for eight months."

For more, see Granite Staters suing Countrywide over mortgage woes.

(1) In an earlier story, Countrywide attorneys reportedly described the lender's publicly-made loan modification assurances as “mere commercial puffery.” For an earlier post on this story, see Attorneys For Major Lender In New Hampshire Lawsuit Admit Company's Loan Modification Assurances Are "Mere Commercial BS."

New York Chief Judge To Give State Civil Legal Services High Priority

In an op-ed article in The Journal News (New York's Lower Hudson Valley), Anne Erickson, president and CEO of the Empire Justice Center, writes:

• Re "Lippman has long list of reforms to pursue," (March 4 story), it's quite refreshing to see newly appointed Chief Judge Jonathan Lippman has put civil legal services funding as a top priority. Lippman is quoted as saying he wants to "reconfigure the indigent defense system and raise money for civil legal services."

For more, see Civil legal services funding lacking.

Attorneys: Are You Current On Your Malpractice Insurance Premiums???

An article in Texas Lawyer cautions attorneys on the increased risk of legal malpractice suits during tough economic times:

• Economic downturns often increase the risk that lawyers will face unhappy clients complaining of legal malpractice. While some lawyers may think they have nothing to fear since their practices do not involve areas of law many blame for the economic collapse, such a belief is unfounded. Some legal malpractice risks are not tied to any one specialized practice area but simply become more common when the economy goes bad.

***

• Some legal malpractice issues are simply an inevitable outcome of activity occurring more frequently in a bad economy. A spike in the number of foreclosures often means more people are unhappy with related legal services. People often sue lawyers who act as trustees in foreclosures, alleging failure to conduct the sale in a proper manner, though the more likely scenario is a suit to enjoin foreclosure.

• As collection activities rise, more people will seek relief under the Fair Debt Collection Practices Act. Various state and federal fair debt collection practices laws may apply to lawyers involved in collection activities, including foreclosures and collection litigation, so all such lawyers should understand and abide by these laws' requirements if there is any doubt as to their application.

For more, see In Tough Times, Look Out for Legal Malpractice Claims.

Class Action Lawsuit Filed Against Owner Of Loan Modification Firm Currently Facing Felony Theft Charges

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

• A nine-page class action lawsuit was filed [Thursday] against a former Las Vegas talk show host who was arrested in connection with an alleged mortgage rescue scam. Las Vegas attorney James Stout filed the lawsuit on behalf of Ana and Hilpolito Villafuerte and other unnamed plaintiffs. The lawsuit alleges fraud, breach of contract claiming damages to the plaintiffs of more than $50,000, and negligence.

• Attorney General Catherine Cortez Masto announced Wednesday that Jack Ferm was arrested on two counts of felony theft and related charges in connection with an alleged mortgage rescue scam. Ferm is president and owner of U.S. Justice Foundation, a business that led customers to believe that Ferm would prepare legal documents to stop ongoing foreclosures on their homes without the need for them to hire an attorney, Masto said.(1)

For more, see Class-action suit filed against former LV radio host.

Go here for other posts on U.S. Justice Foundation.

For a copy of the lawsuit, see Villafuerta v. U.S. Justice Foundation, et al.

(1) In the class action complaint (at paragraph 23), the plaintiffs assert the belief that Ferm engaged in the unauthorized practice of law in violation of Section 7.285, Nevada Revised Statutes.

"Old Gray Lady" Victimized In Multi-Million Dollar "Home" Equity Stripping Deal? Or Did She Lure "Unwitting" Billionaire Into An Equitable Mortgage?

In New York City, The New York Times (aka the Old Gray Lady) reports:

• The New York Times Company said [last] Monday that it had raised $225 million through a sale and leaseback of part of its headquarters building, one in a series of moves to pay down its debts and increase its cash cushion during a drastic slump for the newspaper industry.

• The sale-leaseback agreement with W. P. Carey & Company, an investment firm, could last as long as 15 years, but it gives the Times Company the option of buying the building back after 10 years for $250 million, an option both sides expect will be exercised. W. P. Carey specializes in corporate financing, not real estate, and both companies characterized the agreement more as a loan secured by the building, than a real estate transaction.

***

• The company spent more than $600 million on its building, on Eighth Avenue in Midtown Manhattan, which was completed in 2007. The Times Company owns 58 percent, and its development partner, the Forest City Ratner Companies, owns the rest.

• The deal is back-loaded, with the repurchase price looming in 2019, and a relatively low starting lease payment of $24 million a year on 750,000 square feet of space. That amounts to $32 a square foot, while most recent leases on Class A office space in the same part of Manhattan have gone for $50 to $80 a square foot.(1)

For more, see Times Co. Building Deal Raises Cash.

(1) Given that:

• the Old Gray Lady is desperate for cash (a report that she was spotted down at the welfare office, however, is unconfirmed),
• the parties reportedly characterized the arrangement as a secured loan,
• the rent payments on the leaseback apparently have no relation to fair market rents in the area ($32/sq. ft. vs $50-80/sq. ft.), and
• the amount raised is considerably less than what she has invested in the building ($225M vs. $600M+; the story is silent as to what the true current value of her building is),

this deal has the "fragrant scent" of an equitable mortgage, and not a true sale leaseback. I wonder how each of the parties will treat the deal when filing their Federal income tax returns, and whether that treatment gets the IRS' blessing.

Remove Straightjacket From Legal Aid Advocates

A Washington Post editorial comments on the recent news that the omnibus appropriations bill signed last week by President Obama set aside $390 million for Legal Services Corp., a group involved in providing wide-ranging civil legal assistance to the growing ranks of those in need. The amount is up $40 million, or 11 percent, over last year's funding level. However, the op-ed piece suggests that the federal government should do a little more:

• [L]awmakers should go a step further and unshackle Legal Services from congressionally imposed restrictions that have kept it from working more efficiently and broadly. For example, unlike most others who represent plaintiffs, Legal Services lawyers who prevail in a civil case are prohibited from seeking legal fees from an opponent. This makes no sense, especially because any recovery of fees could supplement the group's funding.

• Legal Services is also barred from using public or private funds to engage in a range of activities, including all class-action lawsuits, any representation of immigrants who are in the country illegally and all litigation involving abortion-related matters. While some limits on the use of taxpayer dollars may be appropriate, none should limit what local legal-aid clinics can do with money they raise privately. Sen. Tom Harkin (D-Iowa) is spearheading an effort to address many of these issues and may unveil legislation as soon as next week. Such reforms are long overdue.

For more, see Unshackling Legal Aid (An easy way for Congress to help poor people).

Congress Moves To Establish Financial Product Safety Commission

In Washington, D.C., Harvard Law School News reports:

• Harvard Law School Professor Elizabeth Warren was on hand in Washington, D.C. [last] week as U.S. senators introduced legislation to create a new government agency, the Financial Product Safety Commission, to help consumers obtain financial products and services without predatory or deceptive financial practices. Warren, who is currently the chairwoman of the influential Congressional Oversight Panel (COP) monitoring the Treasury’s economic rescue plan, conceived the idea of the commission, which is modeled after the Consumer Product Safety Commission.

For more, see Senate takes up Warren's proposed Financial Product Safety Commission.

Points To Consider When Contemplating Abandoning An Underwater Home

A recent article in The New York Times examines some of the considerations for underwater homeowners thinking of walking away from their homes. For more, see Thoughts on Walking Away From Your Home Loan.

Central Florida Mandatory Mediation Order Affecting Owner-Occupant Home Foreclosures Excludes Osceola County

In Osceola County, Florida, the Orlando Sentinel reports:

• Homeowners facing foreclosure in Osceola County may be shut out of a process that could have provided some relief to them, because the judge who oversees their cases opposes it.

***

• Late last month, 9th Judicial Circuit Chief Judge Belvin Perry, who oversees state courts in Osceola and Orange counties, issued an administrative order that makes mediation mandatory in foreclosure cases. [...] But the order doesn't apply to Osceola, where almost one of every 10 homes is going back to the lender, because administrative Judge R. James Stroker, who oversees Osceola, made the case against it. He wrote a letter to Perry objecting to mandatory mediation but refused to turn the letter over to the Sentinel.

For more, see Foreclosure mediation unnecessary, Osceola judge says.

Elderly South Florida Couple Held Hostage By Broken Elevator; Condominium Association's Lack OF Funds May Be The Problem

In Hollywood, Florida, WTVJ-TV Channel 4 reports:

• An elderly couple living in the Southbrook Condominiums in Hollywood said they're being held hostage in their third story home because a broken elevator has gone two months without fixing. Olga Marino and her 90-year-old husband both require wheelchairs in order to get around and said they're forced to take the stairs, which is a safety hazard.

• “We don’t have the proper gear to take a person in her condition two flights of stairs down,” Luis Marino, the couple’s son, said. The Marino's said they pay a monthly maintenance fee of nearly $300, including their mortgage but have seen no action in trying to repair the elevator.

***

• The county declared the elevator a danger in a March 4th notice to residents, which could cost as much as $20,000 to fix. “Supposedly they [the condominium association] don’t have this money,” Luis Marino said.

For more, see S. Fla. Elderly Couple Outraged Over Broken Condo Elevator.

South Florida Homeowner Facing Foreclosure Out $7,000 After Hiring Firm In Failed Loan Modification Attempt

In Lehigh Acres, Florida, The News Press reports:

• Yolande Tanelus was in danger of losing her home and after paying nearly $7,000 to a foreclosure rescue company, she's in even worse financial trouble. Tanelus worked two jobs to pay the $2,872 mortgage on her home in Pompano Beach. But at age 51, she could no longer keep up the pace of a 16-hour workday, so she quit one of the jobs. That's when she fell behind in her payments to Countrywide Home Loans.

• Tanelus, who now lives in Lehigh Acres, turned to Outreach Housing LLC, a Fort Lauderdale company billed as a "grass roots organization helping homeowners fend off aggressive mortgage lenders and defend themselves against erroneous lender practices." By contacting Outreach, Tanelus had gone from the frying pan into the fire.

For more, see Mortgage 'rescuer' lets owner drown.

Go here for other posts on Outreach Housing.

Default On $131M Note Throws Apartment Buildings In Three States Into Foreclosure; Tenants Face Threats Of Utility Shutoffs, Sewage Seepage

In Portsmouth, Virginia, The Virginian Pilot reports:

• The management of two large Churchland-area apartment complexes has not paid utility bills recently and appears to have abandoned them - prompting a court to appoint a receiver for the properties. The complexes are the 196-unit Chelsea Point, formerly called The Villas, in Portsmouth, and the 208-unit Vacaro Apartments, formerly known as the Woodhaven Apartments, in Chesapeake.

***

• Owners S.E. Portfolio Apartments LLC, which is based in Irvine, Calif.; and GTS Property Portfolios B-2 LLC, which has a Midlothian registered office, got a loan on the properties in 2007, the document said. The complexes are among 11 in three states that are security on a nearly $131 million note, it said. It said Bethany Management Group LLC,(1) a related entity, was believed to have "effectively abandoned management" of the sites.

• [One tenant] said she has lived there for a year and that maintenance became worse. Last weekend, she said, the plumbing backed up in her building and flooded the hallway and laundry room.

For more, see Receiver named for Portsmouth apartment complexes.

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

(1) Go here for other posts on Bethany Group buildings in foreclosure in Georgia and Arizona. RentSigmaSkimming

Bank Illegally Ransacks Home & Changes Locks, Says Homeowner In $150K+ Lawsuit

In Central Oregon, KATU-TV reports:

• Tammy Glenn’s central Oregon home on Pine Hollow reservoir has always brought her peace and happiness. The small A-frame home is right on the water, and it’s been a relaxing break from the everyday grind of running her hardware business – until now. “My whole sense of security has been rattled to say the least,” Glenn told KATU News. Rattled, Glenn says, because her mortgage company entered her home three times, ransacked everything, and changed her locks – all without her knowledge.

***

• The reason Chase Bank gave her? They thought the home was vacant and abandoned. Glenn says that not even close to the actual situation. [...] Now, she's suing Chase Mortgage for more than $150,000.(1)

For more, see Bank's mistake shatters woman's security.

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

(1) In a another case, a homeowner scored over $1M in a similar sounding case against another lender. See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure. ForeclosureLockOuts

Illinois AG Tags Unlicensed Contractor With Civil Suit; Firm Accused Of Pocketing Money, Failing To Satisfactorily Perform Work

Frrom the Illinois Attorney General's Office:

• Attorney General Lisa Madigan [...] filed a lawsuit in Ford County Circuit Court alleging that a Gibson City, Ill., contractor solicited roofing contracts without a license and collected up to $18,090 in fees for work that he failed to perform or completed in a substandard manner.(1) Madigan’s suit alleges that Bryan Brandon, B.F. Roofing and Brandon Finishing entered into contracts for roofing and remodeling services, accepted consumers’ down payments and then either failed to perform the work or conducted the work in a substandard manner. The Attorney General’s Consumer Fraud Bureau has received seven complaints about Brandon’s work from consumers in Champaign, Clinton, DeWitt, Ford, McLean and Vermillion Counties.

For more, see Madigan Sues Ford County Roofer For Failure To Fulfill Home Improvement Contracts.

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

(1) According to the press release, Madigan’s lawsuit alleges that Brandon violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Home Repair and Remodeling Act by performing work in a shoddy, unprofessional manner; failing to complete the repair work; and refusing to provide refunds to consumers. The complaint also alleges that Brandon failed to provide homeowners with written contracts and the “Home Repair: Know Your Consumer Rights” pamphlet, as required under Illinois law. StiffingContractorsTheta

Watch Out For Junk Mail Simulating Official Government Documents Peddling Property Tax Reduction Scams

The Office of California Attorney General Edmund Brown has issued the following consumer alert:

• Companies using official-sounding names like "Tax Review," "Tax Adjusters" and "Tax Reassessment" seek to scam homeowners who are worried about their property taxes and declining property values. They send misleading mailers that look like official government agency documents to trick you into sending them money to try to lower your property taxes. They also use addresses like "Regional Processing Center" to make you think the mail is coming from a government agency. Sometimes, they threaten to impose a late fee if you don’t send them money by a certain date. Don’t be fooled. Government agencies don’t charge for tax reassessment—it’s free.

For the rest of the alert, see Property Tax Reduction Scams.

Mortgage Servicing Industry Reform Needed In Effort To Address Foreclosure Crisis

Ms. Margot Saunders, Counsel, for the National Consumer Law Center testified Wednesday before the House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit calling for reform in the mortgage finance industry.(1)

Included among the industry players that "need reforming" are those in the mortgage servicing industry, on whom Ms. Saunders offers this observation:

• Mortgage servicers are the link between mortgage borrowers and the mortgage owners. [...] Despite the important functions of mortgage servicers, borrowers have few market mechanisms to employ to ensure that their needs are met. Rather, in the interest of maximizing profits, servicers have engaged in a laundry list of bad behaviors, which has considerably exacerbated foreclosure rates. The most common abuses in loan servicing include misapplication of payments, use of suspense accounts, failure to make timely escrow disbursements, and cascading fees imposed upon homeowners in default. These abuses exist because there are market incentives rather than deterrents for this type of behavior. Any new regulation of the mortgage marketplace must account for these dynamics and move beyond them.

Go here for Ms. Saunders' entire prepared testimony to Congress (Her views on the reform of the mortgage servicing industry are found on pp. 11-13).

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

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the testimony.

(1) The title of the hearing was Mortgage Lending Reform: A Comprehensive Review of the American Mortgage System. Click Here To View Archived Webcast. QuestionableServicingTacticsSigma

Feds Turn Up Heat On Home Loan Scams

The New York Times reports:

• Spurred by rising public anger, federal and state investigators are preparing for a surge of prosecutions of financial fraud. Across the country, attorneys general have already begun indicting dozens of loan processors, mortgage brokers and bank officers. Last week alone, there were guilty pleas in Minnesota, Delaware, North Carolina and Connecticut and sentences in Florida and Vermont — all stemming from home loan scams.

For more, see Financial Fraud Is Focus of Attack by Prosecutors.

Maryland Feds Score Another Mortgage Fraud Guilty Plea, Snag Suspect In Another Alleged Scam

From the Office of the U.S. Attorney in Maryland:

Bethesda Womam Pleads Guilty In Mortgage Fraud Scheme (Recruited Straw Purchasers and Prepared False Documents to Buy Properties, Resulting in Over $2.5 Million in Losses to 10 Individuals and Banks):

• Kara McIntosh, age 46, of Bethesda, Maryland, pleaded guilty [last week] to mail fraud arising from the fraudulent purchase of properties in Maryland and the District of Columbia using false mortgage documents, announced United States Attorney for the District of Maryland Rod J. Rosenstein.(1)

*******************

Fort Washington Man Charged In Mortgage Fraud Scheme (Case Investigated by the Maryland Mortgage Fraud Task Force):

• Robert Dewain Venson, age 38, of Fort Washington, Maryland was arrested [last week] for mail and wire fraud, money laundering and failing to file tax returns in connection with a three year mortgage fraud scheme involving 13 residential properties, announced United States Attorney for the District of Maryland Rod J. Rosenstein.(2)

(1) The "cash back" straw buyer mortgage scheme involved fraudulent loans worth over $19,021,366. Over 10 individuals and banks were harmed. The loss amount foreseeable to McIntosh is between $2.5 and $7 million. Many of the purchased properties have been foreclosed upon. Among the bad acts were the pocketing of money designated on the closing statement as “renovations” that her company purportedly performed. No such renovations ever occurred.

(2) Rather than purchase the properties in his own name, Venson allegedly paid straw buyers to appear at the settlement posing as the buyer. Venson typically would represent to the straw buyer that he would pay the loan obligation and allegedly inflated the price listed on the sales documents to an amount substantially larger than the actual price, causing the mortgage lender to provide funds for the purchase substantially in excess of the actual price, pocketing the difference.

State AG Files Civil Suits Against Two South Jersey Loan Modification Firms Promoting "Hope" - Won't Rule Out Future Criminal Action

In Trenton, New Jersey, KYW Radio 1060 (Philadelphia) reports:

• New Jersey officials have filed three separate lawsuits, two in Camden County Superior Court, alleging mortgage fraud on a large scale. The actions were announced Wednesday in Trenton during a midday press conference by Attorney General Anne Milgram, who says she decided to take the civil route in attempts to shut the operations down quickly. But she won’t rule out later criminal prosecution against any of the 11 people (four from South Jersey) named in the civil actions.

• In the two Camden County cases, it is alleged that "Hope Now Financial Services" of Cherry Hill and "New Hope Modifications" of Bellmawr attempted to align themselves with a national nonprofit effort that helps low-income people stay in their homes and avoid foreclosure. The two Camden County firms, in fact, have no connection with the Hope Now Alliance, a counseling service created in conjunction with the federal government.

• What the firms did, according to Milgram, is scam more than 100 people from as far away as Texas. Milgram told reporters, “These businesses collected substantial upfront fees from distressed mortgage holders for loan modification services, but did nothing to actually help.” The upfront fees were as much as $3,000 from each individual, many of whom lost their homes to foreclosure and suffered perhaps irreparable harm to the credit ratings, according to officials. Two principals named in the New Hope suit -- Donna Fisher and Brian Mammoccio -- reside in Mullica Hill (Gloucester County), NJ.

For the story, see Officials Say Finance Groups Preyed on NJ Homeowners.

For more from the New Jersey Attorney General's Office, see:

• NJ AG press release: Attorney General Announces Three New Mortgage Fraud Complaints - Disbarred Lawyer, Son Sued for Racketeering; Loan Modification Businesses Charged,
• Lawsuit: Milgram v. New Hope Property LLC d/b/a New Hope Modifications,
• Lawsuit: Milgram v. Hope Now Financial Services.

City Of Oakland Files Five Lawsuits Accusing Lenders, Agents Of Illegal Foreclosure Evictions

In Oakland, California, KGO-TV Channel 7 reports:

• Oakland City Attorney John Russo said [Thursday] that his office has recently filed five lawsuits against major banks and local agents he alleges are illegally evicting tenants. At a news conference at City Hall, Russo alleged that despite repeated warnings, banks and their agents have continued to violate Oakland's "just cause" law by sending illegal eviction notices to good tenants in foreclosed buildings.

***

• Russo said the lawsuits name as defendants banking giants JPMorgan Chase and Fidelity National Financial, along with their subsidiary companies and local agents, whom he alleges are paid to remove tenants from properties the banks have acquired through foreclosure.

For more, see Banks accused of violating renters' rights.

For more from the Oakland City Attorney's Office, see:

• Press Release: Oakland City Attorney sues major banks, local agents to stop illegal evictions and abuse of tenants’ rights;
• Lawsuit against: JPMorgan Chase, Chase Home Finance, EMC, etc.,
• Lawsuit against: Fidelity National Financial, etc.,
• Lawsuit against: Keller Williams, etc.,
• Lawsuit against: Session Real Estate,
• Lawsuit against: Smart Choice Realty, etc.
• Examples of Wrongful Eviction Notices,
• City Attorney's Guideline for Tenants' Rights in Foreclosed Housing.

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

Texas AG Announces Final Distribution Of Restitution From Loan Modification Company; Firm Takes Total Hit Of $750K

From the Office of Texas Attorney General Greg Abbott:

• Texas Attorney General Greg Abbott [yesterday] announced the conclusion of the state’s enforcement action against Foreclosure Assistance Solutions (FAS). As a result of an agreement, the Florida-based company must no longer engage in the foreclosure mitigation business in Texas and has paid more than $390,000 in restitution to 351 Texas homeowners. FAS is the eighth foreclosure rescue operation shut down by Attorney General Abbott.

***

• Homeowners who contacted Foreclosure Assistance Solutions were pressured to immediately pay a $1,200 fee and enter into a contract. The contract prohibited homeowners from contacting their mortgage lenders – yet communicating with lenders is critical when homeowners are facing financial difficulties. After paying the $1,200 fee, homeowners were largely ignored, and many of their homes were foreclosured [sic].

• Today’s settlement also prohibits the company from conducting Texas-based mortgage foreclosure mitigation in the future and requires that the defendants pay a total of $750,000, including $475,000 in restitution, $100,000 in civil penalties and $175,000 in attorneys’ fees.

For the Texas AG's press release, see Texas Attorney General's Enforcement Action Provides Restitution To Texas Homeowners (Foreclosure Assistance Solutions Inc. repays 351 Texas homeowners more than $390,000).

For relevant court documents on this case, see:

• Court order distriubting remaining restitution from Foreclosure Assistance Solutions,
• Agreed final judgment and permanent injunction - Foreclosure Assistance Solutions, et al.,
• Original Texas AG's lawsuit (9/2007) - State of Texas vs. Foreclosure Assistance Solutions, et al. (lawsuit alleged violations of the Texas Deceptive Trade Practices Act).

San Antonio Feds Set Up Hotline To Field Mortgage, Loan Modification, Foreclosure Rescue Scam Complaints From Area Homeowners

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

• A growing number of homeowners are becoming the targets of mortgage-fraud schemes, and some may not even know it until it's too late. Right now, homeowners across San Antonio are falling victim to mortgage-fraud schemes. The FBI says its new hotline could help curb the corruption.

***

• "The hotline is basically our attempt to become a little more proactive than reactive in addressing mortgage fraud here in San Antonio," Special Agent Jenson told News 4 WOAI. The F.B.I. says it is important to track mortgage-fraud crimes early on in the process. Anyone who is aware of a possible case of mortgage fraud should call 210-650-6777.

For more, see F.B.I. targets mortgage fraud with new hotline.

Florida Cities Can Force Condominium, Apartment Complexes To Hire Security, Says State AG

The South Florida Sun Sentinel reports:

• Is your condominium association ready to fight crime?More importantly, can it afford to hire at least one professional security guard? It soon could have no choice. Florida Attorney General Bill McCollum ruled last month that cities in this state have the authority to force condo associations and apartment complexes to hire security guards. His opinion came in response to questions from Sunny Isles Beach in Miami-Dade County, where police several months ago began calling for more help patrolling condo communities. A workshop showed a rash of petty crimes and car burglaries were taking place.

For more, see Cities can require condo associations to hire security guards.

For the Florida AG's advisory legal opinion, see AGO 2009-08: Municipalities, security services for condominiums.

Oregon Lawmakers To Consider Legalizing The Shift Of The Financial Loss Of Home Equity Thefts Through Use Of Fraudulent POAs Onto The Victim

A 2007 story in California's Contra Costa Times on the California Power of Attorney Act and the ripoff of the elderly using powers of attorney begins as follows:

• AN OAKLAND WOMAN steals $200,000 from her sick 73-year-old mother's bank account. She blows most of it at Cache Creek Casino. Her life savings gone, the senior now has to get by on Social Security.

• An East Palo Alto woman is accused of taking out a $200,000 loan on her disabled 92-year-old grandmother's house without her permission. According to San Mateo County prosecutors, she buys herself a champagne-colored Hummer and leaves her disabled grandmother alone for days in a house full of rats.

• A Stockton woman is hired to take care of a 92-year-old former elementary school principal. She steals more than $100,000 from the elderly woman, spending $12,000 on five decorative gates for her own home.

• All of these cases have one thing in common: The weapon used to commit the crime, or alleged crime, was a perfectly legal document called a power of attorney.

As I mentioned in one of yesterday's posts, a hearing in the Oregon House Judiciary Committee is scheduled for tomorrow in which advocates for the banking industry will be attempting to push through a proposed bill, based on a model uniform act (Uniform Power of Attorney Act) that, from the standpoint of the victim, could very well lead to the legalizing of the use of this weapon when committing these types of crimes in Oregon.

The proposed law reads in a way whereby victims whose houses are sold or encumbered by fraudulent mortgages using a forged power of attorney will NOT be able to void the transaction unless they can prove that the individual handling the transaction had actual knowledge that the POA was forged.

As if it wasn't already difficult for a victim of this type of crime to file a civil lawsuit to undo the effects on their property title of a home equity theft, the propsed law, if passed, will essentially assure the homeowner-victim that recovering his/her home equity by voiding the illegal transaction through civil litigation will be an impossibility. The victimized homeowner may still recover the home, but will be stuck having to pay off the fraudulently obtained mortgage placed on the property by the scammer. While the victim may be entitled to criminal restitution, recovery of the home equity value in this way depends on:

1. prosecutors filing a criminal action against the alleged scammer (not always the case),
2. prosecutors obtaining a guilty conviction (not always the case) in which restitution is awarded, and
3. the now-convicted scammer having the funds to pay the restitution (generally not the case).

Those of you with any interest in curbing the horror stories involving the fraudulent use of powers of attorneys to victimized unwitting homeowners are encouraged to contact the Oregon House Judiciary Committee and tell them how you feel (Jennifer Ranstrom-Smith, Committee Assistant, 503-986-1513 Jennifer.RanstromSmith@state.or.us).

In closing, keep in mind that the proposed bill, while only affecting Oregon, is based on a model uniform act, the Uniform Power of Attorney Act. A successful attempt to sneak this legislation through the Oregon legislature by the banking industry will only encourage industry advocates to do the same in other states.

For the 2007 story in the Contra Costa Times, see Theft of Elder Nation: An editorial series: State needs to revoke "theft license".

This bill to be considered tomorrow by Oregon lawmakers is HB2537; you can obtain a copy via this link.

For yesterday's post, see Banking Industry Advocates Pushing Proposed Bill That Could Encourage More Home Equity Thefts Thru Forged POAs.

Go here for posts on the use of powers of attorney to ripoff the elderly of their home equity.

Go here, Go here, Go here, Go here, Go here, and Go here for other posts related to deed or refinancing scams by forgery, swindle, power of attorney abuse, etc. DeedGammaTheft FinancialAbuseOfElderlyAlpha

Nevada AG Files Felony Theft Charges Against Owner Of Vegas Loan Modification Firm

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

• Jack Ferm was arrested on felony charges Wednesday morning after a hearing in District Court. He is the head of mortgage rescue company, the U.S. Justice Foundation, which was ordered to close last week. Instead of a slap on the wrist, Foundation President Jack Ferm left district court in handcuffs. The man whose company filed hundreds of unsuccessful lawsuits to stop foreclosures now faces felony criminal charges.

***

• According to the complaint, Ferm promised he could stop foreclosure by helping homeowners sue their mortgage companies themselves. Instead, at least two victims claim they paid thousands for services Ferm never provided.

• "Attorney General Masto is aggressively pursuing any fraud related to the mortgage industry. The current wave of scams happens to be the loan modification scams, and again, this was one of the companies we've received the most complaints about," said Chief Deputy Attorney General John Kelleher.

• In previous interviews, Ferm insisted his foundation filed as many as 800 lawsuits using boilerplate legal documents prepared by paralegals.

According to the story, Ferm, a non-attorney, was arrested while in court on a different matter related to his loan modification activities. Specifically, he was responding to an order to show cause in connection with allegations of unauthorized practice of law.

For more, see U.S. Justice Foundation's President Arrested.

See also Nevada Attorney General press release: AG Announces Former Las Vegas Radio Talk Show Host Arrested In Mortgage Rescue Fraud Scheme:

• Nevada Attorney General Catherine Cortez Masto announced today that Jack Ferm, a former talk show host in Las Vegas, Nevada, has been arrested on two counts of felony theft and related charges in connection with the operation of U.S. Justice Foundation, a mortgage rescue scam.

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