Wednesday, May 13, 2009

2nd Co-Conspirator Goes Down In Metro Dream Homes' Alleged $70M Ponzi Scheme

From the Office of the U.S. Attorney (Maryland):
  • Charlotte Melissa Josephine Hardmon, age 39, of Bowie, Maryland pleaded guilty [Monday] to conspiracy to commit wire fraud in connection with her participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves, announced United States Attorney for the District of Maryland Rod J. Rosenstein.

***

  • According to her plea agreement, beginning in 2005, co-conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgage within five to seven years.

For the entire press release, see Second Conspirator Pleads Guilty in $70 Million “Dream Home” Mortgage Fraud Scheme.

For the indictment of four of the other alleged co-conspirators, see U.S. v. Williams, et al.

Go here for earlier posts on Metro Dream Homes.

Thousands Of Foreclosure Lawsuits Brought By Companies Lacking Standing To Sue Continue To Slip Through The Court System In Uncontested Actions

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • As a lawyer helping homeowners grapple with foreclosure, April Charney has praised Sarasota's Lee Haworth, chief judge of the 12th Judicial Circuit. But Charney now puts an asterisk in her rave review.

***

  • Though Haworth makes foreclosure mills follow the letter of the law when taking someone's homestead, Charney says that's only when a defense lawyer is involved. Spot checks indicate thousands of other cases going uncontested are filed without proof the filer has standing to be in court. Some include false claims that a homeowner declined to negotiate, or incorrectly say the house was not a homestead.

  • Charney insists those aren't mistakes. It happens because convenient lies usually go undetected and unpunished. "Whatever is expedient, they will do," Charney insists. So even when a property owner doesn't fight, Charney says judges and their staffs have a responsibility to check cases and hammer lenders' lawyers who make false claims.

For more, see Enforce letter of the law and check for little lies. EpsilonMissingDocsMtg

More On The Use Of Multiple Corporate Hat-Wearing Dummy Vice Presidents By Lenders & Mortgage Servicers In Foreclosure Actions

The issue of employees of so-called foreclosure / bankruptcy services firms being allowed to sign legal documents (with said documents to be filed in court in connection with foreclosure actions) as officers of multiple, foreclosing financial institutions was the topic of several past posts.

Examples of how one company, Fidelity National Foreclosure Services and affiliates, of Mendota Heights, Minnesota, has made available dozens of its employees to foreclosing lenders & mortgage servicers to act as authorized corporate officers for the limited purpose of signing necessary documents to be filed in court in the effort to obtain foreclosure judgments can be found in the following documents filed in the Massachusetts land records.

To access the following five links below, first go to www.lowelldeeds.com, then come back to this page and click the following linked Book/Pages:(1)

With respect to one of the Fidelity National employees whose name appears as an authorized corporate officer for all of the above listed companies (a certain Laura Hescott), a quick search of the online New York court cases reveals that Ms. Hescott receives mention in at least the following four foreclosure actions in her capacity as a vice president of one of the entities having some involvement in the foreclosure action:

  • Deutsche Bank Trust Co. Ams. v Peabody, 2008 NY Slip Op 51286(U) [20 Misc 3d 1108(A)]; June 26, 2008, Supreme Court, Saratoga County, Nolan, J.; (Hescott was identified as vice president of Deutsche Bank, according to the decision);

  • Deutsche Bank National Trust Company v. Harris, 2008 NY Slip Op 30308(U); February 5, 2008, Supreme Court, Kings County, Schack, J.; (Hescott was identified as vice president of Mortgage Electronic Registration Systems, according to the decision);

  • IndyMac Bank, FSB v Bethley, 2009 NY Slip Op 50186(U) [22 Misc 3d 1119(A)]; February 6, 2009, Supreme Court, Kings County, Schack, J.; (Hescott was identified as vice president of both Mortgage Electronic Registration Systems and vice president of IndyMac, according to the decision);

  • Indymac Bank, FSB v Boyd, 2009 NY Slip Op 50094(U) [22 Misc 3d 1112(A)]; January 22, 2009, Supreme Court, Kings County, Schack, J.; (Hescott was identified as vice president of IndyMac, according to the decision).

Note that in none of these four New York cases is it reflected that Laura Hescott, although signing documents as a vice president for one of the financial institutions, appears to actually be an employee of Fidelity National who is merely out on loan to the institution.

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

(1) For evidence of additional similar arrangements between Fidelity National and other lenders and loan servicers in Massachusetts & New Hampshire (sorry, no direct links to the New Hampshire documents):

Massachusetts:

First go to suffolkdeeds.com - then come back to this page and click the following link:

New Hampshire (requires Java-enabled browsers):

First go to nhdeeds.com (Hillsborough County) - then do a "document search" by entering the Book & Page number for the following documents in the appropriate boxes in the upper right hand corner of the "search screen":

  • Book 8000 / Page 2106 (HSBC Consumer Lending (USA) Inc., Beneficial Company LLC, & HFC Company LLC.);
  • Book 8035 / Page 583 (Wachovia Mortgage Corporation; power of attorney that lists the functions that the "dummy" assistant vice presidents (employees of Fidelity National) are authorized to perform on behalf of Wachovia);
  • Book 8037 / Page 142 (Beneficial New Hampshire Inc.);
  • Book 8023 / Page 51 (Washington Mutual Bank Affidavit stating that Laura Hescott signed an assignment of mortgage as an assistant vice president for Washington Mutual);
  • Book 7833/ Page 2052 (HSBC Mortgage Corp.; Laura Hescott signs foreclosure deed as "attorney in fact" on behalf of HSBC).

First go to nhdeeds.com (Rockingham County) - then do a "document search" by entering the Book & Page number for the following documents in the appropriate boxes in the upper right hand corner of the "search screen":

  • Book 4922/ Page 2932 (Household Finance Corporation II);
  • Book 4945/ Page 2067 (Beneficial Mortgage Company of New Hampshire). EpsilonMissingDocsMtg Arthur M. Schack

Boston Non-Profits, Housing Advocates Lead Effort In Helping Area Homeowners, Existing Tenants Stay In Bank-Foreclosed Homes Thru Buy-Back Program

In Boston, Massachusetts, The Boston Globe reports:
  • Thomas Quinn did something that most people who lose their homes to foreclosure can only dream about: He bought back his family's Hyde Park house. [...] "I'm a happy homeowner again with a payment I can live with," he said. "It is saving me over $1,000 a month." Quinn is one of a small but growing group of former owners who are not only staying in foreclosed homes but are buying them back, with the help of nonprofit groups and housing advocates. And in some cases, they are getting their homes at significant discount the second time around, because real estate values have plunged.

  • "We are in the process of helping a lot of people buy back their homes," said Zoe K. Cronin, a housing attorney for Greater Boston Legal Services. "There is not likely going to be another buyer. If there is someone willing to buy it back at a real value, that's probably the best option" for lenders, she said.

  • Boston Community Capital, a 25-year-old agency with a mission to help create healthy communities, is at the forefront of the effort, with about 30 borrowers - tenants and former homeowners - already in the process of purchasing their homes. In Quinn's case, the nonprofit bought his house from Wells Fargo Home Mortgage in February and weeks later sold it back to him for $198,750 - about what he owed the bank.

For more, see Still there, foreclosed no longer (Nonprofits help occupants buy back homes).

Oakland Tenant Walks Away With $4K Settlement, Over A Year Of Free Rent In Battle Against Lender & Its Illegal Foreclosure Eviction Attempt

In Oakland, California, Beyond Chron reports the story of one tenant's battle against a foreclosing mortgage lender and its attempt to carry out an illegal eviction, despite the city's Just Cause Ordinance, which, with exceptions, prohibits a lender from doing so. He ultimately sought out the assistance of the local non-profit law firm Eviction Defense Center to fight the lender:
  • [H]ughs said that his experience with the Center was user-friendly, unlike the rest of the legal system; he paid $40 for a consultation and to file papers, and it cost him $90 to go to court. Considering all the money he was saving while on rent strike, the minimal fees seemed worth it. Hughs first approached the Eviction Defense Center on Nov. 20, 2008. The Center filed a demand for a jury trial, and on Feb. 6 they represented him at a court appearance. A week later, Hughs got his settlement: After a year and a half of maintaining his home and living rent-free, he promised to leave the property within 30 days in exchange for $4,000.

For the story, see Oakland Resident Squats Bank-Owned Home.

(1) Reportedly, the Eviction Defense Center does not represent prior owners who have been foreclosed on, only tenants, who are protected by Oakland’s Just Cause Ordinance. According to executive director Anne Omura, many attorneys who represent banks are from out of county and are unfamiliar with local laws, the story states. When they do know the laws, they reportedly try to circumvent them. Numerous real estate agents and law firms are said to be on watch lists for continually filing lawsuits with no legal merit. Or for using intimidation. “Banks hire aggressive and often times unscrupulous agents who will bang on the door and threaten [tenants],” Omura said, “and a lot of people don’t know their rights and end up getting displaced.” RentSigmaSkimming

Tuesday, May 12, 2009

Gotti's Gotta Go, Says NY Appeals Court As Foreclosing Lender Gets Green Light To Give Late Crime Family Boss' Daughter The Boot From L.I. Mansion

In Brooklyn, New York, the New York Post reports:
  • Here's the reality: the Gotti's gotta go. The bank has been given the go-ahead to foreclose on Victoria Gotti's palatial estate on Long Island -- the same used in the TV reality show "Growing Up Gotti" -- saying she owes a whopping $650,000 in mortgage payments, according to court paper made public [Monday]. Gotti's lender, JP Morgan Chase, claims the daughter of the late Gambino crime family boss John "Dapper Don" Gotti -- owes them the staggering amount after she failed to make payments for two years starting in September 2006, court records reveal. [...] The bank said in court records that the mafia princess owed them $25,000 a month -- and that she never made all the payments.

***

  • The ruling reversed a 2007 decision by Nassau County Supreme Court Justice Roy Mahon who determined foreclosure proceedings were too early at the time. Gotti could not immediately be reached for comment, but her mother, also named Victoria, blamed the whole thing on her former son-in-law. "She's not in the mood to talk to anybody," her mother told The Post. Asked about [Gotti's ex-husband Carmine] Agnello's involvement, she barked, "The creep that he is, he took out a mortgage behind her back. She can't afford to pay."

For more, see BANK FORECLOSES ON VICTORIA GOTTI'S ESTATE.

For the court ruling, see JP Morgan Chase Bank, N.A. v Agnello, 2009 NY Slip Op 03695, May 5, 2009, Appellate Division, Second Department.

Mortgage Scammer Admits Running Home Equity Ripoffs To Perpetrate Ponzi Scheme

On Long Island, New York, ABC News reports:
  • Peter Dawson was a mini-Bernie Madoff -- on the surface, a charming family man with a big house, on the make in working class neighborhoods of Long Island, N.Y. Now, he has been sentenced to state prison for at least five years for running an elaborate mortgage scam.

***

  • Dawson admitted he ran a Ponzi scheme: He convinced his clients to take equity out of their homes and invest it in his hedge fund. But that "hedge fund" didn't actually exist, he said, and he pocketed the money. When he had to, he paid off old investors with new investors' money. During the housing boom, Dawson took advantage of desperate homeowners, eager-to-lend banks and lax regulations to steal millions.

For more, see Exclusive: Confessions of a Mortgage Scammer (Mini-Madoff Admits Crime But Blames Banks and Brokers for Not 'Stopping the Madness').

Mass AG Squeezes $60M Settlement From Goldman Sachs In Connection With Subprime Mortgage Probe

In Boston, Massachusetts, The Boston Globe reports:
  • More than 700 Massachusetts homeowners struggling with subprime mortgages will have their monthly payments reduced - some by as much as 35 percent - as part of a $60 million settlement Attorney General Martha Coakley reached with Goldman Sachs Group Inc.

  • Goldman Sachs owns those homeowners' mortgages through subsidiaries and has agreed to rewrite the terms of their loans in order to stave off legal action by Coakley. The attorney general has been investigating the role investment banks played in promoting subprime mortgages that borrowers ultimately couldn't afford.

***

  • As part of the settlement, Goldman Sachs will reduce the outstanding balances of subprime mortgages for those 714 homeowners, most of whom live in Boston, Brockton, Lawrence, Springfield, and Worcester. Homeowners seeking to refinance or sell their properties could see a reduction in their first mortgages of up to 35 percent as well as much as a 100 percent cut in second mortgages.

  • Reducing those loan amounts will cost Goldman Sachs $50 million. It has also agreed to have its subsidiary, Litton Loan Servicing LP, help qualified borrowers who are in trouble on their loans to avoid foreclosure. Goldman will also pay the state $10 million.

For more, see State reaches $60m subprime deal with Goldman Sachs.

For the Massachusetts Attorney general press release, see AG Coakley and Goldman Sachs Reach Settlement Regarding Subprime Lending Issues.

Go here for:

Ignoring The Rule Of Caveat Emptor In The Application Of Consumer Protection Statutes

In a recent court victory (go here for court ruling) against a foreclosure rescue operator accused of preying on financially distressed homeowners and using equity stripping techniques to rip them off, the Washington State Attorney General's Office successfuly applied its state's Consumer Protection Act in seeking to have the operator's conduct to be found in violation of the statute.

In its Trial Memorandum, the AG's office cited a decision of the U.S. Supreme Court in support of the proposition that the rule of caveat emptor has no application when applying consumer protection laws, and in my view, deserves highlighting here:
  • There is no duty resting upon a citizen to suspect the honesty of those with whom he transacts business. Laws are made to protect the trusting as well as the suspicious. The best element of business has long since decided that honesty should govern competitive enterprises, and that the rule of caveat emptor should not be relied upon to reward fraud and deception.

FTC v. Standard Education Society, 302 U.S. 112, 116 (1937).

Securitization A Key Stumbling Block To Completing Successful Short Sales

The Huffington Post reports:
  • [A]ccording to one analysis, short sales resulted in loan losses of only 19 percent, compared with an average loss of 40 percent on homes sold after foreclosure. So why aren't these sales more widely used?

***

  • [Rep. Brad Miller (D-N.C.)] points his finger at securitization. Once the mortgages are bundled and sliced up into different pieces, known as tranches, the owners of the pieces get paid back according to a certain pecking order. Senior investors get paid back first and if there's a loss, the most junior investors won't get anything. It's those investors who are blocking short sales.

  • "The people with the least senior tranches have no reason to agree to the modification because they take a complete loss and the people in the most senior tranches don't lose anything. So they've managed to structure their mortgages in a way that makes it almost impossible to modify or sell short," said Miller.

  • Miller sponsored legislation to reform the bankruptcy code to allow judges to rewrite those contracts, taking away the ability of junior investors to sue and encouraging them to negotiate. But the House-approved measure died in the Senate, 51-45, killed last week by Republicans and 12 Democrats, leaving it 15 votes short of the 60 needed to overcome a filibuster.

For more, see Short Sales: Banks Blocking Way Out Of Foreclosure Crisis.

New Mexico AG Files Separate Suits Against Lenders, Mortgage Brokers For Actions That Left Elderly Homeowners Facing Foreclosure

In Santa Fe, New Mexico, KRQE-TV Channel 13 reports:
  • New Mexico's attorney general is going after everyone from mortgage brokers to banks after accusing them of mortgage frauds that took advantage of two homeowners now facing foreclosure. In two civil lawsuits filed Friday morning the AG is asking a judge for immediate action to stop foreclosures on the two properties. Both incidents involve elderly residents.

  • In one suit is based on a Los Lunas couple who said they gave money to their brokers and bank to pay off bills. They claimed that money never made it to creditors and that they were cheated and overcharged by their mortgage company. According to the AG the second case showed lenders ignored numerous red flags in working with a 78-year-old Chimayó woman who clearly couldn't afford her mortgage. The woman had filed a complaint with the AG's office alleging her signature was forged and other information on the mortgage application falsified.

For more, see AG casts wide net in mortgage suits (Fraud victims face foreclosure, AG says).

For the New Mexico AG press release, see Alleged Mortgage Loan Fraud Brings Two AG Lawsuits...Banks, Loan Servicers and Brokers Targeted.

Monday, May 11, 2009

Sloppy Lender Lawyers Making False Statements Running Rampant In C. Florida Foreclosures? Chief Judge To Recruit Law Students To Review Court Files

In Central Florida, the Sarasota Herald Tribune reports:
  • Foreclosure lawyers want to take back property as fast as possible, and sometimes they do not let the facts slow them down. In case after case, lawyers representing banks are giving false statements in court about who owns mortgages, or whether the homeowner is willing to negotiate, or whether they have completed all the legal steps to put a foreclosed house back on the market.

  • The errors and fabrications in the court files are seldom caught by judges with hundreds of foreclosure cases before them.(1) The judges say they can only hope to catch a few of the offending lawyers in hopes of keeping the rest honest. The courts usually rely on defendants to point out problems in the cases against them.

***

  • Nobody knows how common it is for foreclosure cases to be based on untrue statements or incomplete proof. More than half of all foreclosure defendants simply walk away, and never show up in court to defend themselves.

  • A Sarasota attorney, Richard Kessler, enlisted a few friends to go through 180 foreclosure cases in Sarasota County looking for errors. They found three out of four cases proceeded with incomplete or improper documentation. For instance, the survey found that only one in 12 cases had the documents to prove the company foreclosing on the property was also the company holding the mortgage note. In half of the cases reviewed, the plaintiff said the mortgage note had been lost.

  • Kessler contacted [Florida's 12th Judicial Circuit Chief Judge Lee] Haworth and offered to have his business double check the paperwork for the courts, proposing that his fee could be charged to the company filing the case. Haworth declined, saying he cannot add such a filing fee, and the courts have no money to pay for the service.

  • Instead, Haworth is recruiting volunteer law students to review all the cases for foreclosure judges this summer to verify documents. "We think having cops on the beat will help," Haworth said.

***

  • A judge in Miami fined Wells Fargo bank $95,000 late last year because of sloppy paperwork filed by Florida Default Law Group, one of a handful of companies that handle the majority of foreclosures in the state. Judge John K. Olson blasted Florida Default, saying the firm seemed to believe that "filing any old pleading without undertaking any investigation into its accuracy is perfectly acceptable practice."

For more, see Lies a new tool in foreclosure (Lawyers, in rush to regain properties, can exploit judges' workload).

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

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) In one case cited in the article, minutes after a foreclosure attorney told her everything was in order in a recent case, Circuit Judge Donna Berlin was ready to sign off. Then she happened to glance at the file, and realized that the two properties were in Miami, a few hundred miles outside her jurisdiction. "I didn't have time to go through and read it," Berlin told a group of attorneys at a meeting last weekend. "And it was not something that I normally look at." SloppyForeclosuresAlpha EpsilonMissingDocsMtg

Central Florida Loan Modification Firm Added To Florida AG Lawsuit Hit List; Accused of Pocketing Upfron Fees In Violation Of State Law

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [Friday] announced that his office has filed a lawsuit against an Orlando loan modification company alleging the company was committing foreclosure rescue fraud. Three Angels Community Action Network(1) and company president Sherrard A. Haugabrooks are named in the lawsuit filed [...] in Seminole County Circuit Court. The lawsuit specifically alleges violations of Florida’s Foreclosure Rescue Law, §501.1377. [...] The company allegedly charged homeowners an up-front fee generally equal to a monthly mortgage payment prior to providing loan modification services.

For the entire press release, see Attorney General Sues Orlando Loan Modification Company for Foreclosure Fraud.

For the lawsuit, see State of Florida v. Three Angels Community Action Network, et al.

(1) According to the press release, the company also does business as 3ACN; US Loss Mitigation Services of FL, Inc.; Appraisal Technology and Valuation Inc.; and 3ACN Loss Mitigation Services, Inc.

NY AG Files Criminal Charges & Parallel Civil Suit Against Process Serving Firm & Its CEO Alleging Massive "Nail & Mail Sewer Service" Operation

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [...] announced criminal charges against Long Island-based American Legal Process (“ALP”) and its CEO and President William Singler for a fraudulent business scheme in which the company allegedly failed to provide proper legal notification to thousands of New Yorkers facing debt-related lawsuits, causing them unknowingly to default and have costly judgments entered against them without the chance to respond or defend themselves.

  • According to the court papers filed [...], ALP, as a legal process server, was hired by high-volume debt collection law firms in New York to serve legal papers, usually a summons and complaint, notifying individuals that they are being sued and must answer the complaint. ALP, however, allegedly engaged in “sewer service,” where process servers take advantage of individuals facing lawsuits by failing to properly alert them and denying them the chance to respond.

  • As a result, thousands of judgments were allegedly obtained against unsuspecting New Yorkers, many of whom first learned they were being sued when they found their bank accounts frozen or their wages garnished. ALP allegedly covered up the fraud by falsifying sworn affidavits of service in courts across New York. The Attorney General’s Office also filed a parallel civil suit against ALP and Singler seeking a court order prohibiting them from engaging in improper service of process, monetary damages and substantial penalties.

***

  • With respect to the notice sent to the law firm of Forster & Garbus, the Attorney General said: "I am putting all law firms on notice that they are responsible for the conduct of the companies they use to serve complaints and other legal documents. Law firms cannot turn a blind-eye to abuses perpetrated on their behalf.”

***

  • According to the court papers [...], between January 2007 and October 2008, ALP claimed to have served 98,000 summons and complaints throughout New York State to New Yorkers alleged to owe debt. The majority of these were done through “nail and mail,” the method of service that is easiest to abuse. The Attorney General’s investigation revealed that thousands of legal documents were not properly served, or served at all, to the individuals they were intended for.(1)

For the entire NY AG press release, see AG Cuomo Announces Arrest Of Long Island Business Owner For Denying Thousands Of New Yorkers Their Day In Court (American Legal Process Provided “Sewer Service” to Thousands of New Yorkers Owing Debt According to Criminal Complaint and Civil Suit; Failed to Properly Notify the Individuals That They Faced Lawsuits As a Result, Individuals Would Unknowingly Default and Have Judgments Entered Against Them Without the Chance to Defend Themselves). Go here for version En español.

Go here for other posts on "sewer service" (a reference to the illegal process server practice of filing a sworn affidavit of proper service in court when none was actually made).

(1) Carolyn Coffey, an attorney with MFY Legal Services, a nonprofit provider of free legal services, said: “The consequences of sewer service are profound, especially on vulnerable New Yorkers. In MFY’s 2008 report, Justice Disserved, we documented many victims of improper service who had judgments unknowingly entered against them, often to devastating effect. [...] MFY applauds Attorney General Cuomo for taking the initiative to combat this illegal practice, especially because sewer service often injures the elderly, disabled and working poor of New York.” SewerServiceAlpha

Owner Of Northern California Loan Modification Firm Faces Foreclosure, Files Bankruptcy; Some Customers, Ex-Employees Call Him A Con Man

In Northern California, KPIX-TV Channel 5 reports:
  • Some customers and even former employees of the company called "Saving California", which promised to help save homes in foreclosure, have told CBS 5 Investigates the company didn't deliver on its promises and call the man who runs it a "con man."

***

  • A CBS 5 investigation found customer after customer of [Ray] Jeter's [...] loan modification company [...] complaining his company took their money and didn't deliver on its promises. [...] And anyone who wants money back from Jeter may have little chance of ever seeing it. Jeter's filed for bankruptcy.

***

  • [His bankruptcy filings show] there's a debt of $1.75 million. What for? Jeter has a mansion at the top of a hill in Soquel. It also turns out the man who promised to save other people's homes didn't pay for his own; it's in foreclosure.

For more, see NorCal Loan Modifying Firm Owner Files Bankruptcy.

Sunday, May 10, 2009

Foreclosed Arizona Homeowner Thwarts Lender's Illegal Lawsuit In Attempt To Collect Unpaid, Non-Recourse 2nd Mortgage Used To Purchase Home

From a press release from the office of Harper Law PLC:
  • In a[n Arizona] foreclosure proceeding, the first mortgage is given preference over the subordinate or subsequent mortgages. In today's Arizona home market this process frequently leaves subordinate mortgages entirely unpaid after a foreclosure. Understandably, these lenders are pursuing all means possible to recover their losses, but oftentimes they have no legal recourse.

  • Recently, Arizona Attorney Kevin Harper represented a homeowner who lost her home to foreclosure in late 2008. The lender on the homeowner's second mortgage filed a lawsuit to recover over $40,000 it alleged was owed on the second mortgage, which was money the homeowner used to purchase the house in 2006. Mr. Harper filed a Motion to Dismiss the lender's lawsuit pursuant to [Arizona statute] A.R.S. § 33-729(A), which states that a lender is barred from pursuing any action against a[n Arizona] borrower if the mortgage was obtained to purchase the [Arizona] home. After receiving Harper Law's Motion to Dismiss, the lender realized the futility of its action and immediately offered to dismiss the case and pay the client's attorneys' fees.

For more, see Arizona Real Estate Lawyer Warns of Frivolous Lawsuits by Second Mortgage Lenders.

Florida Man Cops Plea To Stealing Title To Vacant Homes, Then Pocketing $500K+ In Subsequent Mortgage Refinancing Proceeds

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [last week] announced that a Columbia County man has pleaded guilty to his involvement in a mortgage fraud scheme. [... Rory V.] Porter, 42, was arrested in November 2007 by the Alachua County Sheriff’s Office after detectives from the Alachua and Columbia County Sheriffs’ Offices discovered Porter’s involvement in a mortgage fraud scheme with elements of identity theft.

  • The investigation revealed that, between May 2007 and August 2007, Porter befriended owners of homes which were free of any liens, vacant, and for sale. Using information he obtained through his relationship with the homeowners and from public records, Porter forged documents and recorded deeds to transfer the homes to his possession. He would then locate private lenders and borrow money using the homes as collateral. Authorities believe Porter stole homes in the Gainesville and Lake City areas worth in excess of $800,000 and obtained loans against those homes in excess of $500,000.

For the entire press release, see Columbia County Man Pleads Guilty to Mortgage Fraud Scheme.

Debt Renegotiation Scams Not Limited To Foreclosure Rescue, Loan Modification Firms As Illinois AG Hammers Settlement Outfits In Separate Civil Suits

From the Office of the Illinois Attorney General and the Illinois Department of Financial and Professional Regulation:
  • Attorney General Lisa Madigan and Acting Secretary of the Illinois Department of Financial and Professional Regulation (IDFPR) Michael T. McRaith warned consumers facing significant credit card debt about the risks of debt settlement offers as she announced two lawsuits filed against debt settlement firms.(1) Attorney General Madigan's lawsuits allege that these companies engage in deceptive marketing practices, charge excessive fees and do little or nothing to improve consumers financial standing.

***

  • Madigan said her office has seen an increase in advertisements for debt settlement companies that promise to significantly reduce consumers credit card debt and provide them with an alternative to bankruptcy protection. Typically, after consumers enroll in debt settlement programs, the companies charge excessive upfront fees and advise consumers to stop paying their credit card bills. Despite this advice, the debt settlement companies fail to begin negotiations with consumers credit card companies for several months. As a result, credit card companies add fees and penalties to consumers credit card balances and often even begin collection efforts to recoup the debt, all of which puts the consumers in a worse financial situation. In many instances, while consumers were enrolled in debt settlement programs, credit card companies have sued the consumers to collect the balance on the consumers accounts.

For the entire Illinois AG press release, including a summary of the specific allegations against each outfit, see AG Madigan Sues Two Debt Settlement Firms (Attorney General, IDFPR Warn Consumers About Firms Promising to Reduce Credit Card Debt).

(1) AG Madigan sued the following defendants:

  • 1st lawsuit: SDS West Corporation, an Aliso Viejo, Calif.-based debt settlement agency; Bruce Hood, the Chief Operating Officer of SDS West; SDS West's Chief Executive Officer, Raymond Dorso; Nationwide Support Services, Inc., an Irvine, Calif.-based debt settlement servicer; and Joanne Garneau, President of Nationwide Support Services.
  • 2nd lawsuit: Debt Relief USA, Inc., a debt settlement firm based in Addison, Texas and Kelly E. Reilly, the President of Debt Relief USA.

NY AG Subpoenas Fourteen Debt Settlement Companies & One Law Firm In Nationwide Probe; Seeks To "Rein In A Renegade Industry"

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [Thursday] announced a nationwide investigation into the debt settlement industry, subpoenaing fourteen debt settlement companies and one law firm.(1) Companies in the debt settlement industry often prey upon consumers who find themselves unable to keep up with credit card payments during these difficult economic times.

  • Today, millions of hardworking Americans are finding themselves imprisoned by debt. In response, a rogue industry has stepped in, offering consumers false hope, charging tremendous fees, and leaving them in a worse financial situation,” said Attorney General Cuomo. “Our mission is clear: to hold unscrupulous businesses accountable; to rein in a renegade industry; and to ensure that people are not victimized when faced with financial hardship.”

***

  • The subpoenas include requests designed to uncover the companies’ fee structures, how many people have benefitted from the companies’ services, and what kind of relief the companies are actually providing.(2)

In what appears to be an attempt to literally squeeze the blood out of aggrieved debtors, at least one of these firms has been accused of suggesting to the debtors to sell their blood plasma as an additional source of funds to apply towards their debt settlement "program," according to the press release.

For the entire NY AG press release, see AG Cuomo Announces Nationwide Investigation Into Debt Settlement Industry (Subpoenas Fourteen Debt Settlement Companies and One Law Firm in Connection with Probe; Debt Settlement Companies Often Charge Huge Fees for Misleading Plans, Suggest Selling Blood Plasma to Raise Funds, and Leave Consumers in Worse Financial Shape).

(1) The fifteen firms receiving AG Cuomo's "invitations to cooperate" are:

  • American Debt Foundation, Inc.; American Financial Service; Consumer Debt Solutions; Credit Answers, LLC; Debt Remedy Solutions, LLC; Debt Settlement America; Debt Settlement USA; Debtmerica Relief; DMB Financial, LLC; Freedom Debt Relief; New Era Debt Solutions; New Horizons Debt Relief Inc.; Preferred Financial Services, Inc.; U.S. Financial Management Inc. (d.b.a. My Debt Negotiation); and the Allegro Law Firm.

Cuomo is also currently investigating Nationwide Asset Services, Inc., based in Phoenix, Arizona, and Credit Solutions of America, Inc., based in Addison, Texas, according to the press release.

(2) According to the press release, the debt settlement plans are generally premised on consumers aggregating savings, over one to three years, from which both the payment of the company’s fees and any negotiated settlement are to be made. Yet most consumers who are targeted by these companies are unable to meet the savings requirements because of their precarious financial situation.

Some of the companies also urge consumers to seek additional sources of funds through means such as selling their blood plasma, mowing lawns, cutting down on car insurance, and borrowing from their neighbors and church. Even for those consumers who can meet the requirements set out by a plan, their amount of aggregated savings is ordinarily insufficient to settle their debts. As a result, many consumers find themselves worse off financially because of these debt settlement plans.

More On Now-Defunct, Alleged Attorney-Based Loan Modification Scam That Victimized 2000+ Homeowners

In San Francisco, California, SF Weekly recently ran a column on an alleged loan modification foreclosure rescue scam that clipped homeowners in foreclosure out of thousands of dollars and that is now out of business:

  • The apparent swindle, fi[r]st described in the September, 2008 SF Weekly column "Facing foreclosure? Con man Paul Noe II has a deal for you," involved a boiler room of agents who would contact Spanish-speaking homeowners behind on their mortgage payments. Roth's canvassers would convince apparent victims they might save their homes by entering into a business deal with convicted con artist Noe, scion of a legendary con artist dynasty. Under the terms of the deal, Roth's employees would offer a complex contract to prospective clients. The deal required the client to pay monthly fees to a Noe-formed company. That company -- which happened to be partially owned by Roth's wife -- would in turn hire Roth as counsel for the client, supposedly to fend off foreclosure via lawsuits.

***

  • Attorneys now suing him on behalf of former clients say the scheme involved Roth stringing homeowners along long enough to collect thousands of dollars in fees, then months later claiming to have lost the lawsuit, despite his best efforts.

For more, see State Bar Takes Over 'Son of Super Swindler' Law Firm -- 2,000 Con Jobs Too Late. UnauthPractOfLawTheta

Saturday, May 09, 2009

"Wire-Wearing" Mistress Key To Federal Indictment Snagging Builder-Boyfriend In Alleged Tax Evasion Scheme; Accountant, Real Estate Agent Also Named

In Columbus, Ohio, The Columbus Dispatch reports:
  • Federal agents put a secret recording device on the mistress of a central Ohio luxury-home builder and pieced together shredded documents from his accountant's trash to unravel a tax-evasion scheme that involved kickbacks to home buyers and fraudulent loans linked to one of Franklin County's largest mansions.(1)

For more, see 3 indicted in tax scheme (Builder, accountant accused of 18 counts in alleged fraud involving luxury homes).

(1) According to the story, the home builder, Thomas Parenteau, and the accountant, Dennis Sartain, pleaded not guilty yesterday in U.S. District Court in Columbus to an 18-count indictment charging them with tax fraud, bank and wire fraud, money laundering and obstruction of justice. Bonnie Helt, a real-estate agent who sold many of Parenteau's luxury homes, also was arraigned. She pleaded not guilty to bank and wire fraud, money laundering and obstruction of justice, the article states. She is accused of helping put the real-estate deals together and cover up the sales.

Ohio AG Tags Two Home Improvement Outfits With Suits Alleging Pocketing Homeowner Money, Failing To Deliver Professional Work

From the Office of the Ohio Attorney General:
  • Attorney General Richard Cordray has filed two lawsuits against home improvement companies accused of defrauding Ohioans. One lawsuit, filed in the Union County Court of Common Pleas, charges ABC General Contracting and its owner, Jeremy Adams, with failure to deliver promised services. The other suit, filed in the Montgomery County Court of Common Pleas, charges Brown and Brown Roofing and its owner, Bob Brown, with shoddy service.

***

  • [Prosecutors allegedly] found that Adams routinely collected $400 to $7,700 from consumers but did little or no actual work in return. [...] According to Cordray’s lawsuit, Brown did shoddy, unprofessional work, made false representations about warranties and failed to provide proper estimates to consumers.(1)

  • Both lawsuits charge the companies with numerous violations of Ohio’s Consumer Sales Practices Act. Cordray is asking the court to stop the companies from committing deceptive practices, to hold them responsible for reimbursing consumers and to assess a $25,000 civil penalty for each violation of the law.

For the entire press release, see Cordray Takes Action Against Home Improvement Fraud (Two Ohio companies leave trails of fraud throughout state).

(1) According to the press release, an investigation found that Adams operated under numerous business names, including Adams Contractors, Mr. Haul, Absolute Maid Service, Rent-a-Husband, Lakeside Remodeling, A2Z General Contractors and Handyman Services. None of these names are registered with the Ohio Secretary of State. Bob Brown also failed to register with the Secretary of State, Cordray said. Brown operated his business under the names Brown and Brown Roofing and Bob Brown Roofing.

Broome County Leaning Against Stripping Mineral Rights Away From Delinquent Owners Who Repurchase Property Earlier Lost In Tax Foreclosures

In Broome County, New York, the Binghampton Press & Sun Bulletin reports:
  • Hard-luck Broome County property owners who lose out on tax foreclosures should keep their mineral rights, a special committee is recommending. Under a proposal to update county policies, Broome County will give up its claim to potentially lucrative mineral rights on properties lost to foreclosure and then repurchased by their original owners who show hardship. [...] The issue came to light last year after Broome's Office of Real Property retained mineral rights to three of 12 foreclosed properties that were later repurchased by their owners.

For more, see Legislators: Let mineral rights revert (Change would help foreclosed owners).

For follow-up story (8-15-09), see Tax foreclosures, mineral rights explained.

Go here for other posts on those looking to strip property owners of their mineral rights. MineralRightsAlpha

Maine Woman Admits Misrepresenting Value Of Home In Foreclosure & Using It As Collateral For Bail Bond

In Farmington, Maine, the Kennebec Journal Morning Sentinel reports:
  • A woman who signed a bail lien using property in foreclosure to post bail for a man charged with manslaughter in the death of a toddler pleaded guilty to forgery Monday. Jamie Badeau, 24, of Wilton, misrepresented the value of the real estate she used to bail out David Cook, 26, of Wilton. She used property in foreclosure to post $100,000 surety bail for a man charged with manslaughter in the death of a toddler. [...] On Jan. 5, 2009, Badeau signed a surety bond and bail lien for Cook at the Franklin County jail and swore to the bail commissioner that the property had a net value of $100,000.

For more, see Woman pleads guilty in bail forgery case.

Couple Seeking To Make Some Extra Cash Left Holding The Bag In Straw Buyer Deal; Schemes Begin Unraveling As Economy Tanks

In Calgary, Alberta, The Calgary Herald reports:
  • About two years ago, in a lawyer's office, Linda put her signature on a document she believed would help someone buy a house. She thought it was an easy way to make some money,(1) while doing good for someone she understood just needed her "good name" to get a leg up.

  • But the small act of putting pen to paper has left Linda and her husband Rick (not their real names) on the hook for a house trashed by its tenants and facing a $100,000 lien on the home they've lived in for a decade. The couple are part of a growing group of Calgarians who have fallen victim to a common mortgage fraud scheme known as "straw buyer."

***

  • As the economy falters, mortgage fraud schemes are starting to unravel, said Sgt. Shawn Goertzen of the Calgary police's commercial crime unit. Goertzen said there have been several phone calls recently from people finding themselves in the exact same situation as Rick and Linda. But, for every one case that comes to the attention of officials, there are many more.

For more, see Mortgage frauds on the rise in Calgary (Scams start to unravel as economy falters).

(1) According to the story, Linda pocketed $3,000.

Friday, May 08, 2009

Recognizing & Avoiding Foreclosure Rescue, Loan Modification Scams The Focus Of Miami Seminar

In Miami, Florida, the South Florida Carribean News reports:
  • Alarming foreclosure rates in South Florida are prompting many homeowners to seek the services of foreclosure rescue and loan modification companies. To help consumers avoid being victimized and losing their money, the Miami-Dade Consumer Services Department and Mayor Carlos Alvarez’s Mortgage Fraud Task Force are holding educational presentations in English and Spanish.(1)

For more, see Learn how to guard yourself against mortgage fraud & loan modification scams.

(1) The English session will be held Wednesday, May 13 at the North Dade Regional Library, 2455 N.W. 183rd Street in Miami Gardens, at 6:30 p.m. A Spanish session will be held Wednesday, May 27 at the West Kendall Regional Library, 10201 Hammocks Blvd., at 6:30 p.m. Representatives of the Consumer Services Department and the Mortgage Fraud Task Force will discuss the methods con artists use to carry out foreclosure rescue and loan modification fraud and answer questions. They will also provide consumers with information to obtain legitimate assistance to help save their homes.To RSVP for these events, please call the Consumer Services Department at (305) 375-3677, and specify which event you are interested in attending.

Florida To Belt Mortgage Lenders With Big Hike In Fees When Filing Foreclosure Actions

In Tallahassee, Florida, the Sarasota Herald Tribune reports:

  • The cost of foreclosing on homes and businesses will rise sharply under a bill lawmakers are expected to approve [Friday], a change that one state leader predicts may persuade lenders to try harder to work out alternatives with struggling borrowers.

***

  • Under the measure, the cost of filing foreclosure actions -- which are now $295 -- will be increased on a sliding scale. For properties under $50,000, it will rise to $395. For homes and businesses between $50,000 and $250,000, it will increase to $900. And for properties over $250,000, it will jump to $1,900 -- more than a sixfold increase.

***

  • "I think if I was a lender or someone filing a lawsuit I might have a little more incentive to try to work things out," [Lee Haworth, the chief judge for the 12th Judicial Circuit in Sarasota] said, adding there may be "a big jump" in the filings before the new law actually takes effect.

For the story, see Bill increases costs to foreclose.

Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M

From the Washington State Office of the Attorney General:
  • The Washington Attorney General’s Office declared a major victory for consumers today in response to a judge’s order that a notorious foreclosure rescue scammer must pay more than $3.2 million to victims he wronged plus $179,000 in penalties for violating the Consumer Protection Act.
  • Joseph Kaiser’s a cunning real estate investor who made his living by claiming to help people facing tax foreclosure – then taking their homes, land and money,” Attorney General Rob McKenna said. “Thanks to the hard work of our Consumer Protection Division, he will no longer be able to prey on struggling homeowners.” The Attorney General’s Office also obtained an order permanently stopping Kaiser from participating in real estate transactions with people facing foreclosure.
  • Kaiser, of Tacoma, was the first foreclosure “rescuer” to be tried by the Attorney General’s Consumer Protection Division, which works to enforce a fair marketplace for consumers and businesses. He is the author of several books describing tactics for making quick profits from real estate and has conducted seminars to teach his methods for earning large amounts of money through deals involving distressed properties.
  • Kaiser entered transactions with more than 300 property owners. No one has ever successfully regained their home from Kaiser. Assistant Attorneys General Jim Sugarman and Jake Bernstein represented the state in the trial, which included six days of testimony and arguments by attorneys on both sides during December 2008 and January 2009.
  • Kaiser’s victims were elderly, disabled or low-income individuals – people who trusted him to solve their foreclosure problems and were betrayed,” Sugarman said. “Kaiser portrayed himself to these people as an expert in saving homes facing foreclosure, when he is actually an expert in taking homes facing foreclosure.”
  • King County Superior Court Judge Palmer Robinson ordered Kaiser to pay nearly $4.2 million including more than $780,000 to partially repay the state for the costs and attorney fees for bringing the lawsuit. It’s a significant finale to a case that began in March 2007 when the state filed civil charges against Kaiser and simultaneously settled with several of his colleagues.
  • In its complaint, the state alleged that the defendants used public records filed with county treasurers to contact property owners with offers to help solve their foreclosure problems. Their real intent, however, was to obtain ownership of the home or to let the home be sold at tax foreclosure and then take the excess sales money that should have been paid to the homeowner.
***
  • Trial Judge Michael Trickey called Kaiser’s contracts “grossly unfair.” “No fully informed person, not acting under compulsion, would enter a transaction with such onerous terms,” Trickey wrote in his decision [at paragraph 12].
For the entire press release(1), see Pay time for notorious foreclosure rescue scammer (Attorney General announces major victory in state’s case with Washington man who promised help but took homes).

See also, Seattle Post Intelligencer: Foreclosure guru hit with $3.2 million penalty ("I'm the Tiger Woods of foreclosure rescue" accused man claims).

(1) Relevant court documents and other case information:

Fannie's Reverse Mortgage Interest Rate Rule Changes To Invite Fraud, "Bait & Switch" Tactics?

The Associated Press reports:
  • Almost daily, the reverse mortgage industry is changing, and it’s worrying plenty of people. For years, reverse mortgages have been reliable, a way for seniors to live off the equity in their homes as they age. [...] But now, reverse mortgage veterans [...] are concerned about that some sudden changes by Fannie Mae that allow [interest rate] margins to fluctuate almost daily until the funding process is complete. These adjustments can confuse seniors and cause them to question whether they are getting fair treatment.

  • Fannie Mae — the largest financier in the U.S. mortgage industry — is trying to attract more money to the reverse mortgage market by increasing the amount lenders can make on selling the loans. But raising fees and allowing rates to change can lower the amount of money senior homeowners can borrow. It also can increase the fraud risk as competition for their business increases.

***

  • Industry insiders fear that the margin increases will lead to higher instances of fraud, with lenders quoting a low margin to get clients interested, then disclosing a margin increase later in the process in a “bait-and-switch” strategy.

For more, see Changes in reverse mortgages stir fears among senior citizens.

For stories related to reverse mortgage problems, go here and go here. reverse mortgage yak

NYC Housing Officials Fear Deteriorating Conditions For Tenants In Rent-Regulated Apartment Buildings In Danger Of Foreclosure

In New York City, The Indypendent reports:
  • City housing officials laid out their plan to deal with multi-family building foreclosures [last week] at the New York City Council. In the Council’s Community Development committee, council members grilled newly minted Department of Housing Preservation Development ["HPD"] commissioner Rafael Cestero on the foreclosure crisis. HPD’s commissioner laid out a plan to tap federal bailout and stimulus money to save multi-family buildings from falling into foreclosure.

***

  • Cestero warned about the dangers of multiple family buildings going into foreclosure such as landlords refusing to make repairs that contribute to deteriorating building conditions. This in turn could drive entire blocks into decline by lowering property values and encouraging other property owners from investing in buildings – namely through making repairs and capital improvements. HPD will stress outreach to owners in danger of foreclosure, code enforcement targeting distressed buildings and the linchpin – using federal funds to purchase or co-finance mortgages with private investors.

For more, see Foreclosures Could Loom for Rent-Regulated Buildings.

See also, the New York Post: FORECLOSING IN ON 90,000 APARTMENTS (As many as 90,000 city apartment units could go into foreclosure as the housing crisis spreads from single-family homes to rental properties, city officials warned). RentSigmaSkimming

Tenants Forced Out By Raw Sewage In Condemned Omaha Apartment Building In Foreclosure; Landlord Unavailable For Comment

In Omaha, Nebraska, KETV Channel 7 reports:
  • There’s an apartment complex in Omaha that the city’s chief housing inspector calls deplorable and the landlord is nowhere to be found. In fact, one building has raw sewage flowing throughout it.

***

  • All my stuff is ruined,” said tenant Kimberly Wright. “I don’t have a place to stay. I lived here with my three children. I’ve lost everything.” Wright was displaced when city inspectors recently condemned the building. She showed I-Team investigators the raw sewage that backed up into her toilet and bath tub. It flooded her ground-level apartment and sent a terrible stench through the building. The city’s chief housing inspector, Kevin Denker, said the conditions inside the building are about as bad as they get. “This looks like an issue of the sewer line going out to the street being blocked and every time anybody runs their sink or flushes their toilet above this unit, it empties into this unit,” Denker said.

***

  • KETV NewsWatch 7 tried contacting the company by phone, but two business lines, a cell phone and a tenant hot line had been disconnected. The current mortgage holder for the apartment complex confirmed the property is in foreclosure.

  • The director of the Fair Housing Center [of Nebraska], Jill Fenner, said her agency will help Wright and other tenants bring legal action against the landlord. “She can sue for three times the rent, plus liquidated damages and reasonable attorney’s fees,” Fenner said. But any legal action will take time.

For more, see City Condemns 'Deplorable' Apartment Building (Tenant Loses Everything After Raw Sewage Backs Up In Her Unit). RentSigmaSkimming

Thursday, May 07, 2009

FTC, Others Testify On Foreclosure Rescue & Loan Modification Scams

The Federal Trade Commission announced Wednesday:
  • The Federal Trade Commission [Wednesday] told the U.S. House Subcommittee on Housing and Community Opportunity of the Committee on Financial Services that, with the rapid increase in mortgage delinquencies and foreclosures, the FTC has intensified its efforts to protect consumers from foreclosure rescue and loan modification scams. The FTC also recommended legislative and other remedies to enhance the agency’s effectiveness.

For the rest of the press release, see FTC Testifies on Efforts to Combat Foreclosure Rescue and Loan Modification Scams.

Go here to view the archived webcast.

Witness List & Prepared Testimony:

Panel One:

Panel Two:

California Regulator Shifts Over A Dozen Deputies To Investigate Loan Modification Outfits As Firms "Are Popping Up Like Weeds!" Says DRE Spokesman

In San Diego, California, the San Diego Union Tribune reports:
  • Complaints about loan modification companies that charge hefty fees but provide little or no service are soaring statewide as distressed homeowners struggle to avoid foreclosure. While many firms are reputable, the state Department of Real Estate ["DRE"] is shifting resources to keep up with a mounting caseload of consumers who say they've been taken advantage of. There were very few complaints against loan modification firms last fall, but since then the number has climbed to about 500, said department spokesman Tom Pool.

  • In response, the department has transferred more than a dozen deputies to enforcement duties. Loan modification companies “are popping up like weeds,” Pool said. “The best defense is consumer education. We are seeing more and more foreclosures every day. We are probably going to get a whole new crop of victims.”

For more, see Complaints to state soar over loan modification firms (Officials monitoring for-profit companies).

California State Bar Testifies On Role Of Some Attorneys In Upfront Fee Foreclosure Rescue & Loan Modification Scams

In a U.S. House of Representatives hearing Wednesday entitled Legislative Solutions for Preventing Loan Modification and Foreclosure Rescue Fraud, Mr. Scott Drexel, Chief Trial Counsel of The State Bar of California testified as to the role that some attorneys are playing in scamming the public in foreclosure rescue & loan modification fraud. He pointed out to the subcommittee that since approximately November 2008, calls to The State Bar's toll-free telephone lines have averaged nearly 900 per month on the subject of loan modification and foreclosure rescue fraud, an annual rate of more than 10,000 telephone calls on this subject alone. Among other points made by Mr. Drexel in his prepared testimony are the following:
  • [A]ttorneys have been complicit in loan modification and foreclosure rescue fraud in several respects. The key component of their involvement in fraudulent activities is their ability to demand and receive advanced fees for services.

  • Regrettably, a certain number of attorneys are willing to engage in these fraudulent activities on their own.(1) In many cases, however, attorneys are approached by non-attorney foreclosure consultants who seek to work in concert with them. In exchange for the use of the attorney’s name and his or her ability to charge and receive advanced fees, the foreclosure consultant typically offers to perform most or all of the loan modification services and promises to either pay the attorney a specified amount for each loan modification or to provide an agreed-upon percentage of the fees received from the homeowner.

  • The foreclosure consultants often prey upon new attorneys who are unaware of their ethical responsibilities and who, in the current economy, are having problems in attracting sufficient legal business.

  • These consultants also appear to prey upon older attorneys who cannot afford to retire but who no longer have the energy or ability to maintain a large law practice by offering them a steady monthly income to supplement what the attorney can earn through his or her legitimate law practice.

  • Besides the fraudulent aspect of the activities themselves, these arrangements violate numerous provisions of California’s Rules of Professional Conduct. For instance, rule 1-310 of the Rules of Professional Conduct prohibits a member of the State Bar from forming a partnership with a person who is not a lawyer if any of the activities of the partnership consist of the practice of law.

  • Similarly, rule 1-320 prohibits a member or a law firm from directly or indirectly sharing legal fees with a person who is not a lawyer, with exceptions that are not applicable to the alleged services to be provided by foreclosure consultants.

***

  • In the cases that the California State Bar has been investigating, we have typically encountered advanced fees for loan modification services ranging from approximately $2,500 to more than $10,000, with the average fee in the range of about $3,000 to $4,000.

  • In most of the cases that the State Bar is investigating, the attorney and/or the foreclosure consultant perform few, if any, services in exchange for these advanced fees. In essence, these monies have been obtained from homeowners under false pretenses. At most, in exchange for these advanced fee payments, the attorneys or foreclosure consultants make a few, largely ineffectual, telephone calls to the financial institution that holds the mortgage.

Go here for the entirety of Mr. Drexel's prepared testimony.

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

In a related point, from the Committee on Professional Responsibility and Conduct ot The State Bar of California, see: ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

In a related story, see SF Weekly: State Bar Takes Over 'Son of Super Swindler' Law Firm -- 2,000 Con Jobs Too Late (The State Bar of California has taken over the law firm of Mitchell Roth, who had, in partnership with convicted felon Paul Noe II, convinced more than 2,000 troubled homeowners to fall for an apparent "foreclosure assistance" scam).

Go here and Go here for other posts on the potential perils relating to attorneys and non-attorney loan modification firms joining forces to provide foreclosure-related rescue services.

(1) Mr. Drexel describes one particularly egregious case, in which the attorney and the foreclosure consultants with whom he is working have talked homeowners into providing them with bank account information before the homeowner has even signed an agreement retaining the attorney for loan modification services. The attorney then electronically withdraws funds from the homeowner’s bank account without any prior notice or authorization from the homeowner and before the homeowner has even decided to retain the attorney. UnauthPractOfLawTheta

First Of Ten Defendants In Alleged San Diego-Area Land Grant Foreclosure Rescue Scam Cops Plea; 400+ Homeowners Victimized, Say Prosecutors

In San Diego, California, XETV-TV Channel 6 reports:
  • A man accused with nine other people of stealing hundreds of thousands of dollars in a home foreclosure scam pleaded guilty Tuesday to seven felonies, including conspiracy and grand theft. Octavio Escatel, 29, will be sentenced to probation and a year in jail at a June 5 hearing before Judge Charles Gill.

  • William Hutchings and wife Xiaoke Li, Edgar Martinez, Diego Gil, Shawna Landis, Joel E. Garcia, Stephen Mauer and Alex Olmos pleaded not guilty to more than 150 counts of grand theft, conspiracy and deceitful practices as a foreclosure consultant. They, along with a 10th defendant, Rose Napoli, had their trial set for Jan. 19.

***

  • More than 400 homeowners in San Diego and Riverside counties were victimized, prosecutors said. Two methods were allegedly used to induce property owners in foreclosure to participate in a so-called land grant program, according to prosecutors. One method required homeowners to pay a one-time fee of up to $10,000 to put their property in a land grant, prosecutors said. The second method was a lease-back scheme, according to authorities. In both scenarios, the homeowners were typically evicted and retained no legally recognized title to their property.

For the story, see Man Preyed on Over 400 People in Home Foreclosure Scheme.

California Probe Continues Into Man At Center Of Possible Straw Buyer Scheme Leaving 150+ Homes In Foreclosure

In Fresno, Cailfornia, KSEE-TV Channel 24 reports:
  • Renters at Stonemark Homes in east central Fresno could be the victims of a real estate scheme that stretches from the Valley down to Southern California. At the center of the suspected scam is 58 year old James McConville. McConville is the subject of an investigation in San Diego County for allegedly renting identities to purchase properties. More than 150 homes connected to McConville have gone into foreclosure.

  • That seems to be McConville’s M.O., find investors or find people with good credit, use their identity, pay them a little bit so he can get the loans and then let them (properties) go into default while he pockets all of the money,” property appraiser Carin Lane said.

***

  • At least 10 people listed as owners of multiple units at the east central Fresno complex have McConville's address listed as their own. [...] Many of the owners of Stonemark units were also listed as owners of units at McConville's other properties now being investigated as possible scams.

For more, see Real estate scheme could leave renters homeless.

For media reports on the San Diego investigations involving McConville, see:

NYC Woman Charged With Swiping Three Manhattan Apartment Buildings From Dead Ex-Boyfriend's Estate

In New York City, the New York Post reports:
  • A former exotic dancer with a body for sin and maybe a brain for it, too, stole three Upper East Side apartment buildings from her late ex-boyfriend and brazenly started collecting rent, authorities said. Flora Soto Hernandez, 54, was arrested Thursday on 21 counts of forgery and fraud for posing as a landlady, officials said. She's now cooling her heels on Rikers Island, on $250,000 bail. The former blonde bombshell claimed her ex, a wealthy property owner named Fred Zeiss, left the buildings to her when he died in 2002.

***

  • Zeiss' brother, Alan, says the deed conveyances are forgeries. "This is one of the most brazen yet ludicrous schemes I've ever seen," said Alan Zeiss' lawyer, Mark Bederow.

***

  • She even attempted to sell one of the buildings, at 405 E. 90th Street, a source said. Alan Zeiss countered by placing a lis pendens on the property, a legal notice that should have kept Soto from trying to sell the building. But that didn't perturb Soto. "She marched down to the County Clerk's Office with fake affidavits and tried to get them removed," said Bederow.

For more, see BUILDINGS 'STOLEN' (BOGUS LANDLADY SCAMMED EX'S ESTATE: DA).

Go here, 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. DeedZetaTheft