Monday, July 13, 2009

Chicago-Area Homeowners In Foreclosure Urged To Show Up To Court "Case Management Call" To Seek Assistance

In Chicago, Illinois, the Southwest News Herald reports:
  • Cook County Circuit Court Clerk Dorothy Brown said a recent administrative order issued by a Chancery Court judge represents a second chance for many homeowners facing foreclosures to have their cases heard in July and August, noting that some may be able to save their homes through mediation. Brown is getting the word out about Chancery Division Presiding Judge Dorothy Kinnaird’s administrative order, which provides that a “case management call” be set for the mortgage foreclosure section of all pending mortgage foreclosure cases filed prior to April 1, 2009.(1)

***

  • A few of the issues case management hearings will consider are: whether the necessary requirements have been met to foreclose; whether an Access to Justice attorney should be appointed; whether credit counseling is appropriate; and whether the case is appropriate for a court-ordered mediation.

For more, see Second Chance To Hear Cases Of Foreclosures.

(1) Brown especially urges people whose banks are not willing to do modifications to come to court for case management. She said people who show up for the case management hearings in July and August will automatically be given a 30- to 45-day continuance to allow them to go to the Pro Se Advice Desk for assistance with their cases. Brown noted that individuals do not need attorneys in order to come to the case management calls. Defendants may also seek to have the $188 appearance fee waived.

Central Florida Feds Expect To Bag 100+ Suspects In Upcoming Mortgage Fraud Indictments

In Central Florida, the Bradenton Herald reports:
  • Federal authorities are investigating several suspected cases of mortgage fraud in Manatee and Sarasota counties as part of a larger statewide crackdown, the Bradenton Herald has learned. Those investigations are zeroing in on organized groups and industry insiders suspected of defrauding mortgage lenders out of tens of millions of dollars during the housing boom. The cases, part of a crackdown that began in March, could result in criminal charges against more than 100 people locally and throughout Florida later this year.

***

  • The FBI and U.S. Attorney’s Office in Tampa confirmed the investigations Thursday but declined to discuss specifics other than to say they’re part of a concerted “surge” to combat the growing problem. “We have investigations going on throughout the (middle) district (of Florida), from Naples to Jacksonville and everywhere in between,” U.S. Attorney A. Brian Albritton said. “We’re trying to do as many cases as we can, and I expect it to be over 100 defendants.”

  • Albritton said authorities hope to file charges against most of the defendants by November. In some cases, prosecutors have already begun negotiating potential plea deals, he said. The effort already has netted its first convictions: Three people recently received prison sentences of 46 months to 22 years for a $30 million mortgage fraud scheme in Cape Coral that was investigated by the Internal Revenue Service and the FBI.

For more, see FBI investigating local mortgage fraud.

Trustees In Mortgage Securitizations May Begin Finding Themselves In The Crosshairs As "Joint Venturers" In Lawsuits Seeking To Impose Fraud Liability

The New York Times reports on the hot water facing many of those big institutions who played any part in the creation and peddling of mortgage securitized interests in toxic loans:
  • Some legal experts point to a number of cases in which plaintiffs contend that firms involved in the securitization process, like trustees hired to oversee the pools of loans backing securities, worked so closely with the lenders that they should face liability as members of a joint venture. And these experts see a rising receptiveness to this argument by some courts.(1)

Among the cases referred to in the story is current litigation brought by the Atlanta Legal Aid Society on behalf of a couple fighting foreclosure of an allegedly abusive and predatory loan. They seek punitive damages from the lender, NovaStar Mortgage Inc., as well as from the original trustee (JPMorgan Chase) and the subsequent trustee (Bank of New York Mellon).(2)

Another lawsuit referred to in the story was one targeting lender First Alliance, in which its main backer, Lehman Brothers, found itself hammered with some of the liability.(3)

A third lawsuit referred to involving the issue of liability for abusive lending going beyond the original lender resulted in a settlement after the court denied two motions to dismiss it.(4)

For the story, see Looking for the Lenders’ Little Helpers.

(1) From the story:

  • As we are unpeeling what was happening on Wall Street, we may see that Wall Street didn’t find the safety from litigation risk that it hoped to find in securitization,” said Kathleen Engel, a professor at Cleveland-Marshall College of Law at Cleveland State University. “I think there is potential for liability if borrowers can engage in discovery to see exactly how much the sponsors were shaping the practices of the lenders.”

(2) From the story:

  • We contend that the trustee has direct liability on the theory that even though they were not sitting at the loan closing table, they were involved in the securitization and profited from it,” said Sarah E. Bolling, a lawyer in the Home Defense Program at the Atlanta Legal Aid Society who represents the [homeowners]. “The prospectus had been written before the loan was closed. If this loan was not going to be assigned to a trust, it would not have been made.”

(3) From the story:

  • More than 7,500 borrowers had successfully sued First Alliance for fraud, and in 2003 a jury found that Lehman, which had lent First Alliance roughly $500 million over the years to finance its lending, “substantially assisted” it in its fraudulent activities. Lehman was ordered to pay $5.1 million, or 10 percent of damages in the case, for its role.

(4) From the story:

  • That matter turned on the language in the securitization’s pooling and servicing agreement, which provides details not only on the types of loans in a pool but also on the relationships of various parties involved in it. Diane Thompson, a lawyer with the National Consumer Law Center, said that the meaning of the agreement was that “the trustee was a joint venture with the originator and was therefore responsible for everything that happened in that joint venture.” Many such agreements, she said, create a joint venture by force of law. “Everybody I know that has tried this argument has had pretty good success. Absolutely we are going to see more of these cases.”

Onslaught Of Chapter 11 Filings Expected From Condo Associations Suffering From Decrease In Maintenance Fee Collections, Deadbeat Unit Owners?

In South Florida, the Daily Business Review reports:
  • In a move an increasing number of condo associations are expected to follow, the Maison Grande in Miami Beach has filed for bankruptcy.(1) Facing almost $1 million in claims by unsecured creditors, a troublesome recreational lease, and at least 100 unit owners [out of 502] delinquent on payments of their fees, the association filed a Chapter 11 petition last month in U.S. Bankruptcy Court in Miami. As one of the first condo association bankruptcies of the current economic crisis, “it’s definitely cutting edge,” said attorney Mark Schorr, a solo practitioner in Fort Lauderdale who represents the Maison Grande association.

***

  • [Attorney Robert] Kaye represents a Tamarac condo association that is considering bankruptcy. With half of its 280 unit owners delinquent on their maintenance fees, the association is in the red to the tune of $50,000 per month, he said. Kaye also represents a Palm Beach County condo association that is likely to file for bankruptcy after losing a court case against a roofing contractor. A judgment of $130,000 could grow to more than $300,000 after attorney fees and court costs are added, he said. “They can’t afford that, and 20 percent [of 120 unit owners] already are delinquent in paying fees,” Kaye said. These associations, which he declined to name — and many more — are likely to file for bankruptcy protection as they run out of funding options, he said.

***

  • As foreclosure filings have soared in the wake of the housing and financial market bust, they can take almost two years to complete. That means condo associations still must maintain the foreclosed units, and the remaining condo owners must pick up the tab of their non-paying neighbors. “As long as lenders are extending foreclosures into 18 months and two years, the associations are pretty well stuck because there is no cash flow and they can’t raise funds necessary to operate,” Kaye said.(2)

For more, see $1 million debt sends condo association into Chapter 11.

(1) Go here for the Maison Grande's Chapter 11 Case Management Summary, filed with the Federal Bankruptcy Court in Miami pursuant to Local Rule 2081-1(B), and which provides the facts and circumstances surrounding the filing of its bankruptcy petition.

(2) In a related story, see South Florida Sun Sentinel: Community associations confront squatters (Options are limited for associations):

  • In some cases, squatters are owners of units in foreclosure who stop paying mortgage or maintenance fees and leave their electricity, cable and water bills for the rest of the association residents to pick up while they live cost-free. In others, they are holdover renters in units or homes in foreclosure who stay put without paying a dime in rent or other fees.

$900K Real Estate Deposit Part Of $2.2M In Escrow Cash Ripped Off From Clients By NYC Attorney, Says Manhattan DA

From the Office of the Manhattan District Attorney:
  • Manhattan District Attorney Robert M. Morgenthau announced [Wednesday] the second indictment charging a lawyer with stealing settlement and escrow monies from his clients. This second indictment charges the defendant with stealing more than $1.5 million from five clients. This follows a previous indictment that was unsealed on May 19, 2009 charging the defendant with stealing $652,600 from 11 medical malpractice and personal injury clients. The total amount the defendant is charged with stealing in both indictments is $2.2 million.

  • MARC A. BERNSTEIN, 54, of Bernstein & Bernstein, LLP in Manhattan, was arrested [Wednesday] on charges of grand larceny and scheme to defraud. [...] The investigation leading to [the current] indictment, and the one preceding it, revealed that BERNSTEIN engaged in a scheme to steal from his victims, many of whom were affected by medical malpractice or injury suffered as a result of car accidents. In the typical case, BERNSTEIN negotiated a settlement on behalf of the victim, took control of the incoming settlement money and then stole it.

  • In one instance that has now given rise to charges, Bernstein, acting as an escrow agent, received $900,000 in real estate deposit money on a contract of sale for the purchase of a building in lower Manhattan and stole that money from the intended purchaser of the property.(1)

Go here for the entire Manhattan DA press release.

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

(1) For those who have been screwed out of money or property through the dishonest conduct of a New York attorney in the course of providing legal representation, and seek some financial reimbursement for the screwing over, go to the The Lawyers’ Fund For Client Protection Of the State of New York for more information. For other states and Canada, see:

NYC Man To Pay $95K Restitution For Home Sold Out From Under Elderly Stroke Victim; Agrees To Cough Up $40K By Sept. To "Buy Out" Of 3-9 Year Sentence

From the Office of the Queens County District Attorney:
  • Queens District Attorney Richard A. Brown [Thursday] announced that a St. Albans an has pleaded guilty to stealing the identity of a 68-year-old Jamaica, Queens, man who had been disabled as a result of a stroke and then secretly selling his house out from under him and pocketing the profits.(1)

***

  • The District Attorney identified the defendant as Shawn Corcas, 39, of [...] St. Albans. The defendant pleaded guilty [...] to one count of second-degree grand larceny and one-count of first-degree falsifying business records.(2) He was ordered to pay $95,000 in restitution to the victim, Keith Simmons. As a condition of the plea, the defendant agreed to pay $40,000 restitution by September 14, 2009, the date of his sentencing. If he adheres to that condition he is expected to be sentenced to five years’ probation. If the defendant fails to make that amount of restitution by that date he is expected to be sentenced to three to nine years in prison.(3)

***

  • District Attorney Brown said that, according to the charges, [... t]he defendants sold the home of the victim, Keith Simmons, 68, [...] in Jamaica, on March 6, 2008, without his knowledge, then deposited the proceeds of the sale – $95,801.29 – into [a] business account [...]. The victim suffered a stroke in January 2008 that left him without the ability to speak coherently. [...] An unidentified man is alleged to have posed as Keith Simmons [at the title closing] using a fraudulent driver’s license in his name as identification.

For the Queens DA press release, see ST. ALBANS MAN PLEADS GUILTY IN CONNECTION WITH FRAUDULENT SALE OF DISABLED 68-YEAR-OLD QUEENS MAN’S HOME (Faces 3 To 9 Years In Prison In Event Of Failure To Pay Part Of $95,000 Restitution To Victim By Date Of Sentence).

(1) District Attorney Brown said, “The victim was swindled out of his home by this defendant with the help of his sister. He took advantage of an elderly man suffering from disabilities to strip the equity dollars from his home without regard to the financial and emotional consequences that his actions would cause. Fortunately, the victim’s niece reported the crime. Today’s guilty plea – and the ordered restitution – provide a measure of justice for this victim.”

(2) The defendant’s sister, Patricia Corcas, 55, of Rosedale pleaded guilty earlier this year to first-degree falsifying business records and is expected to be sentenced on July 15, 2009 to five years’ probation.

(3) My guess is that another term of Corcas' probation might be for him to make monthly payments to the victim to be applied to the unpaid balance on the $95K restitution order over the five year probation period, with any subsequent default in the payments constituting a probation violation.

Obama Administration About To Turn Up The Heat On Mortgage Servicing Industry Over Sluggishness In Making Loan Modifications?

A column in The New York Times reports on an invitation recently extended(1) by the Treasury & HUD Secretaries to the top 25 mortgage loan servicers to get together in Washington on July 28 for a chat:
  • The subject of the meeting is going to be loan modifications. Specifically, the government is going to be asking — in none-too-friendly fashion — why the nation’s big servicers aren’t doing more to modify loans for homeowners who are in danger of defaulting on their mortgages. Back in the spring, after all, they all signed onto the administration’s new Making Home Affordable program, which uses a series of incentives — not the least of which is $1,000 to the servicers for every mortgage they modify — to help keep people in their homes and prevent foreclosures. And yet, five months later — and two years into the housing bust — the rising tide of foreclosures remains the single biggest threat to economic recovery.

Among the reasons cited by loan servicers for their difficulties in modifying delinquent loans are:

  • The volume of loans is overwhelming servicers,
  • The process is a one-on-one process that requires servicers to actually underwrite the loan, many of which were not properly underwritten when originated (“Servicers have to become full-blown underwriting shops,” according to one loan servicing firm CEO).

However, some suspect the continuing lack of incentive for the lenders and servicers in accomplishing loan modifications as being equally or more compelling reasons for the sluggisness surrounding the loan modification effort:

  • Many times, when a mortgage holder falls behind, he will “self-cure” (as it’s called in the trade) — and eventually get current with his mortgage. So the bank, or the servicer, often has a reason to simply wait him out,

  • The rate of re-default on modified mortgages can be as high as 50 percent, resulting not in foreclosure avoidance, but merely foreclosure postponement,

  • Many institutions also are reluctant to do large-scale mortgage modifications because the write-downs of the portion of the loans they'll have to eat will hurt their balance sheets,

  • The length of time it takes to complete a foreclosure can take a long time, enabling lenders to keep the loans on their books at their inflated values,

  • The $1,000-per-modification being dangled by the government was pretty meaningless, given the amount of time, money and effort they require, according to some in the industry.
For the story, see From Treasury to Banks, an Ultimatum on Mortgage Relief.
.
Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the story.
.
(1) From the story:
  • That letter the administration sent out on Thursday did not mince words. It demanded that the servicers begin “adding more staff than previous planned, expanding call centers beyond their current size, providing an escalation path for borrowers dissatisfied with the service they have received, bolstering training of representatives, developing extra online tools, and sending out additional mailings to borrowers who may be eligible for the program.”

Sunday, July 12, 2009

Cook County Sheriff Charges Four With Digging Up Graves & Reselling Plots, Allegedly Netting Scammers $300K

In Aslip, Illinois, The Associated Press reports:
  • Prosecutors on Thursday charged three gravediggers and a manager in an elaborate scheme in which hundreds of corpses were dug up at a historic black cemetery near Chicago and strewn in a weeded area or reburied with other bodies so that plots could be resold, authorities said.(1) As frantic relatives of the deceased descended on the Burr Oak Cemetery -- the final resting place of lynching victim Emmett Till, blues singers Willie Dixon and Dinah Washington -- investigators said it could be months before they fully understand what took place.

Reportedly, more than 300 bodies are suspected to be disturbed and dumped into at least one mass grave as part of a scam that netted the workers about $300,000, authorities said.

For more, see 4 Charged In Grave Robbing Plot.

See also Chicago Sun Times: Infant headstones among the missing at Burr Oak.

(1) Reportedly, the suspects, all of whom are black, were identified as Carolyn Towns, 49, Keith Nicks, 45, and Terrence Nicks, 39 -- all of Chicago -- and Maurice Dailey, 61, of Robbins. They have each been charged with one count of dismembering a human body, a felony. DeedContraTheft

Ohio Woman Gets Help From Non Profit Law Firm In Saving Home From Foreclosure, Filing Suit Alleging Loan Modification, "Rescue" Scam

In Hamilton, Ohio, the Middletown Journal reports:
  • A Middletown woman filed suit Thursday, July 9, in Butler County Common Pleas Court against two Cincinnati-based companies and a Kentucky attorney alleging a foreclosure rescue scam, according to the Legal Aid Society of Southwest Ohio. The lawsuit alleges the defendants were running a scam that promised to save Marsha Fuller’s home but did little or nothing in exchange for the $1,200 fee. Foreclosure Assistance USA and a related company, American Foreclosure Professionals(1) preys upon homeowners desperate to save their homes from foreclosure, according to the complaint filed in court.

***

  • The company did hire an attorney to represent Fuller, but she alleges that attorney failed to independently investigate the case and instead relied on information received from Foreclosure USA, according to a news release from the Legal Aid Society of Southwest Ohio. When the attorney discovered the Ohio Attorney General’s Office sued both companies for running a deceptive business, he withdrew from the case and left Fuller without an attorney to respond to the lender’s motion for a foreclosure judgment, according to the complaint.(2)(3)

Source: Woman files suit in foreclosure rescue scam.

(1) For more on the Ohio AG's civil suit against these operators, see Foreclosure Rescue Companies Sued for Deceptive Practices.

(2) Reportedly, the homeowner received assistance from legal aid, which negotiated a loan modification and saved her home from foreclosure.

(3) Three relatively recent rulings of the Ohio Supreme Court illustrate how attorneys who allow themselves to be "pimped out" by upfront fee loan modification firms and foreclosure rescue operators can find themselves in hot water. For more, see Attorneys Incur License Suspensions For Fee Sharing, Other Violations In Arrangement With Loan Modification, Foreclosure Rescue Operator.

Rent Skimming Landlords Pocketing Gov't Rent Subsidies While In Foreclosure; Section 8 Tenants Forced Out Onto Street With Trampled Legal Rights

In Central Florida, WFTV-TV Channel 9 reports:
  • A growing number of Central Florida's poorest residents are being forced out of their rental homes because their landlords aren't making the mortgage payments. Eyewitness News reporter Berndt Petersen found out that more and more Section 8 landlords are taking the federal rent payments while they default on the mortgages.

***

  • Stacey Kleinfeld runs Lake County's Section 8 Housing program, which helps lower income tenants pay their rent. However, a growing number of Section 8 landlords aren't paying their mortgages. "The federal government is being taken advantage of," Kleinfeld said. [...] Kleinfeld says some landlords are pocketing the federal rent money, sometimes more than $1,000 per month, while defaulting on the mortgages. Kleinfeld's office has had a tough time finding the landlords.(1)

For the story, see Landlords Accused Of Pocketing Rent Money.

(1) A federal foreclosure law signed this spring by President Barack Obama requires (with one exception not applicable here) property owners who come into land through foreclosure to honor all existing leases, and to provide a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009.

In addition, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have these special rights granted by Federal law (and even if they are aware of their rights, they may be unable to find and/or afford legal representation competent on this legal issue). For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program. RentSigmaSkimming

Wells Fargo Suing Itself In Foreclosure Actions Becoming Common??? Proliferation Of 80/20 Mortgages During Housing Boom Cited As Reason

In Hillsborough County, Florida, Dow Jones Newswires columnist Al Lewis opines:
  • You can't expect a bank that is dumb enough to sue itself to know why it is suing itself. Yet I could not resist asking Wells Fargo Bank NA why it filed a civil complaint against itself in a mortgage foreclosure case in Hillsborough County, Fla. "Due to state foreclosure laws, lenders are obligated to name and notify subordinate lien holders," said Wells Fargo spokesman Kevin Waetke.

***

  • In this particular case, Wells Fargo holds the first and second mortgages on a condominium, according to Sarasota, Fla., attorney Dan McKillop, who represents the condo owner. As holder of the first, Wells Fargo is suing all other lien holders, including the holder of the second, which is itself. "The primary reason is to clear title and ownership interest in a property to prepare it for sale," Waetke said in an email exchange. "So it really is not Wells Fargo vs. Wells Fargo."

  • Yet court documents clearly label "Wells Fargo Bank NA" as the plaintiff and "Wells Fargo Bank NA" as a defendant. Wells Fargo hired Florida Default Law Group., P.L., of Tampa, Fla., to file the lawsuit against itself. And then Wells Fargo hired another Tampa law firm -- Kass, Shuler, Solomon, Spector, Foyle & Singer P.A. -- to defend itself against its own lawsuit, according to court documents. Wells Fargo's defense lawyers even filed an answer to their client's own complaint.

***

  • Rather than suing itself -- a stunt that was never even attempted on the MTV show "Jackass" -- wouldn't it be easier for Wells Fargo to release one of the liens to itself? Or pursue some other internal accounting strategy rather than tie up the court with nonsense?(1)

***

  • Still trying to comprehend this legal lunacy, I called the Florida Bar, which put me in touch with Florida mortgage foreclosure lawyers. One of them, Tampa attorney Kristofer Fernandez, said he's seen several cases where a large bank has sued itself for foreclosure as the holder of both first and second mortgages. "Four or five years ago, you would have never seen this," Fernandez said. "Now, it's very common."(2)

For the story, see Wells Fargo Bank Sues Itself.

For the original Consumer Warning Network story raising this issue, see Have the Banks Gone Crazy? Wells Fargo Sues Itself.

(1) "This is just folks cranking out paperwork without conscious thought," said Anthony Sabino, a law professor at St. John's School of Law in New York City. Sabino added that it is possibly more confirmation of the old saw that a lawyer is one who can speak from both sides of the mouth.

(2) According to the column, in the final years of the housing boom, banks were lending to homeowners with no money down. To do this, they often made 80/20 loans, giving homeowners an 80% first mortgage and a 20% second mortgage.

Long Island Man Found Guilty Of Hijacking Homes In Foreclosure & Renting Them Out To Unwitting Tenants

In Riverhead, New York, North Country Gazette reports:
  • After a three week trial and three hours of deliberations, a Suffolk jury convicted a Medford man Friday of burglary, grand larceny and fraud charges for breaking into foreclosed houses in Patchogue, Medford, Shirley, and Holbrook and renting out the homes to unsuspecting tenants. Paul Salamone, 28, smashed lockboxes, changed locks, removed For Sale signs, and put guard dogs in the homes to keep realtors and the rightful owners of the property away while he searched for potential tenants.

***

  • District Attorney Thomas Spota said evidence turned up by DA fraud investigators found that Salamone filed a total of 13 fraudulent liens with the county clerk’s office and the New York Department of State. “These liens were based on phony debts that, even if they were valid, would not have allowed Salamone to break and enter the houses in question, much less rent them out,” DA Spota said. The district attorney said Salamone’s scheme relied on fraudulent liens, receipts and other paperwork that falsely legitimized “a con game that victimized tenants and the legal owners of the houses”.

Source: Jury Convicts Man Of Foreclosure Scam.

See also:

Notice Of Disciplinary Charges Filed By State Bar Against California Attorney In Connection With Disgruntled Loan Modification Client

In Southern California, the Orange County Register reports:
  • One state regulator has faced a hurdle in trying to stop companies from scamming people who need help avoiding foreclosure. But this week another agency stepped in to join the fight. The California State BAR on July 7 filed its first disciplinary case against an attorney related to the burgeoning, and sometimes messy, loan modification business. [... O]n Tuesday it filed a notice of disciplinary charges against Sean Rutledge, a lawyer with United Law Group in Irvine.

  • The notice accuses Rutledge of taking $1,750 from a homeowner in November 2008 but never making an effort to get his loan modified. After the client requested a refund, it took months to get his money back and the client had to first sign a document releasing Rutledge of all legal liabilities, according to the filing.

***

  • Diane Curtis, a spokeswoman for the BAR, said in disciplinary cases attorneys face a range of punishments, from nothing to disbarment.(1)

For more, including Rutledge's response, see Irvine attorney is first to face discipline over loan mods.

(1) Russell Weiner, acting chief trial counsel for the BAR, said, “Attorney misconduct in connection with the provision of loan modification services is a significant and growing problem. It is unfortunate that any attorney would fail to adhere to the highest ethical standards in providing legal services to a vulnerable client possibly facing the loss of their home.”

For the February 2, 2009 "Ethics Alert" on loan modifications from the State Bar of California Committee on Professional Responsibility and Conduct, see Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications. For the State Bar's subsequent press release, see State Bar Issues Foreclosure Ethics Alert.

Saturday, July 11, 2009

Sentencing Phase Finally Begins In Maryland Equity Stripping, Straw Buyer, Sale Leaseback Foreclosure Rescue Scam; 1st Of 10 Defendants Gets 10 Years

From the Office of the U.S. Attorney (Maryland):
  • U.S. District Judge Roger W. Titus sentenced Kurt Fordham, age 39, of Ft. Washington, Maryland, [Friday] to 10 years in prison, followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also ordered Fordham to pay restitution of $13,131,287.63, and forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland, and three vehicles.(1)

For the entire press release, see Metropolitan Money Store Conspirator Sentenced to 10 Years in Prison in over $35 Million Mortgage Fraud Scheme (Fordham Personally Responsible for Over $13.5 Million in Losses to Mortgage Lenders and Used Over $800,000 of Fraudulently Obtained Proceeds to Pay for His Wedding).

Go here for other posts on the Metropolitan Money Store sale leaseback foreclosure rescue scam.

(1) Nine other defendants have pleaded guilty to the conspiracy and are facing a maximum sentence of 30 years in prison: JoyJackson, age 41, President of Metropolitan Money Store, and Jennifer McCall, age 47, both of Ft. Washington, Maryland, a chief executive officer of Metropolitan Money Store and owner of JC and JC Investments LLC; Katisha Fordham, age 35, of Washington, D.C., a loan processor at the Metropolitan Money Store; Richard Allison, age 37, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau; Clifford McCall, age 47, of Lanham, Maryland, president of Burroughs & Smythe Financial Services, Inc., based in Lanham and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland; Carlisha Dixon, age 31, of Hyattsville, Maryland, vice president and a director of Burroughs & Smythe Financial Services, Inc.; Chandra Jones, age 31, of Lanham, Maryland, the daughter of co-defendants Jennifer and Clifford McCall; Ronald Aaron Chapman, Jr., age 34, of Washington, D.C., a loan officer at MMS; and Wilbur Ballesteros, age 33, of Lanham, Maryland, a licensed real estate agent, and closing agent on more than 60 straw buyer properties.

NYC Controller Urges All Brooklyn Residents To "Make Out A Will ASAP!" To Avoid Risk Of Getting Fleeced By Public Administrator's Office

In Brooklyn, New York, the New York Daily News reports:
  • Brooklyn's scandal-plagued court system gets a new black eye in a scathing audit that found the borough's public administrator's office riddled with "mismanagement and laziness." The city controller's office uncovered shoddy recordkeeping, suspicious real estate deals and auctions run by a shadowy company that vanished when auditors started asking questions.

  • "From the time my auditors began this audit, there seemed to be one startling revelation after another with regard to the lack of detail paid to the process of distributing and accounting for the estates of the deceased," Controller William Thompson said.

  • Surrogate judges in each borough appoint a public administrator to oversee the estates of people who die without wills. Thompson's auditors found a "culture of mismanagement and laziness" in Brooklyn's public administrator office. Things were such a mess that Thompson urged all Brooklyn residents to "make out a will as soon as possible" - avoiding the risk of being bilked by the office.

For more, including descriptions of a couple of fishy-smelling deals involving real estate owned by deceased property owners, see Audit reveals shady shenanigans in Brooklyn courts.

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For an example of what happened to one alleged victim of the Brooklyn public administrator's office, see:

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It appears that the Brooklyn office of the public administrator should be getting used to allegations of the "grave robbing" ripoffs of the dead, the near-dead, and others who are otherwise incapacitated, based on an April 8, 2006 story in the New York Daily News (see B'KLYN TOMB-RAID PROBE: EX-JUDGE FOCUS IN THEFTS FROM VICS WITH NO WILLS):

  • A WIDE-RANGING SECRET PROBE of the Brooklyn public administrator's office, its booted surrogate judge and contractors hired by the office has uncovered brazen thefts from the assets of people who died without wills, the Daily News has learned.

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

Based on the following excerpt from a June 29, 1988 story in The New York Times, shenanigans in the office of the public administrator may have been taking place for decades. See 3 in Surrogate's Office Charged With Thefts:

  • Three investigators from the Brooklyn and Bronx Public Administrators' offices were arrested yesterday and charged with falsifying public records and stealing valuables from rooms they believed had been occupied by people who died without leaving a will. The arrests ended an elaborate two-year sting investigation into the city's Public Administrators' offices, said the city Investigations Commissioner, Kevin B. Frawley, who conducted the inquiry with State Attorney General Robert Abrams and State Comptroller Edward V. Regan. An inspector for the Queens Public Administrator's office was arrested in March. The city's Public Administrators' offices handle the estates of people who have died without leaving a properly executed will.(1)

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According to a June 1, 2009 Daily News story, the Bronx public administrator's office hasn't been so hot lately, either. See Audit Court invested Bronx estate cash illegally.

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead and incapacitated.

(1) For other stories involving the Brooklyn Public Administrator's office, see:

  • New York Daily News (August 18, 2002): WRINGING OUT THE DEAD IN BROOKLYN (If there's no will, court grabs big hunk of estate),
  • New York Daily News (May 29, 2002): Spitzer to probe legal fees (Eying payouts to Brooklyn Surrogate Court counselor),
  • New York Daily News (October 28, 2005): 31G RAISE FOR COURT OFFICIALS: SOME ADMINISTRATORS UNDER FIRE,
  • New York Daily News (May 15, 2002): B'KLYN COURT PANEL CLOSED TO THE NEWS (The oversight commission for state Surrogate Court administrators marked its first meeting in five years yesterday by barring a Daily News reporter from the session),
  • New York Daily News (May 9, 2006): L.I. LAND SALE SCANDAL. COURT OKD AUCTION OF DEEDED SITE (Officials in Brooklyn Surrogate's Court improperly sold off a piece of East End real estate - never notifying the property's rightful owners, the Daily News has learned),
  • New York Daily News (December 16, 2008): AG seeking payback on estate fees (Attorney General Andrew Cuomo is seeking to reopen 170 estates of deceased people in order to reimburse heirs who were gouged by a greedy Brooklyn lawyer, the Daily News has learned. Legal papers were filed yesterday in Surrogate's Court to recover exorbitant legal fees charged by Louis Rosenthal, former counsel to the Brooklyn public administrator),
  • New York Times (February 3, 1988): Wider Inquiry Into Stealing From the Dead (New York State and city investigators, expanding their inquiry into thefts of property from the dead, seized accounting records yesterday from Public Administrators' offices in Brooklyn, Queens and the Bronx),
  • New York Law Journal (July 1, 2005): Judge Loses Seat After Showing 'Shocking Disregard' for Law (New York state's high court finds actions constituted removable misconduct). daily eagle retired judge

NYC Controller: Bronx Public Admisistrator's Office Plays Fast & Loose With Dead People's Property

In The Bronx, New York, the New York Daily News reports:
  • Bronx court officials broke the law by investing $21 million in risky securities with money from the estates of dead people, a new audit charges. City Controller William Thompson charged the public administrator's office in Bronx Surrogate's Court violated state law three years ago, when it placed 30% ofthe cash it was holding for heirs with a brokerage firm to buy exotic securities said to be "safe as cash."

  • The investments turned sour and were worth nothing for much of last year. That temporarily put taxpayers on the hook for paying the heirs their due. The risky investment was outlined in a July Daily News report. Thompson's audit confirmed The News' findings and said the investment decision reflected overall sloppy management that plagued the office.

  • Public administrators in each borough manage millions of dollars from estates of people who die without wills. Thompson found "a severe lack of management" in the Bronx. [...] Meanwhile, politically connected lawyers like Michael Lippman, then the administrator's general counsel, earned $2.1 million in fees on the auction-rate securities deals made through a broker.

For more, see Audit: Court invested Bronx estate cash illegally.

Based on the following excerpt from a June 29, 1988 story in The New York Times, shenanigans in the office of the public administrator could potentially have been taking place for decades. See 3 in Surrogate's Office Charged With Thefts:

  • Three investigators from the Brooklyn and Bronx Public Administrators' offices were arrested yesterday and charged with falsifying public records and stealing valuables from rooms they believed had been occupied by people who died without leaving a will. The arrests ended an elaborate two-year sting investigation into the city's Public Administrators' offices, said the city Investigations Commissioner, Kevin B. Frawley, who conducted the inquiry with State Attorney General Robert Abrams and State Comptroller Edward V. Regan. An inspector for the Queens Public Administrator's office was arrested in March. The city's Public Administrators' offices handle the estates of people who have died without leaving a properly executed will.

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead and incapacitated. daily eagle retired judge

The BC Public Guardian's Office: A Ruthless Organization Abusing The Rights Of The Very People It Claims To Protect?

In Vancouver, British Columbia, CBC News reports:
  • When Winifred Hall entered her friend Sheila Scholnick's home in Vancouver's west side after she was locked out, the place looked as though there had been a burglary. "The house had been ransacked," the elderly B.C. woman told CBC News, her voice shaking.

***

  • The culprits: British Columbia's Public Guardian and Trustee, a provincial agency set up to protect the financial and legal affairs of those declared mentally incapable of handling it themselves. While the public guardian is supposed to protect society's most vulnerable citizens, Hall and several others are describing it as a ruthless organization abusing the rights of the very people it claims to protect.

  • It was late 2007 when Hall came home to padlocks on the door of the Blenheim Street house where she had lived with the owner and her late friend, Sheila Scholnick, for the past two years. The public guardian allowed her briefly back into the building to retrieve her belongings, but that was all.

***

  • For about six months before being turfed from the home, Hall had Scholnick's enduring power of attorney after Scholnick was admitted to a nursing home following a fall in May 2007. With that enduring power of attorney, she had the ability to act in her friend's name even when Scholnick lost decision-making capacity, but that right was nullified by the public guardian when it assumed control of the elderly woman's finances. In fact, it was Hall who called the public guardian, concerned that Scholnick was being swindled by a man who had begun visiting Scholnick at the nursing home. She alleges the man manipulated Scholnick into withdrawing money from her debit account to give to him.

***

  • Hall hoped the agency would freeze Scholnick's account to keep it from happening again. But instead, the Public Guardian took control of Scholnick's affairs, emptying all but $50 out of her accounts and informing Hall that her power of attorney had been revoked.

For the entire story, see B.C. public guardian accused of abusing rights (Last months of elderly woman's life made miserable by agency: friends).

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead, the near dead, and those incapacitated to the point where they can't care for themselves. daily eagle retired judge

Judge Refuses To Reduce 14-Year Sentence For Disbarred Attorney Guilty Of Looting $1.7M+ In Clients' Escrow Funds; Laments Inability To Increase Term

In Central Florida, the St. Petersburg Times reports:
  • Disbarred Clearwater lawyer Richard Da Fonte, who asked a judge to reconsider his 14-year sentence for stealing more than $1.7 million from clients, has been denied his request for shortened prison time. "I think the defense is very lucky that the law is that I cannot increase the sentence,'' Pinellas-Pasco Circuit Judge Joseph A. Bulone said Friday.

For more, see Prison term of disbarred lawyer Richard Da Fonte sticks.

Go here for other posts on disbarred lawyer Richard Da Fonte.

(1) If a Florida attorney is representing you and screws you out of money or property through dishonest conduct and you seek some financial reimbursement for the screwing over, go to The Florida Bar's Clients' Security Fund for more information. For other states and Canada, see:

Court Rules Against Bank In Attempt To Make Closing Attorney Pay For Fraud Committed By Woman Borrowing $180K Secured By Home Belonging To Another

In Wellington, New Zealand, The National Business Review reports:
  • Westpac Bank has failed to persuade the Supreme Court to reverse a decision in lower courts that a solicitor should be liable for a mortgage fraud which cost it $180,000. The Supreme Court today dismissed an appeal by Westpac and ordered it to pay solicitor Alan John Clark $15,000 costs, plus "reasonable disbursements."

  • Associate Judge Anthony Christiansen, in the High Court, rejected a Westpac bid for summary judgment against Mr Clark, and said he considered Westpac's loss may have been a result of "slack lending practices". His decision was upheld by the Appeal Court, and Westpac took its case to the Supreme Court, where it also lost.

  • The bank was caught out by a "clever imposter" who impersonated Marie Antoinette Fenech, and used a false passport to obtain a $180,400 mortgage on her Remuera house. The same conwoman apparently used similar tactics at three other banks and three other lawyers.

For more, see Westpac fails in bid to recover cash from fraud. DeedContraTheft

Friday, July 10, 2009

Arizona AG Files Suit In Alleged Straw Buyer Scheme Coupled With "No Qualifying" Rent To Own Program Leaving Investors, Tenants, Banks Holding The Bag

From the Office of the Arizona Attorney General:
  • Attorney General Terry Goddard has filed a consumer fraud lawsuit against numerous Tucson real estate professionals and businesses(1) alleging a sophisticated, multi-million-dollar real estate fraud scheme. The lawsuit, filed in Pima County Superior Court, alleges that the defendants engaged in a sophisticated system of fraud that led to the filing of foreclosure notices on more than 130 homes and caused substantial harm to investors, lenders and rent-to-own homebuyers.

***

  • The complaint states that the defendants participated in a scheme that used deceptive tactics to entice under-qualified, novice investors into purchasing homes and then sold them to rent-to-own buyers. However, investigators say the scheme was designed to fail because it targeted rent-to-own homebuyers with credit problems and ignored whether they could qualify to purchase the homes.(2)

Among the Arizona AG's allegations are that the operators:

  • deceived more than 130 investors with assurances of a legitimate and "worry free" investment system requiring little or no capital investment and virtually no involvement in the transaction or in the subsequent management of the investment,

  • defrauded and deceived lenders in order to fraudulently obtain the financing for the millions of dollars of "investment" properties purchased by the consumer-investors,

  • offered the investment homes purchased by investors as legitimate rent-to-own opportunities with the offer of "no qualifying" and the promise of easy home ownership; and that the rent-to-own scheme deceptively targeted unqualified or under-qualified consumers and relied on a high turnover to obtain new "down-payments" as profit. Out of hundreds of rent-to-own transactions, apparently only one consumer out of 270 or more was able to buy a home in the fraudulent rent-to-own system. The rent-to-own purchasers were clipped for upfont money of $1,500 to $10,000 on rent-to-own homes they could not ultimately qualify for. Despite promises of "no qualifying," consumers still needed financing but could not repair their credit or qualify for financing to buy the home.(3)

For more, see Goddard Files Suit Against Massive Real Estate Fraud Scheme.

For the Arizona AG lawsuit, see State of Arizona v. AZI Rent2Own LLC., et al.

(1) The defendants named in the lawsuit are:

  • Andrew Silverstein, former Re/Max All Executives real estate agent,
  • Anthony Zandonatti, owner of AZI Rent2Own and owner of RTOSearch.com,
  • AZI Rent2Own, LLC (d.b.a. Arizona Investments),
  • RTOSearch.com,
  • VinLan Ventures, LLC (d.b.a. Re/Max All Executives),
  • Vince Volpe, designated broker of Re/Max All Executives,
  • Tucson Mortgage, LLC (d.b.a.Tucson Mortgage),
  • William "Bill" Anastapolous, owner of Tucson Mortgage,
  • WGA Enterprises, LLC,
  • Thomas Piazza, Tucson Mortgage loan officer,
  • Amaury Leon, Infinity Funding loan officer,
  • Darren Breen, Red House Lending loan officer,
  • Dave Klein, former Tucson Mortgage loan originator.

(2) Regulators in Arkansas and Missouri recently invoked state securities laws to shut down a similar operation. See:

(3) If any of the allegations are even close to being true, the operators are going to have a tough time vigorously defending themselves in this civil lawsuit without opening themselves up to the exposure of possible criminal charges from the Arizona Feds. Invoking their "right to remain silent" and having their attorneys attempt to quickly reach a settlement acceptable to the Arizona AG may be the preferred route for them to take if they hope to have any chance of keeping the local Feds from showing up at their front door. A case like this illustrates the kind of leverage a state attorney general has when bringing a civil lawsuit of this type, knowing that the allegations can very easily be "copied & pasted" into a Federal indictment (ie. mail fraud, wire fraud, conspiracy, etc.) if the local Feds so choose. rent to own lease purchase option scams yellowstone

Tenants In Foreclosed Boarding House To Fight Off Eviction; Say New Law Prohibits Landlord From Giving Them The Boot

In Hyannis, Massachusetts, the Cape Cod Times reports:
  • A group of tenants who received eviction notices last week at a local lodging house may be among the state's first to find protection under a federal foreclosure law signed this spring by President Barack Obama. As many as a dozen tenants in six rental units at Park Square Village, a 36-unit boardinghouse on Main Street in Hyannis, received eviction notices Friday threatening legal action if they did not vacate their units within seven days.

  • The notices, issued by new property owner Bass River Properties of West Dennis, offer no reason behind the evictions. But with a stated July 11 deadline, they may be in violation of the new foreclosure law, which requires property owners who come into land through foreclosure to honor all existing leases and to provide a 90-day window for any month-to-month tenants,(1) experts say.

For more, see Cape evictions test new federal law.

(1) See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. RentSigmaSkimming

Detroit Feds Indict Five In Alleged Straw Buyer Scam Involving Fraudulent Short Sales Of Luxury Condos

In Detroit, Michigan, Crain's Detroit Business reports:
  • Terrence Berg, the U.S. attorney for the Eastern District of Michigan, announced the unsealing Wednesday afternoon of a felony complaint involving the fraudulent short sale of luxury condominiums at the Harbortown development on the Detroit River.

  • The complaint alleges that Edward Tate, Craig Covert, Richard Allen, Richard Watts and Louis Lynch conspired to commit wire fraud involving unqualified straw buyers and false loan applications. It is alleged that Tate, 27, masterminded the scheme, which involved an unnamed real estate developer who defaulted on a loan from the Bank of America.

  • As part of the work-out plan with the bank, the developer was allowed to sell the condos at a drastically reduced price in what is termed a short sale. The complaint alleges that Allen, Watts and Lynch were the straw buyers, who were in prison for such crimes as murder and attempted rape at the time the loan applications claimed they were suitably employed. It is alleged that Covert was paid to recruit straw buyers. All five were arrested Wednesday. In addition to arrests, a search warrant was executed at Pure Title Agency L.L.C. in Farmington Hills.

Source: U.S. attorney charges suspects with mortgage fraud at Harbortown project.

For the U.S. Attorney press release, see Seven Charged In Two Separate Mortgage Fraud Schemes.

Builder Cops Plea In Real Estate Investment Scam Allegedly Using Fraudulently Obtained Loans To Unload New Homes On Unwitting Out-Of-Town Investors

In Central Florida, the Ocala Star Banner reports:
  • An Ocala home builder pleaded guilty to one count of organized scheme to defraud Monday for his role in a real estate scam in which dozens of members of Miami's Cuban community were duped into signing falsified loan documents toward purchasing new homes in Marion Oaks. As part of his plea, Jerry Hart of Big Sun Valley Homes Inc. will likely receive five years of probation and testify against Ocala developer Edward Albart, the last remaining among six defendants(1) whose case is still open - and the man whom statewide prosecutors believe to be at the center of the scheme.

***

  • Between April 2000 and July 2001, approximately 24 individuals were talked into buying the Ocala homes with the promise that they wouldn't have to pay any closing costs. They were told that the homes, which had not yet been built by Hart's company, would first be rented out for several months, then transferred to their ownership, after which they could rent out the property as they pleased. Several of the victims, who testified through a Spanish-speaking translator during a hearing Monday, said they thought they were making a business investment, even though they did not live in Ocala.

For more, see Ocala home builder pleads guilty to scam (Felony charges dropped in exchange for testimony against accused mastermind).

(1) Reportedly, real estate agent Maria Victoria Marrero, whose ties to Miami's Cuban community enabled her to convince scores of non-English speaking inhabitants to sign falsified contracts, entered a plea deal with prosecutors. Gregory F. Pillon and Darryl Pillon, who worked at Friendship Title Company, reportedly also entered into plea deals. Charges against a sixth defendant, Margarita A. Aranegui-Lindsey, were eventually dropped.

Loan Servicer Coughs Up $674K+ In Refunds After Allegedly Beating Baltimore Borrowers Out Of Improperly Imposed Prepayment Penalties

In Baltimore, Maryland, the Baltimore Business Journal reports:
  • Ocwen Loan Servicing, one of the U.S.’s largest servicers of residential mortgage loans, has voluntarily refunded $674,137 to more than 180 Maryland borrowers after a state examination found violations of Maryland law restricting the imposition of prepayment penalties.

For more, see Ocwen Loan Servicing refunds $674K to Md. mortgage borrowers.

Lender's Refusal To Waive $9K Prepayment Penalty May Force SW Florida Couple Into Foreclosure

In Charlotte County, Florida, WINK News reports:
  • A family is facing foreclosure, even though they're trying to pay off their mortgage. [...] A couple that has cut every expense to make their bills and keep their home may [lose] it even though they're paying on time. Rick and Janice Brooks say they made a bargain to sell to avoid foreclosing on their home. [...] They thought they found their way out -- a buyer who could satisfy all of their mortgage debt. "$221,892 is what everyone will get once this is all over," Brooks says.

  • But, that doesn't account for an additional $9,000 they now owe the bank -- a penalty for paying their mortgage before it's due. Something neither of them realized they were contractually obligated to do. "It's not like we're asking them to forgive any part of our loan," Janice Brooks says. "We're asking them to waive an unjust fee that was given at a more economically sound time. It's not stable now." They've already borrowed money from family. Now, everything in their Charlotte County home is for sale since it looks like their lender won't budge on the fees.

***

  • Rick and Janice have just one week to try to get their lender to waive the penalty fee. If not, they say they'll have to cancel the contract on their home, which could result in a lawsuit.

For the story, see Penalized for paying mortgage on time?

Foreclosure Rescue, Loan Modification Scams Gain Increased Attention From FBI

The Washington Post reports:
  • Nationwide, the number of mortgage fraud suspicious-activity reports referred to law enforcement increased 36 percent over 2007, [according to the just released FBI's 2008 Mortgage Fraud Report]. And the government's economic stimulus programs could fuel further increases, according to the FBI [...].

The FBI report points out that fraud involving foreclosure rescue and loan-modification schemes are "emerging as recent vulnerabilities."

  • Perpetrators solicit homeowners with mail flyers offering to help them stop the foreclosure process on their homes. Homeowners are falsely told that their mortgages would be renegotiated, their monthly payments would be reduced, and delinquent loan amounts would be renegotiated. ... Perpetrators require an up-front fee ranging from $1,500 to $5,000 from homeowners. ... Perpetrators often request that the victim homeowners stop payments and communication with their lender. When victims receive delinquency and foreclosure notices, the perpetrators convince them that the loan was renegotiated, but that the lender needs a good faith payment to secure the new account.

Source: Mortgage Fraud Rising.

Go here for the FBI's 2008 Mortgage Fraud Report.

Thursday, July 09, 2009

NYC Announces Program To Turn Unsold, Unfinished Condo Complexes Into Affordable Rental Housing

In New York City, The Wall Street Journal reports:
  • New York City announced Wednesday a pilot program to turn empty or stalled condominium developments into affordable housing, an idea consumer advocates have been pushing for years. The program, which aims to convert as many as 400 units, is designed to provide grants to real-estate developers and lenders to subsidize the completion of developments if the owners agree to turn the building into rental units for middle-income families, which in New York means an income of up to $126,720 for a family of four.(1)

***

  • Other cities will be watching New York's effort closely as they deal with rising numbers of developments that are heading into foreclosure. Housing advocates say that several cities are considering similar programs using funds from a federal grant program designed to restore abandoned homes and complexes.

For more, see New York City Seeks to Turn Condos Into Affordable Housing.

(1) The program is designed to speed along the completion of developments such as 23 Caton Place, a 107-unit luxury condo complex in Brooklyn that stands unfinished after the developer filed for bankruptcy and the lender moved to foreclose on the project.

Manhattan DA Bags 25 Suspects In $100M+ "Cash Back" Metro NYC Mortgage Scam; 13 Charged w/ Multiple Felonies, Dozen Others Waive Indictment, Cop Pleas

From the Office of the Manhattan District Attorney:
  • Manhattan District Attorney Robert M. Morgenthau announced [Wednesday] the indictment of 13 individuals and a mortgage origination company(1) for perpetrating over $100 million in mortgage fraud over a four-year period in the New York City metropolitan area. In addition, 12 individuals have already waived indictment and pleaded guilty to felonies relating to their participation in the mortgage fraud scheme.(2)

  • The indictment charges 13 individuals and the mortgage company, AFG FINANCIAL GROUP, INC., with enterprise corruption, grand larceny, scheme to defraud and conspiracy involving 19 fraudulent mortgage transactions. The defendants include the principals and a number of employees of the mortgage company, as well as bank employees, appraisers, and three attorneys. Two other attorneys are among the defendants who already pleaded guilty.

***

  • The 10-month investigation leading to today’s indictment revealed that AFG Financial Group (AFG), along with a network of co-conspirators and accomplices, located distressed residential real estate properties in New York City and surrounding counties. They then engaged in a fraudulent scheme to steal millions of dollars from lending banks in Manhattan and elsewhere using sham sales of those properties. The conspirators caused the banks to front millions of dollars to finance purchases of the properties. They then walked away with most of the cash, leaving behind over-valued properties and worthless mortgage papers.

***

  • At the sham real estate closings, AFG brought in lawyers to play the roles of legal counsel for buyers, sellers and banks. Instead of looking after their clients’ interests, these lawyers made sure that the closings went smoothly, that no one asked any questions, and that the principals of AFG received the lion’s share of the funds obtained from the defrauded banks. Defendants MARC ZIROGIANNIS and FRED LAX generally represented the banks. In so doing, they betrayed their clients and caused their client’s funds to be stolen. ZIROGIANNIS and LAX also ran title companies that were employed as part of the scheme.

Go here for the entire Manhattan DA press release.

For the indictment, see People v. AFG Financial Group, Inc., et al.

(1) Indicted Defendants:

  • AFG FINANCIAL GROUP, INC., AARON HAND, Oyster Bay Cove, New York, EUGENE CULBREATH, Valley Stream, New York, ERIC SHIELDS, Media, Pennsylvania, MATTHEW MCDERMOTT, Merrick, New York, MARC ZIROGIANNIS, Levittown, New York, KENNETH LAW, Pelham, New York, KATHLEEN SCANLON, Baldwin, New York, JEFFREY PHELAN, Smithtown, New York, JERRY STRKLJA, Astoria, New York, MARILYN MATEO, Bronx, New York, DARLITA BOSTIC, ALLYSON HINDS, Middle Island, New York, RAJMOHAN AUTAR, Queens Village, New York.

(2) Convicted Defendants:

  • MARIA ALBERTINA, EDMOND BEROOKHIM, CHRISTOPHER CARR, PATRICK KUHL, FRED LAX, STEPHEN MARTINI, FRANK MIALE, GIOVANNI MUNIVE, JENNIFER SCHIFF, WAYNE SISMAN, SHARON THOMPSON, SALVATORE TRAPANI.

Maine Regulators Issue Cease & Desist Orders To Fifteen Out-Of-State Loan Modification Firms Accused Of Pocketing Upfront Fees, Failing To Deliver

From the Maine Bureau of Consumer Credit Protection:
  • State regulators [Tuesday] issued orders directing 15 separate foreclosure rescue companies to cease doing business with Maine consumers.(1) The companies, all located out of state, enticed consumers with radio, television and internet advertisements promising to help the consumers avoid foreclosure but then took the consumers’ advance fees and did nothing to assist the consumers.

  • Many debt management companies comply with the law and become licensed and bonded for the protection of consumers,” said Will Lund, Superintendent of Consumer Credit Protection. “These 15 companies, on the other hand, made false promises and then took money from desperate folks who could least afford to lose those funds.” The companies took a collective $36,000 in advance fees from 30 Maine households, but have not saved a single home in the State from foreclosure nor reduced a single debt for a Mainer, said Lund. Further, he said, the companies have ignored all communications from state regulators. “It’s heartbreaking to talk to consumers who have sent their last $495, $995 or $1,495 to a company that does nothing to help them,” said David Stolt, Chief Field Investigator for the Bureau.

For the entire press release, see State Regulators Order Foreclosure Rescue Companies to Cease Doing Business in Maine.

(1) The list of firms nailed by Maine regulators, which contains some of the "usual suspects," follows (with links to the corresponding cease & desist orders):

Schwarzenegger Squeezed By Lenders, Servicers To Demand Rule Prohibiting California Attorneys From Accepting Retainers For Loan Mod Negotiations???

A press release issued by three California consumer advocates(1) announces:
  • The lending industry and loan servicing lobbyists have successfully pressured Governor Schwarzenegger to demand that language be included in SB 94 that would prohibit attorneys from accepting retainers for loan modification negotiations with their loan servicers.(2) The language, if adopted, will prevent homeowners from seeking legal representation to save their home from foreclosure.

For the rest of the press release, see Lending Industry Attacks California Homeowner's Rights to Legal Representation (California Governor Arnold Schwarzenegger told the legislature over the weekend that he would not sign AB 94, a law that would protect homeowners from mortgage modification companies, unless they included a clause that would prohibit attorneys from accepting retainers for performing legal services to prevent foreclosures).

(1) Martin Andelman, of mandelmanmatters on ml-implode.com; Alan Jablonski, a Long Beach, CA based consumer rights attorney, J. Arthur Roberts, a bankruptcy attorney located in Newport Beach, CA.

(2) Reportedly, the language proposed is as follows, according to Martin Andelman:

  • "5) Prohibits persons including attorneys, until January 1, 2013, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other compensation paid by the borrower to do any of the following:
    a) Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she would perform."

Cleveland Housing Judge Continues Hammering Wells Fargo In Its Attempts To Dump Dilapidated Foreclosed Home Inventory

In Cleveland, Ohio, a recent op-ed column in the The Plain Dealer states:
  • Cleveland Housing Court Judge Ray Pianka continues to impress with his proactive approach to fighting the foreclosure crisis. His decision last week to compel Wells Fargo Bank to post $1 million bond if it wants to rehab and sell distressed properties it owns in the city shows the kind of creative tactic required to protect the interests of Cleveland and its residents. Along with posting the bond -- which would cover the cost of demolition should Wells Fargo fail to meet its obligations -- the bank must list all of the properties it owns in the city, and board up and secure any homes that are vacant.

  • Pianka's order supersedes an earlier one requiring that the San Francisco-based bank rehab or demolish all substandard holdings and prove that properties listed for less than $40,000 are up to code. Wells Fargo appealed that decision.

For the column, see Requiring Wells Fargo to post bond on distressed properties makes sense for Cleveland.

In a related story, see The Washington Independent: Banks and the Blight They Leave Behind: It’s Not Just Cleveland Anymore. BetaVacantForeclosure

More On Lien Stripping Of Wholly Unsecured 2nd Mortgages Encumbering Underwater Homes In Chapter 13 Bankruptcy Proceedings

White Plains, New York bankruptcy attorney Jeffrey M. Binder writes the following in the Poughkeepsie Journal on lien stripping of "wholly unsecured" second mortgages on underwater homes(1) in Chapter 13 proceedings in Federal bankruptcy court:
  • During the lien stripping process you are required to file a Chapter 13 Bankruptcy and it can only be filed if your property value is less than the balance owed on your first mortgage which has to be less than one million dollars. You must arrange and pay for an appraisal of your property.

  • For example, if your home is worth $500,000 and your first mortgage payoff balance is $525,000, you have no equity. If you have a second mortgage loan balance of $50,000, this second loan is a wholly unsecured mortgage and you can strip the lien in a Chapter 13 case. The lien now becomes an unsecured debt just like a credit card debt which can be wiped out after a period of time. If, however, the home is worth $530,000, you cannot strip off the second lien because it is merely undersecured, not wholly unsecured.

  • Chapter 13 lien stripping is ideal for the large pool of borrowers who took out 80/20 loans or HELOCs where the 2nd lien is completely underwater. If such a lien is stripped, it can be treated as an unsecured debt in the Chapter 13 payment plan and paid a fraction over 5 years. (The actual percentage paid depends on several factors, including the value of the homeowner's assets and disposable income.) Homeowners don't have to fall behind on payments to be eligible for lien stripping.

For more, see Learn the Secrets of Lien Stripping ... and Save Your House!

See also: Cramdowns & Lien Stripping Of Home Mortgages Under Existing Bankruptcy Law.

(1) Underwater home = property that is worth less than the amount owed on the existing mortgage(s) encumbering the real estate; also referred to as property with "negative equity."

Southern California Loan Modification Scam Used Complicated Money Trail With $1M+ Flowing Into Mexico, Says State AG

In Southern California, the Los Angeles Times reports on an alleged loan modification scam which, according to authorities, is among the most sophisticated operating in California, that stymied investigators with a thicket of bank accounts, 1-800 numbers and wire transfers to Mexico until they finally busted the operation in October.
  • The California attorney general's office had been fielding complaints for months from homeowners who had fallen victim to what one prosecutor termed a "brilliant scheme." Representatives of this operation allegedly induced homeowners to send them as many as three consecutive mortgage payments. More than $1 million flowed through a series of bank accounts, much of it eventually crossing the border to banks in Mexico, according to the attorney general's office.

  • In some cases, people lost their homes because they did nothing to head off foreclosure, believing they had made a deal with their bank. Despite there being hundreds of victims, investigators found the trail confusing. The operation did not register its phone lines in its own name. Instead, investigators said, its 800-numbers ran through Internet phone companies. It was the same with the bank accounts.

  • [Investigators] began working backward from the accounts where checks were deposited and postal boxes where victims sent their money. They determined that much of the money seemed to go to Juan Jose Perez and Isuara Hernandez, a married couple with three children who had recently lived in San Bernardino County. On Oct. 27, the attorney general's office filed a 39-count complaint charging Hernandez, Perez and several associates with grand theft, money-laundering and conspiracy.(1) Five of Hernandez and Perez's associates pleaded guilty;(2) but Hernandez and Perez, who authorities say are the ringleaders, have eluded capture. Investigators suspect they went to Mexico.

For the story, see In California, mortgage scammers find easy pickings (As foreclosures climb, so does fraud by schemers preying on desperate homeowners hoping to modify their loans. State investigators have 750 open cases -- up from just 10 a year ago).

(1) See California AG press release: Attorney General Brown Breaks Up Foreclosure Scam Ring.

(2) See California AG press release: Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison.