“We Want To Send People To Jail!” Says Prosecutor Referring To Loan Modification Scams; Cites "Lawyer Renting" As Attempt By Some To Avoid State Law

In Southern California, the Orange County Register reports:

• The Orange County District Attorney has expanded efforts to combat foreclosure rescue scams and other real estate fraud cases, as the worst housing downturn in decades results in thousands of potential victims. Elizabeth Henderson, assistant DA, said 30% of the cases handled by the office’s major fraud unit are tied to real estate, up from an average 10% in past years. The DA has two prosecutors, two investigators and a paralegal focused just on real estate fraud, she said.

***

• “We want to send people to jail,” she said. The issue is not just that someone might lose $2,000 or more [for a purported loan modification], but that his or her house proceeds to foreclosure while waiting for help that never comes, Henderson said. Defrauding just one person could translate to a maximum penalty of three years in prison for grand theft, she said. Subsequent victims could add eight months to a sentence per person. Loan mod scammers could be committing other crimes, such as fraud, practicing without a license, and breaking rules tied to call centers.

• Henderson said former subprime salespeople are now selling loan modifications — or promises to help a homeowner avoid foreclosure by getting a bank to lower his monthly payments. Such companies sometimes have no intention of helping anyone, she said.

***

• To avoid having to get a real estate license to do loan mods, some companies are “renting” lawyers, she said. Attorneys can negotiate loan mods without a real estate license or a pre-approval from the Department of Real Estate. But the lawyer may just be a front who never touches a loan file, she said.(1)

For more, see District Attorney steps up real-estate fraud investigations.

(1) For those attorneys who have yet to "receive the memo", see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications, an advisory of the Committee on Professional Responsibility and Conduct of the State Bar of California setting forth prohibited activities by attorneys when associating with loan modification firms.

California Woman Faces Grand Theft, Forgery-Related Charges For Allegedly Impersonating Another In Buying, Financing Home With $917K Loan

From the Office of the San Bernardino County, California District Attorney:

• On July 15, 2009, Investigators with the San Bernardino County District Attorney's Real Estate Fraud Unit arrested Anita Mendoza, 44, of Chino Hills, for eight felony counts including grand theft, forgery, and filing forged documents with the County Recorder’s Office. In 2006, Mendoza allegedly forged the victim’s signature on a Grant Deed and Deeds of Trust. Two loans, totaling $917,000, were taken out in the victim's name for the purchase of a Chino Hills residence. The victim had no knowledge of these loans until months later when she was contacted by the lending institution for lack of payment. Mendoza was booked into the West Valley Detention Center and bail was set at $1,147,000.

For the San Bernardino County DA press release, see Chino Hills Woman Arrested for Real Estate Fraud.

Last Minute Closing Delays Hit Foreclosed Home Buyers As Some Lenders Drag Their Feet When Recording Legal Title To Repossessed Collateral

In Central Ohio, The Columbus Dispatch reports:

• Stacee Maurer thought she'd found her perfect first home: a three-bedroom Cape Cod off High Street north of Graceland Shopping Center. On May 22, she signed a contract to pay $93,000 for the foreclosed property -- almost $30,000 less than it had sold for in 2006. Then she landed where a growing number of central Ohio homebuyers are landing: in foreclosure limbo.

• Shortly before she was scheduled to close on the home, Maurer, 24, learned the deal was delayed because the deed transferring the property to the bank hadn't been recorded. In late June, she moved into her parents' home, where she has been waiting -- and is now hoping to close today.

• Real-estate agents, title companies and others who deal with foreclosed properties say Maurer's situation is increasingly common. Eighteen months or more can pass between the time a foreclosure notice is filed and a home is resold, they say. But now, delays are occurring even after the bank repossesses the property, holding up or crushing deals that would put homes in new buyers' hands.(1)

For more, see Growing number of buyers stuck in limbo.

(1) One local Realtor reportedly observed: "What used to take two weeks is taking 12 to 15 weeks," said Bob Pritchard, a Coldwell Banker King Thompson agent who deals in foreclosed properties in central Ohio. "We have been getting extensions on the close-by dates left and right," he said. "You get buyers who are financing and get a rate locked in, they can't close for 30 days and then it may be at a higher rate. It's costing the buyers more to buy the property, and some are just walking away."

Vacationing Campers Threatened With Utilities Shutoffs, Face The Boot As New Hampshire Campsite Falls Into Foreclosure

In Webster, New Hampshire, The Associated Press reports:

• Renters at a Webster, N.H., campground told by the owner that electrical power would be shut off have gotten a temporary court order to keep electricity flowing to their homes. A notice posted last week by Cold Brook Campground owner Tina Shindlewig said electricity would be cut off Tuesday and that residents wouldn’t be able to stay because there would be no water or sewage service. It also said there would be a foreclosure sale on Aug. 18. Campers already had paid between $2,300 and $3,000 each for their campsites for the season. Some campers went to court Monday and won a request for a temporary order to keep utilities going and maintain access to their campsites. A hearing on the order has been scheduled for Aug. 18.

Source: NH campground residents fight eviction notice.

See also, Concord Monitor: Camp owner: plenty of notice (She went to every campsite, she says).

Nassau County DA "Stings" Unlicensed Long Island Contractors; Some Accused Of Pocketing Upfront Homeowner Deposits & Failing To Deliver

In Nassau County, New York, the New York Post reports:

• Nearly four dozen unlicensed Long Island contractors were more skilled at pulling in thousands of dollars for jobs -- than actually doing the work, officials said today. Nassau DA Kathleen Rice announced the results of a 5-week investigation, including the running of a "Sting House" to lure a dozen unlicensed contractors in and capture them on video. Rice said 42 poeple were charged in the larger investigation, including four charged with felonies for never starting -- let alone finishing -- work homeowners had already paid for. [...] One of the arrested contractors, John Napolitano, 47, of Hicksville, was charged with defrauding four homeowners out of a total of $113,000 for ripping apart their homes and never completing renovations.(1)

Source: 42 CHARGED IN LI CONTRACTING SCAM.

For the Nassau County DA press release, see 42 Unlicensed Contractors Nabbed in Countywide Enforcement Sweep (Four charged with felonies after investigation discovers theft and shoddy craftsmanship; 12 busted in undercover house sting).

(1) According to the Nasau County DA, one homeowner had her entire kitchen demolished when Napolitano stopped work and didn’t refund her any money.

Canadian Cops Nab Fugitive California Couple Accused Of Running Loan Mod Scam; Now Await Extradition In Toronto After Fleeing San Jose Police

In Toronto, Canada, the San Jose Mercury News reports:

• A San Jose couple suspected of operating a fraudulent real estate home loan modification business have been arrested in Toronto following a six-month investigation. San Jose police say Amir Rashidifar, 25, and Mary Delvecchio, 28, opened their business, Legal Support Services, in September and offered to modify real estate loans for homeowners facing default and foreclosure. Police say the pair ran an elaborate operation and charged victims $3,000 to $4,000 to modify a loan, but the loans were not modified. So far, San Jose police have identified 129 victims.

• The investigation started in late January after employees of Legal Support Services and 15 victims told police that Rashidifar and Delvecchio had been operating a fraudulent home loan business. Rashidifar and Delvecchio convinced victims that Legal Support Services was working in tandem with knowledgeable and experienced real estate attorneys in the loan modification business, according to officer Jermaine Thomas, a police spokesman. A police investigation into Legal Support Services, [...] revealed that Rashidifar and Delvecchio were not working with licensed attorneys, Thomas said.

• In February, Rashidifar and Delvecchio fled the South Bay after learning of the police investigation, according to Thomas. Police determined that Rashidifar and Delvecchio went to Canada on May 26 and opened a new, fraudulent real estate loan modification business using false identities. San Jose police coordinated its investigation with the Royal Canadian Mounted Police (RCMP), the RCMP Immigration Task Force and Canadian Border Services, who located and arrested Rashidifar and Delvecchio on July 10 at their residence in Toronto. Rashidifar and Delvecchio are awaiting extradition proceedings in Canada and will be returned to the United States to face criminal charges in Santa Clara County.

Source: San Jose couple suspected of real estate loan fraud arrested in Canada.

See also KPIX-TV Channel 5: SJ: Couple Suspected Of Running Fraudulent Loan Modification Company Arrested in Canada.

Long Island Attorney Swipes $73K+ Of Client's Money Given As Deposit In Real Estate Transaction, Says Nassau DA

From the Office of the Nassau County, New York District Attorney:

• Nassau County District Attorney Kathleen Rice announced [...] the arrest of a Plainview attorney who has been charged with stealing more than $73,000 from a couple he was representing in the sale of a piece of property. [...] The Plainview attorney, Stuart Gorman, 55, has been charged with Grand Larceny in the Second Degree. [...] Rice said that on or around October 1, 2008, Gorman was hired by a Brooklyn couple to represent them in the sale of a piece of property in Dyker Heights. Gorman was given a check by the buyer for $73,500 as a down payment on the purchase price. Instead of giving the check to the sellers of the property, Gorman deposited the check into his escrow account and then used the money for personal and business expenses.(1)

For the Nassau County DA press release, see DA Charges Two Men in Separate Cases of Lawyer Misconduct (Theft of real estate proceeds leads to felony charges for Plainview lawyer; Merrick man falsely claims to be attorney, costs ‘client’ $200K).

(1) If the charges prove true that attorney Gorman screwed his clients out of their money, The Lawyers’ Fund For Client Protection Of the State of New York may find itself on the hook for the loss, provided the clients who got screwed apply for reimbursement from the fund within two years after they discover their loss.

For those clients screwed out of their money and property by reason of the dishonest conduct of their attorneys in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map. EscrowRipOffKappa

Homeowner Invokes TILA, State Lending Law In Attempt To Void Home Improvement Loan Gone Bad

In St. Clair County, Illinois, The St. Clair Record reports:

• A woman with learning disabilities claims she should not have to repay a loan for more than $45,000 she took out more than two and a half years ago because she was not fully explained the terms of the loan. In a complaint she filed on July 10 in St. Clair County Circuit Court, Anita Oglesby also claims the neighbors who promised to make necessary repairs to her home with the loan money failed to complete the work.

The story recites, in detail, the allegations contained in the lawsuit. Assuming the allegations are true, this story illustrates how the seemingly benign process of getting a simple loan to finance some needed home improvements can go haywire when bad actors get involved, ultimately leaving the homeowner behind the eight-ball (saddled with a high-interest, adjustable rate loan and a shoddy, incomplete home improvement job, while leaving the home in jeopardy of foreclosure). In this suit, Ms. Oglesby is reportedly asserting violations of the Federal Truth In Lending Act, and the Illinois High Risk Home Loan Act in her attempt to void the transaction.(1)

The non-profit law firm Land of Lincoln Legal Assistance Foundation in East St. Louis will be representing her.

For the story, see Woman sues to rescind ARM home loan.

(1) In the 10-count suit, Oglesby is reportedly asking the court to rescind her loan transaction; to order the defendants to terminate any security interest in her home and to declare any security interests void; to award her statutory damages of twice the financial charge, not to exceed $4,000, for their failure to rescind the loan; to order the right to retain proceeds vested in Oglesby; to enjoin the defendants from instituting foreclosure proceedings on Oglesby's property; and to enjoin the defendant who arranged the allegedly toxic financing from arranging any more loans in Illinois without an Illinois mortgage broker license. In addition, Oglesby is seeking actual damages and other relief the court deems just. UndoMortgageLoans TILAdelta

Aussie Legal Non-Profit Helps Vulnerable Senior Beat Bank In Foreclosure; Son's Manipulation Resulted In Improper Mortgaging Of Family Home For $200K

In Sydney, New South Wales, The Sydney Morning Herald reports:

• AN INTELLECTUALLY disabled pensioner has won a court battle to stave off foreclosure in a case said to have broad implications for consumers who offer their home as security for a business loan. The lawsuit concerns Wollongong man Patrick Ford, whose son - identified as "Scott" - manipulated him to put a $200,000 mortgage on the family home to buy a cleaning business. When the business collapsed and the son absconded, the lender pursued Mr Ford, who cannot read or write. The NSW Court of Appeal agreed this month that Mr Ford did not have to repay the loan, other than about $25,000.

• "[The decision] reinforces that lenders can't get around consumer protection laws by the use of business-purpose declarations and that lenders have obligations to inquire into the circumstances of people to whom they're lending," said Alan Kirkland, the chief executive of Legal Aid NSW, which represented Mr Ford.

***

• Katherine Lane, the principal solicitor at the Consumer Credit Legal Centre, said the various institutions were "recklessly indifferent" to Mr Ford's ability to repay the loan. "They're all interested in their own commission."

• Mr Ford's sister, Ann Watkinson, said the ordeal had been exhausting. "We had sheriffs coming all the time," she said, recounting one visit at 4am. "We'd get a couple of hours sleep, then be awake, crying." [...] Despite the victory, she said the family would have to sell Mr Ford's home to pay expenses. The family hopes there will be enough money to move Mr Ford, 64, to a retirement village.

For the story, see Pensioner fends off lenders in court win.

For the appellate court ruling, which reversed an unfavorable lower court decision, see Patrick John Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186 (8 July 2009).

For more on real estate conveyances that are void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

(1) According to the story, an unusual aspect of the case is the number of financial institutions - a mortgage broker, a loan wholesaler, a mortgage aggregator, an insurer and a trustee - that did not investigate whether the illiterate pensioner understood what he was signing or if he was capable of running a business. FinancialAbuseOfElderlyAlpha DeedContraTheft

Builder Pocketed Customer Deposits, Failed To Build Homes Or Provide Refunds While Stiffing Subs, Says Maryland AG In Civil Suit

From the Office of the Maryland Attorney General:

• Attorney General Douglas F. Gansler announced [...] that the Home Builder Registration Unit of the Consumer Protection Division has filed charges against Altieri Enterprises, Inc. t/a Altieri Homes, Athlone, LLC of Columbia, Altieri Homes at Castle in the Woods, LLC, R & L Livezey, LLC, and Milltown, LLC of Columbia for failing to comply with Maryland’s Home Builder Registration Act, New Home Deposits Act, Consumer Protection Act, and Custom Home Protection Act.

• The Home Builder Registration Unit suspended the registration of Athlone, LLC and charged each company and their principals, Greig Altieri, Daren Altieri, Frank Altieri, Todd Altieri, and Wendy Altieri with accepting payments from consumers in Howard and Harford counties and then failing to construct the homes, pay subcontractors, or refund payments made by consumers. The companies also failed to disclose to the Home Builder Registration Unit lawsuits filed by consumers and subcontractors concerning the companies’ building activities.

For the Maryland AG press release, see Attorney General Gansler Files Charges Against Altieri Homes and Associated Companies (Homebuilder Allegedly Accepted Deposits and Failed to Build Homes).

Sarasota Title Agent Dodges Hot Water; Remains In Good Standing Despite Admitting To Screwing Around With Escrow Funds Resulting In Six-Figure Losses

In Central Florida, the Sarasota Herald Tribune reports:

• As the closing agent on the [real estate] deal, it was Sarasota title agent Lisa Rotolo's job to make sure the [existing mortgage] loan got repaid. Instead, in 2004 Rotolo partially paid off the old loan and handed her clients $100,000, according to a 2008 foreclosure case filed in Sarasota County's circuit court. During testimony in the case, Rotolo conceded that she directed money to her clients and then filed documents incorrectly stating the old mortgage had been repaid. Bank officials did not realize what she had done until early 2008, when her clients, Jonathan Glucker and his wife, Heather Kabobel, stopped making payments and another lender foreclosed on the property, claiming it had first rights to sell the house and recoup its losses.

***

• Last year, Rotolo was named in a suit filed by David Oriente in Sarasota County's circuit court. Oriente alleged that Rotolo allowed [real estate agent Craig] Adams [see The king of the Sarasota flip] to take $400,000 out of an escrow fund that was supposed to be used for buying properties. Adams used the money to pay off an old debt and kept $50,000, the lawsuit states. [...] Circuit Court Judge Bob McDonald awarded Oriente's company more than $471,000 in damages in December 2008 after Adams failed to respond to the lawsuit.

***

• Today, Rotolo's company, Diamond Title, has closed. But Rotolo still has her Florida license to operate as a title agent. No one, including the bank officials suing her, has filed a complaint against her, according to a spokeswoman for the Department of Revenue, the state agency that oversees Rotolo's profession. Rotolo remains a committee chair for the Sarasota Association of Realtors, a trade group that promotes itself as a watchdog over local real estate agents.

For the story, see Title agent closed 100 Adams deals. EscrowRipOffKappa

Florida AG Continues Loan Modification Scam Sweep w/ Civil Suits Against Group Accused Of Making Automated Robo-Calls Using President "O's" Voice

From the Office of the Florida Attorney General:

• Attorney General Bill McCollum [Tuesday] announced that his office has filed a lawsuit against four related South Florida companies that allegedly charge up-front fees for loan modification services to homeowners facing foreclosure. FHA All Day.Com and owner Jason Vitulano, as well as three other affiliated companies,(1) purportedly collect up to $1 million in up-front fees on a monthly basis. The companies were allegedly soliciting hundreds of consumers nationwide via the internet and though telemarketing robo-calls which illegally used President Obama’s voice.
  
  An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, indicated that Vitulano and his companies were charging up-front fees as high as $5,000 for foreclosure-related loan modification services. Vitulano also allegedly claimed to have an attorney on staff available to assist homeowners, but investigators believe no attorneys are currently working on any of the loan modification files. Consumers who complained to the Attorney General’s Office also reported that the companies have not performed the promised services and that they were unable to contact the companies or get refunds. The Attorney General’s Office has received over 300 complaints about Vitulano and his related companies.

For the entire Florida AG press release, see McCollum Files Lawsuit Against 4 South Florida Companies for Foreclosure Rescue Fraud (Company director allegedly ran boiler-room telemarketing operation using the President’s voice to target victims).

For the Florda AG's lawsuit, see State of Florida v. FHA All Day.com Inc., et al.

Go here to file a complaint against FHA ALL Day.com and its affiliates.

(1) The three affiliated companies are: Safety Financial Services, Inc., Housing Assistance Law Center, and Housing Assistance Now.

Loan Modification Firm Targeted By Florida AG Coughs Up $500K In Partial Restitution Payments; Says It's Now Tapped Out

From the Office of the Florida Attorney General:

• To date, [now-defunct loan modification firm] Lincoln Lending [LLC] has distributed approximately $500,000 in restitution payments. They are currently claiming that funds available for restitution have been exhausted. The OAG is in the process of investigating whether additional funds exist for a continuation of the restitution process. In the event that additional funds are discovered and secured, we will seek a court order requiring the continuation of these payments. Consumers who have filed complaints with the Office of the Attorney General concerning Lincoln Lending, and consumers who have filed affidavits concerning their transactions with Lincoln Lending are not required to take any additional actions at this time.

For more, see Status update concerning Lincoln Lending.

"Loan Modification Industry Is Teeming With Confidence Men & Charlatans!" Says California AG In Announcing Suits Against Five Operators

From the Office of the California Attorney General:

• As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference [last week] announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief. Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

• "The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure," Brown said. "Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn't provide an ounce of relief." Brown filed five lawsuits(1) as part of "Operation Loan Lies," a nationwide sweep of sham loan modification consultants, [...].

For the California AG press release, see Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief.

(1) The California AG's Office filed five civil lawsuits against the following operators:

• Home Relief Services LLC (other defendants: THE DIENER LAW FIRM, GOLDEN STATE FUNDING, INC., PAYMENT RELIEF SERVICES, INC., CHRISTOPHER L. DIENER, KATHLEEN MARRERO-DAVIS, TERENCE GREEN SR., STEFANO MARRERO, MAYA BURRELL MARRERO, RONALD C. SPECTER, KENNETH BUHLER. AG Brown seeks $10 million in civil penalties, full restitution for victims, and a permanent injunction),

• RMR Group Loss Mitigation LLC (other defendants: LIVING WATER LENDING, INC., SHIPPEY & ASSOCIATES, P.C., MICHAEL SCOTT ARMENDARIZ, RUBEN CURIEL, RICARDO HAAG, KARLA C. SHIPPEY, ARTHUR S. ALDRIDGE. AG Brown sekks $7.5 million in civil penalties, full restitution for victims, and a permanent injunction),

• United First Inc. (other defendants: MW ROTH, PLC; PAUL NOE, MITCHELL ROTH),

• U.S. Foreclosure Relief Corp. (other defendants: GEORGE ESCALANTE, CESAR LOPEZ, trading and doing business as H.E. Service Company, and ADRIAN POMERY, ESQ., trading and doing business as Pomery & Associates),

• Statewide Financial Group Inc. (doing business as US HOMEOWNERS ASSISTANCE, US HOMEOWNERS PRESERVATION CENTER, INC., HAKIMULLAH SARPAS, ZULMAI NAZARZAI, SHARON FASELA, RASHA YEHIA MELEK).

Court Voids Delinquent Mortgage & Subsequent Forced Sale Of Property Earlier Conveyed By Forged Deed; Lender Called A "Mortgagee/Buyer In Bad Faith"

In Quezon City, The Philippines, the Manila Buletin reported that a Court of Appeals affirmed a lower court ruling voiding a foreclosure sale where the property owner who lost the title to a 5-unit building by forced sale originally acquired her interest by forging the true owner's name on a deed, and who then subsequently used the property as collateral for a loan from the private lender who ultimately initiated the foreclosure action.

The court found that the foreclosing mortgagee, being an associate of the alleged forger, had some reason to suspect the defect in the title of the alleged forger, and accordingly, declared the lender a “mortgagee and buyer in bad faith,” which made both the mortgage and the subsequent foreclosure sale void.(1)

The court also ruled that, because the property that was mortgaged by the alleged forger was acquired by her through the execution of a forged deed, the deed was null and void, thereby making the subsequent mortgage and foreclosure sale also null and void.(2)(3)

For the story, see Man loses right to property.

(1) In denying the foreclosing lender's appeal, the Seventh (7th) Division of the Philippine Court of Appeals said:

• “where a purchaser [Editor's Note: or, in this case, the mortgage lender] neglects to make the necessary inquiries and closes his eyes to facts which should put a reasonable man on his guard as to the possibility of the existence of a defect on his vendor’s title and relying on the belief that there was no defect in the title of the vendor, purchases [or, in this case, loans money secured by] the property without making any further investigation, he cannot claim that he is a purchaser in good faith for value.”

The same rule is generally applied to real estate purchasers in the U.S. (as well as in other jurisdictions that draw on the English common law on this issue - see The Bona Fide Purchaser for Value of a Legal Estate Without Notice) who invoke the doctrine of bona fide purchaser when attempting to establish that their later-acquired, recorded interest in property is superior to someone else's earlier acquired, unrecorded interest in the same property. Go here for more on the bona fide purchaser doctrine .

(2) The Court of Appeals also reportedly said that since the deed purportedly conveying title was nullified by the lower court for being a forgery:

• “it cannot convey any right that could ripen into a valid title. Necessarily, the subsequent real estate mortgage between Suiza and Santiago was also null and void because the former is not the owner thereof and Santiago cannot be considered a mortgagee in good faith.” “In real estate mortgage contract, it is essential that the mortgagor must be the absolute owner of the property to be mortgaged; otherwise, the mortgage is void,” the Court added.

Since there is no valid real estate mortgage, there could also be no valid foreclosure or valid auction sale of the property.

(3) The bona fide purchaser doctrine typically has no application in the context of a forged deed. A purchaser who takes title to property that was earlier conveyed by a forged deed acquires no title, even if the purchaser could have otherwise established him/herself as a bona fide purchaser. However, assuming it can apply, it seems to me that either of the two legal theories invoked by the court, standing alone, would have been enough to support the voiding of the lender's mortgage and the subsequent foreclosure sale. By applying both legal theories to the same set of facts, it appears that the appeals court took a "belt & suspenders approach" to upholding the lower court decision, arguably making it more difficult for the end result to be reversed should the ruling be appealed further.

Texas Mortgage Fraud Flipper Gets 25 Years; Prosecutor Credits "Citizen Sleuth" For Key Effort In Busting Scam Ring

In McKinney, Texas, The Dallas Morning News reports:

• Jocelyn Sapp smelled a rat. She noticed a vacant house with overgrown weeds in her McKinney neighborhood, then another and another. Sapp started sleuthing, checking county records on the deteriorating homes. The results startled her. One house, listed for sale at $437,500, had sold for $643,500. Another that had been on the market for $319,000 sold for $490,000. "I thought, could they possibly have sold for that much?" Sapp said.

• Eventually, 11 houses on Hills Creek Drive changed hands and then went into foreclosure. That's one-tenth of the residences on the hilly, mile-long street with landscaped lawns and tall trees. [...] Sapp, a retired systems engineer, studied the transactions and saw the same names pop up again and again. Some addresses were in Florida. She didn't understand it all, but she knew something was wrong. She compiled the property records into a binder and handed it to prosecutors. That was three years ago.

• The resulting investigation culminated last week in a 25-year prison sentence for John Barry, who was behind the mortgage fraud that led to all those sales and foreclosures, which, prosecutors said, caused millions of dollars in damage to the neighborhood. [...] Prosecutors applauded Sapp for sniffing out the scam and alerting authorities. "If not for Jocelyn Sapp's vigilance, this never would have happened," Assistant District Attorney Ben Smith said after the conviction. [...] Sapp's work, Smith said, "gave us the names of lenders and title companies we could subpoena documents from." He said, "She was instrumental in our investigation."

For the story, see Jocelyn Sapp's work helped put mortgage scammer behind bars.

See also, Man gets 25 years for mortgage fraud scheme in McKinney's Stonebridge Ranch community.

Two Foreclosure Rescue Operators Get Five Years Each In Scam That Stripped Homeowners Of Their Equity & Left Lenders, Straw Buyers Holding The Bag

In New York City, Courthouse News Service reports:

• Two foreclosure profiteers in Brooklyn and the Bronx were sentenced to 5 years in federal prison for conspiracy, wire and bank fraud. Andrea Moore and Michael Irving, who ran the scam before the nationwide economic crisis hit, also must pay $1.5 million in restitution. From September 2004 to April 2005 they told homeowners facing foreclosure that they could "refinance" their debt through new and larger mortgages. They said the distressed homeowners should sell their homes to third-party straw buyers, who would pay off the old debt let the victims return in a year. But it didn't work out that way, a jury said.

• "In some instances, Moore and Irving forged the homeowners' signatures on various documents that transferred the homes to straw buyers without the homeowners' knowledge," prosecutors said. They also submitted false financial information on the straw buyers' loan applications. The scheme netted $10 million in loans and mortgages. But "in some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately," prosecutors said. "In nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby cashing out on the properties."

• In the end, the distressed homeowners faced eviction; the straw buyers owed hundreds of thousands of dollars to the new owners and the lenders lost money on loan defaults.

Source: Foreclosure Swindlers Get 5 Years.

For the U.S. Attorney (Manhattan) press release, see Two Members Of Foreclosure Rescue Scheme Each Sentenced To 5 Years In Prison For Engaging In Multimillion-Dollar Mortgage Fraud.

Central Florida Media Probe Identifies At Least 37 Real Estate "Flipping Groups" In Sarasota/Manatee Area Involved In $450M+ In Mortgage Defaults

In Central Florida, an investigative report by the Sarasota Herald Tribune states that it examined more than 3,000 property flips that occurred since 2000 in Sarasota and Manatee counties, interviewed over 100 investors and real estate professionals, and reviewed thousands of pages of deeds, mortgages, foreclosure filings and other public records. Among its findings were:

• At least 37 groups of property flippers operated in Sarasota and Manatee counties. The groups bought hundreds of properties worth more than $350 million and sold them to associates for inflated prices. The flippers identified by the Herald-Tribune -- and the people who ultimately bought their properties -- have so far defaulted on more than $450 million in mortgage loans. Their defaults account for $1 in every $13 lost to foreclosure in Sarasota and Manatee counties from 2005 through 2008.

***

• Most flipping circles were organized by a leader who either recruited investors on the promise of easy money or conspired with friends and associates to sell properties at inflated prices. Some of these investors did not realize they were buying properties at inflated prices; others willingly lied about sales prices to obtain mortgages that more than covered the actual purchase.

For more of its findings, see Flippers' toll: On Gulf Coast, half a billion in defaults.

To read the online profiles compiled by the Sarasota Herald Tribune of more than 100 of the local characters involved in suspicious property deals -- some of them organizers, some of them occasional participants and some of them innocent victims, see Investigation: 'Flipping' In Florida.

In related Herald Tribune stories, see:

• Bradenton area 'club' bought 158 properties,
• 'Flip that house' fraud cost billions,
• The king of the Sarasota flip,
• Title agent closed 100 Adams deals.

"Equity Is No Longer The Game" - Loan Modification Scams Proliferate As Home-Snatching Equity Stripping Scams Subside

A recent report by the National Consumer Law Center makes this observation on the current state of foreclosure rescue scams:

• Homeowners facing foreclosure have always been vulnerable to scammers, con-artists, and thieves. Whether desperate for options or frustrated by uncooperative mortgage servicers, many homeowners are attracted to slick advertisements with bold promises to rescue them from foreclosure. When property values were appreciating rapidly, foreclosure rescue scams primarily focused on obtaining title to the home and robbing homeowners of their equity.(1)

• Today with property prices depreciating and many homes already "underwater," equity is no longer the game. Instead, rescuers have become high-volume, "loan modification specialists." The pitch by this new breed of predators is that, for a fee, which can reach several thousand dollars, they will negotiate a loan modification for a financially distressed borrower. The hitch is that the "work" performed, if any, leads nowhere, with the homeowner out money and time and closer than ever to foreclosure.

• These loan modification companies are flourishing because mortgage loan servicers cannot or will not provide borrowers with timely and consistent information regarding their requests for loan modifications. Frustrated by the lack of responsiveness on the part of the servicers, borrowers across the country are giving loan modification companies their precious dollars with disastrous consequences.

For the NCLC report, see Desperate Homeowners: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help (July 2009).

(1) See Dreams Foreclosed: The Rampant Theft of Americans’ Homes Through Equity Stripping Foreclosure ‘Rescue’ Scams (June 2005).

Michigan AG Files Criminal Charges Against Loan Modification Firms As Part Of "Operation Loan Lies"

Unlike most of the other participants in the the joint Federal/state law enforcement effort to eliminate loan modification scams who have brought civil lawsuits or initiated administrative proceedings (and issued cease and desist orders), the Office of the Michigan Attorney General has taken a different route by bringing criminal charges against the alleged scammers.(1) According to the Michigan AG's office:

• Attorney General Mike Cox [...] announced that his office has filed 18 charges against four companies and one individual for committing foreclosure rescue fraud.(2) Cox also issued warnings to 17 companies regarding complaints from residents about their practices.(3) Michigan law prohibits "foreclosure rescue" companies, which provide foreclosure advice, from making misleading or false statements, or charging service fees before any service is completed.

***

• The charges resulted from the Attorney General's office conducting undercover operations based on complaints from homeowners and include one count of unauthorized use of the Great Seal of the State of Michigan and 17 counts of violating Michigan's Credit Services Act (CSA). The CSA prohibits charging fees before completing services when seeking to negotiate a loan on behalf of a homeowner. The Credit Services Act carries a maximum penalty of 90 days in jail and/or $1,000 fine, and allows the Attorney General's office to seek restitution for affected consumers.

For the Michigan AG press release, see Cox Charges Five for Foreclosure Rescue Fraud.

Go here for a summary of the Federal and state actions by those participating agencies in "Operation Loan Lies."

(1) The U.S. Attorney's Office in Los Angeles is the only other government agency bringing criminal charges in the "Operation Loan Lies" effort (U.S. v. Gilfert Jackson, Case No. 2:09-cr-00538-SVW (C.D. Cal.); U.S. v. Jeff McGrue, Gerald Guidry; Case No. 2:08-cr-01318-ODW (C.D. Cal.)).

(2) Those charged include:

• Save My Home USA of Madison Heights (Charged victims between $595 and $2,000 before completion of services and advised consumers not to communicate with their mortgage company),
• Help4homeowners of Birmingham (Falsely claimed a 97% success rate, charged before completion of services, and its employee admitted they had no loan training),
• Payment Doctors of Livonia (Made false claims and charged before completion of services),
• Michigan Economic Reinstatement Program (MERP) of Livonia and owner Mark Alan Aloe of Farmington Hills (Charged victims between $360 and $3,000 before completion of services, made false claims, and used business cards with state seal but did not work for the State of Michigan. Aloe faces 90 days in jail and/or a $1,000 fine).

(3) Attorney General Cox has requested more information from the following 17 companies about their business activities:

• AFS Loan Modification Corp, Redondo Beach, CA; Apply 2 Save, Inc./Apply2Save, Coeur D'Alene, ID; Elect Group LLC, Deerfield Beach, FL; Equity Recovery Services, Towsen, MD; Federal Home Savers, Comniack, NY; Financial Solution Center, Corona, CA; Fresh Start Home Modification, Woodbury Heights, NJ; Fresh Start Program/Fresh Start Mortgage Assistance, Fresh Start Mortgage Solutions, Mortgage Assistance Solutions, Clearwater, FL; Hope Now Modifications, LLC, Cherry Hill Twp., NJ; IMC Financial, Clearwater, FL; Kirkland Young LLC, Miami Beach, FL; National Home Loan Assistance Program, San Diego, CA; New Hope Loan Modification, Bellmawr, NJ;. Oceanview Investments, Oceanview Investment Services Corp., Fort Lauderdale, FL; Peoples First Financial, San Diego, CA; Pope & Associates Mortgage, Ontario, CA; Savemtg.com, Galthersburg, MD.

Ex-Subprime Toxic Mortgage Peddlers Now Coming To The Rescue As Loan Modification Specialists???

The New York Times recently published a story reporting on how many of the operators of so-called loan modification firms are the same people who, only a couple of years ago, peddled the risky subprime mortgages that has gotten the now-financially distressed homowners in trouble in the first place. One of the loan modification operators featured in the article is Federal Loan Modification Law Center (aka FedMod).

• FedMod is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications. Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers,(1) more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company.(2)

For more, see Subprime Brokers Resurface as Dubious Loan Fixers.

(1) Two of the individuals who spoke to The Times for the story commented:

• “We just changed the script and changed the product we were selling,” said Jack Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center. The new script: You got a raw deal, and “Now, we’re able to help you out because we understand your lender.”

• “Our job was to get the money in and then we’re done,” said Paul Pejman, a former sales agent who worked out of FedMod’s two-story headquarters in Irvine, Calif. He recounted his experience, he said, because “I really feel bad.” “I had people calling me crying, and we were telling them, ‘You can pay me or you can lose your house,’ ” Mr. Pejman said. “People were giving me every dime they had, opening credit cards. But I never saw one client come out of it with a successful loan modification.” [...] “They basically told us, ‘Do whatever you need to do,’ ” he said. “ ‘It’s a sales floor. You’re here to sell.’ People would quote success rates and just pull them out of thin air. People would say 60 percent, 80 percent, 90 percent. To the average Joe in Kansas, that sounded great. But the reality is that 50 percent were immediately declined by the lender.” What shocked Mr. Pejman was how readily customers handed over their credit card numbers. Sales agents tapped into a deep vein of anxiety.

(2) Go here for links to links to the FTC press release and the relevant court documents filed against Federal Loan Modification Law Center.

Habitat-New York City's "Loan Rangers" Public Awareness Campaign Targets Financial Scams With Free Educational Workshops

Habitat For Humanity - New York City announces:

• Habitat for Humanity – New York City invites congregations, schools and community groups to host workshops for your members about credit repair and predatory lending and foreclosure scams. Habitat-NYC will provide free workshop trainers and materials. Community groups just provide weekend or weeknight space for 30 of your members or more. For more information, or to schedule a workshop, contact Paul Benecki at pbenecki@habitatnyc.org or at 212-991-4000 x 338.

These workshops are part of Habitat-NYC’s Loan Rangers Public Awareness Campaign, which educates low-income New Yorkers about deceptive lending practices and better alternatives. Topics include:

• Strategies to avoid (and escape) excessive credit card debt,
• Foreclosure rescue scams (see When Fraud Comes Knocking: Foreclosure Rescue Scams in New York City),
• Risky income tax refund loans,
• Predatory practices at some rent-to-own businesses,
• Easy steps to improve credit scores.

Habitat-NYC Loan Rangers provide:

• A short presentation on how a range of scams and fringe financial products work,
• Fact sheets and flyers that explain the dangers of scams and high-cost loans,
• Details on free and low-cost alternatives available to all New Yorkers.

For more materials and information, visit: http://www.habitatnyc.org/advocate.

Source: Sponsor a Free Workshop and Help Your Community Members Save Thousands of Hard-earned Dollars!

See also, the Staten Island Advance: Staten Island D.A. partners with Habitat For Humanity to fight foreclosure fraud:

• Partnering with Habitat For Humanity in New York City, [Staen Island District Attorney Daniel M.] Donovan's office announced [...] plans to educate the community on mortgage fraud, foreclosure rescue scams, credit card debt relief programs, tax refund anticipation loans and the "rent to own" industry [as part of the Loan Rangers Public Awareness Campaign].

NY Senator To Fannie: Stop Online Horse Trading In Delinquent Bronx Building Mortgages As Deteriorating Conditions May Force 500+ Families Onto Street

In The Bronx, New York, Crain's New York Business reports:

• Sen. Charles Schumer will join Bronx tenants Monday to demand that Fannie Mae abandon its effort to sell distressed mortgages on a portfolio of 19 Bronx buildings via an online auction and instead work with the city to find a buyer who will fix up the rundown properties and keep them affordable. The government-sponsored entity bought the $29 million mortgage portfolio from Deutsche Bank Berkshire Mortgage in 2007 and has proposed auctioning it off through a website called DebtX—an eBay-like site that deals exclusively in the sale of distressed mortgages.

• Many of the buildings, located in the Crotona section of the Bronx, are in states of disrepair, including 10 which have made the city’s list of worst-maintained buildings. The buildings are home to 520 families. “Allowing these buildings to be horse-traded on the open market is a sure fire way to guarantee that another speculator gobbles them up, and either continues to let the buildings rot or kicks the current tenants out on to the street” said Mr. Schumer. “We simply cannot allow that to happen.”

For more, see Fannie Mae urged to abandon Bronx mortgage auction (Sen. Schumer, housing advocates demand that Fannie Mae halt an online auction of mortgages on 19 foreclosed Bronx buildings).

(1) According to the story, a portfolio of 19 apartment buildings in 2007 was purchased for $36 million, $29 million of which was debt issued by Deutsche Bank and immediately sold to Fannie Mae. Fannie discovered the loans didn't meet their underwriting standards after they were delivered by Deutsche Bank. The buildings were subsequently abandoned by the owners when they could no longer afford to pay the overvalued mortgage. The loans went into foreclosure in March. Overleveraged NYC Buildings

First Wave In Nationwide Loan Modification Scam Eradication Effort Results In 189 Legal Actions In Coordinated Federal, State Sweep

Last week, the coordinated nationwide sweep, called "Operation Loan Lies," began with prosecutors filed 189 legal actions against loan modification firms accused of cheating homeowners desperate to adjust the terms of their currently unaffordable home loans. This sweep involves 25 government agencies, including the Federal Trade Commission, the U.S. attorney's office for the Central District of California, and 23 other agencies in 19 states. Go here for a summary of the Federal and state actions.

The following press releases were issued by some of those agencies involved in this nationwide scam eradication effort:

1) U.S. Federal Trade Commission:

• Federal and State Agencies Target Mortgage Foreclosure Rescue and Loan Modification Scams (FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners).

2) Arizona Attorney General's Office:

• Terry Goddard Announces National Crackdown on Mortgage Fraud.

3) California Department of Justice:

• Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief.

3) Colorado Attorney General's Office:

• Attorney General Announces Actions Against Seven Loan-Modification Companies As Part Of Multistate Sweep.

4) Idaho Attorney General's Office:

• Wasden Recovers Money for Loan Modification Victims.

5) Illinois Attorney General's Office:

• Madigan Continues Pursuit Of Mortgage Rescue Fraud (Illinois Attorney General Files Four New Lawsuits, Joins Federal Trade Commission, U.S. Department of Justice in Move to Protect At-Risk Homeowners Nationwide).

6) Iowa Department of Justice:

• A.G. Shuts down “Foreclosure Rescue” Company (Miller: “Beware of foreclosure rescue scams. If you need help, call the free Iowa Mortgage Help Hotline at 877-622-4866”).

7) Kansas Attorney General's Office:

• Attorney General Six Joins ‘Operation Loan Lies' to Stop Fraud and Help Distressed Homeowners (Federal and State Agencies Target Foreclosure Rescue and Mortgage Modification Scams).

8) Maine Department of Professional and Financial Regulation, Bureau of Consumer Protection:

• State Regulators Order Foreclosure Rescue Companies to Cease Doing Business in Maine.

9) Maryland Department of Labor, Licensing, and Regulation, Office of the Commissioner of Financial Regulation:

• Maryland moves against loan consultants (from The Maryland Daily Record).

10) Michigan Attorney General's Office:

• Cox Charges Five for Foreclosure Rescue Fraud (Warns 17 other companies on consumer practices).

11) Missouri Attorney General's Office:

• Attorney General Koster joins FTC, California in suit against foreclosure consultant (obtains restraining orders against two fraudulent businesses).

12) New Jersey Attorney General's Office:

• Attorney General Announces Mortgage Fraud Lawsuits - 10 Defendants Charged in Two Separate Loan Modification Cases.

13) North Carolina Department of Justice:

• AG Cooper targets California schemes that prey on NC homeowners (NC cases part of national Operation Loan Lies).

14) Ohio Attorney General's Office:

• Cordray Sues California Foreclosure Rescue Operation for Fraud (Joins National Crackdown on Mortgage-Related Scams and Urges Federal Regulation ),
• Cordray Issues Statewide Foreclosure Rescue Scam Sweep (Seeks to shut down operations throughout Ohio).

15) Washington Attorney General's Office:

• State, federal sweep slams loan-mod scams (Firms operating in Washington state in government crosshairs for taking advantage of homeowners facing foreclosure).

Foreclosing Lenders To Face Lawsuits For Failing To Deliver On Promises Of Loan Modification Help, Says Ohio AG

In Columbus, Ohio, The Columbus Dispatch reports:

• Mortgage lenders who promise to work with clients facing foreclosure and fail to follow up could find themselves in court. Ohio Attorney General Richard Cordray said [Friday] that he will soon sue mortgage lenders who violate consumer-protection laws. "Many lenders are pledging to work with customers and failing to do so," Cordray said. "They're not returning calls, paperwork gets lost, payments misappropriated." He would not identify targets but said his office is looking at the 10 or 12 largest Ohio lenders.

• "The goal of the lawsuits is compliance with their promises," Cordray said. "We want there to be accessible personnel, a reasonable process, clear steps. What we want is a change in behavior." The news came as he and other state officials, judges and representatives of nonprofit groups met in Columbus as part of a Save Our Homes Summit designed to focus on addressing the foreclosure crisis in the state.

For more, see Cordray warns mortgage lenders (Many customers not getting aid as promised, AG says).

Minnesota Real Estate Agent Gets Three Years In Alleged Foreclosure Redemption, Equity-Snatching Scam

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:

• Michael R. Wayman Jr. was a top-tier real estate agent for ReMax before he discovered the lucrative business of redeeming properties after foreclosure to snatch their equity. [...] But somewhere Wayman's quest for profits veered into illegality, and the 35-year-old Ramsey man was sentenced Friday to just over three years in prison by Hennepin County District Judge Warren Sagstuen on 19 counts of racketeering, perjury and filing false documents. Wayman and his company also were fined $55,000 and face restitution payments to be determined later.

• Prosecutor Tom Fabel sought a sentence of more than seven years, saying Wayman's use of false documents to redeem properties out of foreclosure constituted "massive, systemic abuse" that undermined the integrity of the public land records system.(1) But Sagstuen said Wayman's violations weren't as serious as some racketeering conduct.

For more, see Real estate agent gets prison for racketeering (The Ramsey man was convicted in May of illegalities that netted him thousands in a foreclosure redemption scheme).

(1) According to the story, under Minnesota state law, when a foreclosure occurs, a homeowner typically has six months following the sheriff's sale to redeem the property by paying off the debt owed to the foreclosing creditor. Some do so by selling the house or refinancing, but many owners lose their homes. A house may have several mortgages or other liens filed against it. The priority of those claims is determined by when they were filed with the county. If the homeowner doesn't redeem the property, a junior lienholder must do so to ensure that its debt is paid. That is done by paying off the loan, interest and certain expenses of more senior creditors. The reward is that by gaining the house, the junior creditor not only gets the money it is owed but also keeps any remaining equity in the property. People who specialize in buying up junior liens or creating new ones with the intent of gaining the equity are termed "bottom feeders" by prosecutor Tom Fabel, but what they do is legal under state law that is intended to protect junior lienholders. They can also claim certain expenses related to the property. Wayman ran afoul of the law when he was found to have falsely claimed to have paid taxes on a house he wanted to redeem or claimed expenses that were inflated or were not allowed.

Florida AG Tags Another Outfit With Lawsuit Alleging The Targeting Of Homeowners In Foreclosure With Illegal Loan Modifications

The Office of the Florida Attorney General (which apparently is not a part of the recently-announced, joint Federal/State "Operation Loan Lies" loan modification scam eradication effort) announced last week:

• Attorney General Bill McCollum [Friday] announced his office has filed a lawsuit against a Central Florida company that allegedly charges homeowners facing foreclosure up-front fees for loan modification services.(1) According to the lawsuit filed today in Orange County, Victor Lopez & Associates and its owners are in violation of Florida’s Foreclosure Rescue Fraud Prevention Act. The company’s office is located in Orlando.

For the Florida AG press release, see Central Florida Loan Modification Company Targeting Hispanics Sued for Mortgage Fraud.

For the lawsuit, see State of Florida v. Victor Lopez & Associates, et al.

Go here to file a complaint against this outfit with the Florida Attorney General's office.(2)

Go here for a list loan modification firms being sued by the Florida AG's office and instructions on filing complaints against them.

(1) An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, indicated that Victor Lopez & Associates was charging up-front fees as high as $2,295 to homeowners seeking loan modification services. Additionally, consumer complaints allege that the company has not performed the promised services and that consumers are unable to contact the company or get refunds.According to the lawsuit, Victor Lopez & Associates targeted the Hispanic community by advertising on Spanish radio and television and conducting the majority of sales transactions in Spanish, but only provided consumers with contracts in English.

(2) The Florida AG's Office is currently suing a number of other outfits, alleging illegal loan modification activity. Click on a company to see a brief description of their questionable business practices, a link to the lawsuit against the firm, and a link to an affidavit and instructions for consumers to fill-out if they have been a victim.

• Three Angels Community Action Network
• FMA Servicing, Inc.
• Lincoln Lending, LLC
• Wineberg, Lopez & Rodriguez
• Mortgage Crisis Solutions Association, LLC
• National Foreclosure Counseling Services Corp.
• Keep Your Property, Inc.

Maryland Home Builder Cops Plea To "Playing Fast & Loose" With Buyers' Escrow Deposits

From the Office of the Maryland Attorney General:

• Attorney General Douglas F. Gansler announced [...] that Walter Osborne Ely, Jr., 46, and his sister and business partner Kimberly Zahrey, 44, plead guilty before Baltimore County Circuit Court Judge Vicki Ballou-Watts to 6 counts of failure to hold new home sums in escrow. The offense is a felony punishable by 15 years imprisonment and/or a $10,000 fine.

For the Maryland AG press release, see Owners of Baltimore County Home Construction Company Plead Guilty to Failing to Properly Handle New Home Deposits.

(1) According to the press release, beginning in 2002, as owners of JAE Developers based in Owings Mills, Ely and Zahrey advertised new home construction at three different sites in Baltimore County. They met with prospective buyers, entered into contracts to sell lots and build homes, and took deposits ranging from $1,000 to $5,000 with the exception of a few home buyers who deposited between $8,000 and $50,000. After each deposit was received, it was deposited in either the JAE payroll account or business account, and spent within a week to cover both personal expenses and business expenses that were not associated with the individual client’s home. Some deposits were simply withdrawn as cash. During the time period covered by the indictment, Ely and Zahrey accepted deposits totaling $226,768 from potential home buyers and did not place them into segregated escrow accounts. StiffingContractorsTheta

Massachusetts Closing Attorney Cops Plea To Illegally Pocketing $1M+ In Real Estate Escrow Funds Earmarked For Satisfying Existing Mortgage Loans

From the Office of the U.S. Attorney (Massachusetts):

• [R]oxbury attorney [ANDREA GOODE-JAMES, age 44,] was convicted [...] in federal court of mortgage fraud for pocketing more than $1 million in proceeds of loan closing transactions.(1) At [the] plea hearing, the prosecutor told the Court that had the case proceeded to trial the Government’s evidence would have proven that GOODE-JAMES performed closings on three different properties between 2005 and 2007, and pocketed more than $1 million in lender proceeds, rather than using those funds to pay off pre-existing mortgages as directed by the lenders. To conceal her fraud, GOODE-JAMES made some monthly payments on the pre-existing mortgage loans. She also issued title insurance commitments to the new lenders, which bound the title insurance company for title defects and misled lenders to believe that she had in fact cleared title by paying off prior loans and obtaining discharges of those mortgages.(2)

For the U.S. Attorney press release, see Roxbury Lawyer Pleads Guilty To Mortgage Fraud.

(1) Goode-James pled guilty to one count of mail fraud and three counts of wire fraud, all arising out of her scheme to defraud various mortgage lenders, a title insurance company and innocent homeowners.

(2) For those who have been screwed out of money or property through the dishonest conduct of a Massachusetts attorney in the course of providing legal representation or acting as a fiduciary, and seek some financial reimbursement for the screwing over, go to the Massachusetts Clients' Security Board Of The Supreme Judicial Court for more information. For other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

California Man Faces 147 Felony Counts In Alleged Real Estate Investment/Ponzi Scheme; Parents, Friends Head List Of Victims Claiming Losses Of $5M+

In Santa Barbara, California, The Tribune reports:

• Hard money lender Mike L. Wilson, a Santa Maria mortgage business owner with many San Luis Obispo County clients and real estate investments, was arrested at his Santa Maria home [...] on 147 felony counts. Wilson, 55, was in Santa Barbara County Jail without bail on charges including grant theft, forgery, elder abuse by embezzlement, and fraud in selling securities.(1)

***

• Wilson’s arrest follows at least seven lawsuits filed against the hard money lender in Santa Barbara Superior Court since the end of March. Those suits mirror the criminal complaint, alleging losses of more than $5 million that were supposed to go toward commercial and residential investments in Santa Barbara, San Luis Obispo and Monterey Counties.

• Most of those allegations include an alleged Ponzi scheme, in which Wilson is accused of taking money from investors, promising them that it would be invested in secured real estate, but instead using the money to pay off other investors as a way to keep the scheme going. Wilson also allegedly forged real estate documents, failed to record assignments of deeds of trusts, promised investors they were more secured with real estate deeds than they actually were, failed to tell investors their loans were in default or had been paid off, and preyed on seniors for financial gain, according to the suits.

For more, see Santa Maria hard money lender Mike Wilson arrested on fraud charges (He's set to be arraigned on 147 felony counts of embezzlement, elder abuse and other offenses).

Go here for the Santa Barbara DA press release.

(1) Among the 45 or so alleged victims named in the criminal complaint are Wilson’s parents, and friends who say they had known and trusted Wilson for many years.

Now-Disbarred Georgia Attorney Cops Plea To Phony Real Estate Investment Scam Ponzi Scheme; Accused Of Stealing $1.9M From Clients, Friends

In Atlanta, Georgia, the Fulton County Daily Report reports:

• For nearly four years, McDonough, Ga., attorney Steven H. Ballard capitalized on his credibility as a real estate and business law attorney to bilk friends and clients of more than $2 million in what federal prosecutors say was a Ponzi scheme(1) in which Ballard siphoned more than $200,000 for his personal use. [... Last week], Ballard pleaded guilty to one count of wire fraud in a criminal information (a federal charge filed either prior to or in lieu of a grand jury indictment) that accused him of stealing $1,910,827 from 24 clients and investors in Georgia, Florida and Tennessee between September 2002 and May 2006.

***

• [Federal prosecutor Gale] McKenzie said Ballard's scheme relied primarily on his ability to lure friends and clients into what he billed as real estate investment opportunities. Ballard collected thousands of dollars from investors that he claimed to have used to buy properties and then resell at a significant profit. [...] But Ballard rarely, if ever, made the promised real estate purchases, McKenzie said. Instead, he forged sales contracts, deeds, settlement statements and sellers' signatures to trick his clients into believing the promised real estate transactions had taken place. He then appropriated those funds for his personal benefit or to repay clients and investors he had already bilked and who were threatening legal action, McKenzie said.

• [Ballard's lawyer, T. Michael] Martin said that no banks were defrauded by Ballard's phony transactions because he secured money primarily from longtime clients and friends, many of whom dipped into their retirement funds with the promise of quick, lucrative returns.(2)

For the story, see Ga. Lawyer Pleads Guilty to Ponzi Scheme Worth $2 Million (Steven Ballard's victims were friends and clients).

For the U.S. Attorney (Atlanta) press release, see Former Georgia Attorney Pleads Guilty To Multi-Million Dollar Real Estate Ponzi Scheme (Over a Dozen Victims Defrauded in Georgia, Florida & Tennessee).

(1) Named for famed swindler Charles Ponzi, a Ponzi scheme collects money from legitimate investors but pays returns on those investments only by luring in additional investors and using their contributions to pay the scheme's original participants. A Ponzi scheme eventually collapses because it requires more and more investors and an increasing flow of cash to pay returns required to sustain the fraud.

(2) For those who have been screwed out of money or property through the dishonest conduct of a Georgia attorney in the course of providing legal representation, and seek some financial reimbursement for the screwing over, go to the State Bar of Georgia Clients' Security Fund for more information. For other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Dad's Death Spurs Bitter Sibling Battle Involving Allegations Of Forged Mortgage, Title Transfers Of 80-Year Old Mom's Real Estate

In Perth, Western Australia, The West Australian reports:

• Perth property developer Joe Scaffidi, [...] has been accused in the Supreme Court of forging his mother’s signature to secure loans and the sale of a commercial property worth a total of $3 million. An affidavit, tendered into the court as part of a bitter family fight between Mr Scaffidi and his brother Gino, also alleges $110,000 from the disputed transactions was deposited into a company owned jointly by Joe and Lisa Scaffidi.

***

• The fraud claims relate to four mortgage and land transfer documents signed between December 2005 and April 2006. The paperwork contains signatures of Joe Scaffidi and what purports to be the signature of his 80-year-old mother Maria.

***

• Being fought on several fronts in the courts, the Scaffidi family feud has been escalating since the death of the brothers’ father Antonio in 2004. [...] One of the disputed transactions, a $480,000 loan taken against a [...] rental house owned by [the mother], has placed the property in jeopardy because the loan defaulted. Another transaction before the court was the $700,000 sale of an East Perth office.

For more, see Scaffidi family feud sparks forgery claim. DeedContraTheft

Ex-Aussie Footballer Accused Of Using Forged Deed To Score $320K In Loan Funds Secured By Property Owned By Another

In Manly, New South Wales, The Daily Telegraph reports:

• FORMER Sydney Swans player Daryn Cresswell allegedly obtained $320,000 in fraudulent loan funds using a forged title deed, a court heard [last week]. The alleged scam went unnoticed for years until the rightful owner of the Coolum Beach property on the title deed applied for an investment loan and was told the astonishing news his home was already mortgaged. Cresswell, 38, is expected to be extradited to Queensland today after he was refused bail in Manly Local Court [last week]. He is charged with two counts of creating false loan documents, two counts of using those documents to obtain funds and a further two counts of obtaining funds by deception.

***

• Numerous loan repayments were made from [a Cresswell-owned business] to the [...] home loan account during 2006, but the loan was referred to the banks collections department early in 2007. [...] Police allege funds were also transferred to the home loan account by [others] in January and February 2007. The alleged scam came to the attention of police in April 2007 when the rightful owner of the property applied for an investment loan and was told his home was already mortgaged.

For more, see Court: Ex-Swan frauded home loans. DeedContraTheft

Florida Judge Refuses To Halt Foreclosure Sale Despite Lender's Willingness To Work Out Loan, Says Homeowner

In Volusia County, Florida, WFTV-TV Channel 9 reports:

• President Obama helped create the federal loan modification program so families could stay in their houses. However, a Volusia County father, who took advantage of the plan, lost his house to a bank Thursday morning. The man said he blames a local judge. Thursday morning a home in foreclosure was scheduled to be sold on the courthouse steps, even though the man who owned it worked out a way to pay his lender and stop it from happening. Jerry Gomez sent a cancelled check to his lender, which has already been cashed. Gomez made a last minute, desperate appeal to save his home, [...]. Judge John Doyle answered the plea with a stamp and a signature, denying Gomez's request.

***

• Gomez's home went into foreclosure last year. His loan payment ballooned and his painting business died. Gomez, however, had new hope when he was accepted into the Federal Loan Modification Program. [...] "This should not happen. He's been approved. The lender wants to stop it," loan consultant Jan Brinsley said. Brinsely said Gomez did everything right. But an email from his lender's attorney claims Volusia County judges won't allow them to ask for foreclosures to stop. When Gomez tried to stop it himself, complete with proof of his new loan agreements, Judge Doyle didn't think it was enough. "The lender worked with him. The lender wants to stop the foreclosure and the judge refuses to do it," Brinsely said.

For the story, see Judge Denies Father's Request To Save Home.

Non-Profit Fair Housing Group Files Suit Against Publisher Of Allegedly Discriminatory Classified Ads Against Families With Children

According to a press release from the National Fair Housing Alliance:

• The National Fair Housing Alliance (NFHA) and its member organization Fair Housing Council of Central California (FHCCC) [last week] announced a housing discrimination lawsuit against the nation’s largest classified advertisement publisher, American Classifieds, LLC for publishing housing ads that state children are not allowed.

• It is illegal to discriminate against families with children in housing. In their lawsuit, NFHA and FHCCC allege that American Classifieds published discriminatory housing advertisements in violation of the federal Fair Housing Act and California’s Fair Housing and Employment Act. NFHA filed the lawsuit after a year-long investigation that uncovered over 60 discriminatory advertisements in 17 of the states where American Classifieds does business.

***

• Since 1996, American Classifieds has resolved similar discrimination complaints in Boise, Idaho, Louisville, Kentucky, and Merritt Island, Florida for publishing illegal housing advertisements. Yet that has not stopped the company from continuing to print them.

For the entire press release, see American Classifieds Sued for Discriminating Against Families with Children (National Fair Housing Alliance Investigation Uncovers Advertisements Discriminating Against Families with Children, Other Protected Groups in 17 States).

For more on this case from the National Fair Housing Alliance:

• View the Case Summary,
• View the Complaint/Lawsuit,
• View the map showing cities where allegedly discriminatory ads were found,
• View examples of allegedly discriminatory ads.

Tenants Pocket Thousands In $ettlements In Fair Housing Discrimination Lawsuits Brought By Massachusetts AG

From the Office of the Massachusetts Attorney General:

• AG Obtains Court Order Requiring Malden Landlords to De-Lead Rental Apartment in Settlement of Housing Discrimination Case: Attorney General Martha Coakley obtained a consent judgment against Wai On Chan and Qi Ling Huang-Chan, the owners of a three-bedroom rental property in Malden, resolving claims that they discriminated against a prospective tenant by allegedly refusing to rent to a prospective tenant with a child under the age of six years old because it would have required the landlords to abate any lead paint in the rental unit. [...] According to the complaint, the Chans refused to show their rental unit once they learned that the prospective tenants had an infant daughter. Under Massachusetts law, it is illegal to refuse to rent to a prospective tenant with young children due to the presence of lead paint. In addition to deleading the rental unit, the settlement requires the Chans to pay $1,000 to the victims.

• AG Reaches Settlement Against Realty Company and Landlord for Allegedly Discriminating Against Two Women and 2-Year Old: Attorney General Martha Coakley’s Office obtained a consent judgment against Dorchester-based At Home Real Estate, Inc. (“At Home”), Edward Denney and Watershed Properties, Inc. (“Watershed”), resolving claims that the real estate company, landlord and property owner discriminated against two African-American women [with a two-year old child] by refusing to rent them an apartment because the defendants wanted to avoid their obligation to de-lead the apartment under Massachusetts lead paint laws. The consent judgment, entered yesterday by Judge Charles T. Spurlock in Suffolk Superior Court, requires the defendants to attend fair housing training, pay $7,500 to the victims, and for the property owner to de-lead the property.

• AG Reaches $10,000 Settlement with Two Brookline Real Estate Brokers for Discriminating Against a Family with Young Children: Attorney General Martha Coakley’s Office obtained a consent judgment against Geoffrey Wells, doing business as (d/b/a) Harvard Real Estate of Brookline, and one of his employees, David Ravalli, accused of violating state antidiscrimination and lead paint laws by refusing to show a property to a family because they had young children. The judgment, [...] requires the brokers to pay the family $10,000 and prohibits them from discriminating against any person who seeks or applies for housing because they have children or otherwise discriminating against any person in violation of state and federal fair housing laws.

• AG Sues Brighton Realty Company for Housing Discrimination: Attorney General Martha Coakley’s Office has filed a housing discrimination complaint against City Realty Group, Inc. (“City Realty”), a Brighton-based real estate company, and one of its real estate agents for refusing to rent an apartment to a tester from the Boston Fair Housing Commission who represented that she was looking for an apartment for herself and her three-year-old child. The complaint, [...] alleges that City Realty violated state antidiscrimination and consumer protection laws by refusing to rent to a prospective tenant with a child because it would have created an obligation to abate lead paint hazards in the rental unit. [...] The Attorney General’s Office is seeking an order prohibiting City Realty from engaging in housing discrimination, compensatory and punitive damages on behalf of the victim, and attorneys’ fees and costs.

• AG Sues East Boston Landlord for Discriminating Against Family: Attorney General Martha Coakley’s Office has filed a housing discrimination complaint against Russell Tremaine, the owner of a three-unit building in East Boston, for refusing to rent an apartment to a couple and their infant daughter. The complaint, [...] alleges that Tremaine violated state anti-discrimination and consumer protection laws by refusing to rent to a family with a child because he wanted to avoid the obligation to abate lead hazards in the rental unit. [...] Under Massachusetts law, it is illegal to refuse to rent to a prospective tenant with young children due to the presence of lead paint in the rental unit. It is also illegal to discriminate against renters because of their familial status or because they have children. The Attorney General’s Office is seeking an order prohibiting Tremaine from engaging in housing discrimination, compensatory and punitive damages on behalf of the victims, civil penalties, and attorney’s fees and costs.

• AG Reaches Settlement with Real Estate Company to Resolve Discrimination Claim: Attorney General Martha Coakley’s Office has reached a settlement with a Brockton real estate company in response to a tenant’s claim of discrimination and retaliation. The Assurance of Discontinuance filed in Plymouth Superior Court against Churchill Forge Properties, Inc., and its employee Joyce Levine, alleges that the real estate company and the employee violated state anti-discrimination laws by retaliating against an African-American tenant when he contacted the Massachusetts Commission Against Discrimination (MCAD). Churchill Forge, which is headquartered in Newton, Massachusetts, manages several rental properties across the Commonwealth. [...] “It is against the law for anyone to retaliate against a person who exercises his or her right to make an allegation of discrimination,” said Attorney General Martha Coakley. “If people do not feel free to speak out when they believe they have experienced discrimination, then the Commonwealth cannot effectively fight against discrimination.” [...] The Assurance of Discontinuance requires that Churchill Forge and its employees agree to abide by federal and state fair housing and anti-discrimination laws; [...] notify the Civil Rights Division of any discrimination complaints in the next five years; and pay $11,000 to the tenant. These obligations apply to all of the properties that Churchill Forge manages and operates across the Commonwealth.

• AG Obtains Consent Judgment Against Boston Realty Company Resolving Allegations of Discrimination: Attorney General Martha Coakley’s Office has obtained a consent judgment against a Boston realty company and one of its owners, resolving allegations that they violated Massachusetts antidiscrimination laws by asking a prospective tenant about her national origin. [...] Dakota Enterprises and Lehrer will pay $8,000 to the prospective tenant and her husband, and $500 to the Commonwealth’s Local Consumer Aid Fund.

• AG Obtains Consent Judgment Against Cambridge Landlord for Discriminating Against Section 8 Recipient: Attorney General Martha Coakley’s Office obtained a consent judgment against Brian Keefe and JBK Associates, LLC, the owners of a two-unit apartment building in Cambridge who were accused of violating state antidiscrimination laws by refusing to rent an apartment to an individual who participates in the Section 8 program. The judgment, [...] requires Keefe and JBK Associates to pay the victim $3,000 and prohibits them from discriminating against any person who seeks or applies for housing because they have a Section 8 voucher or otherwise discriminate against any person in violation of state and federal fair housing laws.

• Attorney General Martha Coakley Obtains Jury Verdict in Housing Discrimination Case: A Suffolk Superior Court Jury returned a verdict [...] against Hakim DeFreitas of Dorchester ordering him to pay $8,200 in restitution for discriminating against a prospective tenant who would have used a Section 8 housing voucher to pay her rent. “The Section 8 program provides invaluable assistance to thousands of low income tenants in Massachusetts. This assistance is of particular importance during these economic times as we face critical housing needs and the strain on families is particularly great,” said Attorney General Martha Coakley. “Landlords in Massachusetts should understand that discrimination against prospective tenants that receive public assistance is against the law and will not be tolerated.” The complaint, [...] alleged that DeFreitas screened out applicants with Section 8 vouchers when he tried to find a tenant to rent a home he owned in Dorchester. Under Massachusetts law, it is illegal to discriminate against housing applicants because they receive public assistance, such as assistance through the Section 8 program. It also is illegal to print or publish a housing advertisement that says that Section 8 will not be accepted, or otherwise to make a discriminatory statement about Section 8 in connection with the rental of a home.

• AG Obtains Consent Judgment Against Property Management Company and Condominium Association in Housing Discrimination Case: Attorney General Martha Coakley’s Office has obtained a consent judgment against Property Management of Andover, Inc., and Royal Oaks Condominium Association, resolving claims that the companies discriminated against a disabled condominium owner by refusing to provide him with a reasonable accommodation. [...] According to the complaint, [...] the condominium owner was diagnosed with melanoma, a type of skin cancer, in 2002 and received treatment in 2002-2006 for basal cell carcinomas. He continued to receive treatment for his condition and was advised by his doctor to utilize sun-protective devices, including an awning for his deck, which he then paid for and installed. The complaint alleged that after the owner submitted medical documentation to the defendants that demonstrated his need for sun protection, the defendants threatened to remove the awning and assess fees against him. The complaint alleged that by refusing to permit the owner to install an awning to accommodate his disability, the defendants violated state antidiscrimination law. In addition to barring the company from future acts of discrimination, the consent judgment requires Property Management of Andover, Inc., to [...] make a payment of $2000 to the condominium owner; [...] and report any discrimination complaint that it receives to the Attorney General’s Office for the next four years. In addition, the consent judgment permits the condominium owner to maintain an awning while he resides at the unit.

• AG Obtains Judgment Against Brockton Property Owner and Landlord in Housing Discrimination Case: Attorney General Martha Coakley’s Office has obtained a consent judgment against a Brockton property owner and landlord, accused of unlawfully discriminating against a former tenant by refusing to participate in the Section 8 housing subsidy program. [...] The consent judgment resolves a complaint [...] alleging that the defendants discriminated against a tenant by refusing to accept her Section 8 housing subsidy and by refusing to make certain repairs to the tenant’s apartment, as required by the Section 8 program. Under Massachusetts law, it is illegal to discriminate against housing applicants because they receive public assistance.