Mortgage Servicers To Explain Themselves To Administration Officials Regarding Failure To Keep People In Their Homes

In Washington, D.C., ABC News reports:

• Mortgage servicers accused of not doing nearly enough to stem the nation's foreclosure crisis will sit down with the Obama administration tomorrow to tell their side of the story.(1) The meeting, the results of which are not expected to be made public until early next month, comes amid escalating criticism that both mortgage servicers and the government are ill-equipped to carry out Obama administration programs designed to help keep people in their homes. [...] The National Consumer Law Center, which presented testimony to the Senate earlier this month, has identified dozens of ways in which some mortgage servicers have failed to follow guidelines set by the Home Affordable Modification Program (HAMP), a five-month-old Obama administration program that pays servicers at least $1,000 for each loan modification.

Reportedly, Sen. Chris Dodd, D-Conn., has asked the administration to investigate alleged abuses of the program by mortgage servicers, which include:

• Charging advance fees for loan modifications,
• Telling homeowners they must be in default before becoming eligible for loan modifications,
• Starting foreclosure proceedings even while a homeowner is under consideration for a loan modification.

For more, see Mortgage Companies to Meet With White House (Meeting Comes Amid Mounting Criticism of Obama Housing Programs).

(1) The mortgage servicers are responding to this recently extended invitation from Treasury Secretary Timothy F. Geithner and HUD Secretary Shaun Donovan to get together for a "friendly chat."

35 Law Firms Named In Suit Seeking To Void 100,000+ Money Judgments; 20+ Add'l Firms Currently In NY AG's Crosshairs In Ongoing "Sewer Service" Probe

From the Office of the New York State Attorney General:

• Attorney General Andrew M. Cuomo [Wednesday] announced his office has sued 35 law firms and two debt collectors(1) in New York State in order to throw out an estimated 100,000 default judgments improperly obtained against New York consumers. This is the latest action in Cuomo’s ongoing investigation into unlawful debt collection practices. According to the lawsuit [...], the companies relied on a Long Island company, American Legal Process (ALP), to notify New York consumers that they faced debt-related lawsuits. ALP, however, failed to properly serve consumers across the state with legal papers, causing thousands to unknowingly default and have costly judgments entered against them without the chance to respond or defend themselves.(2) In April of this year, Cuomo’s Office announced criminal and civil cases against ALP and its owner, William Singler, for this fraudulent business scheme.(3)(4)

***

• Attorney General Cuomo also announced that as part of his ongoing investigation into fraudulent process servers and debt collectors, his Office is determining which other law firms statewide relied on ALP to serve legal process on New Yorkers facing lawsuits. More than 20 such firms have been identified to date and his Office is notifying those firms of its intent to seek to vacate any default judgments those firms have obtained based on ALP affidavits of service.

For the NY AG's press release, see Attorney General Cuomo Sues To Throw Out Over 100,000 Faulty Judgments Entered Against New York Consumers In Next Stage Of Debt Collection Investigation (37 Law Firms and Collectors Named in Lawsuit for Failing to Properly Notify New Yorkers Being Sued for Owing Debt; Cuomo Seeks to Vacate Over 100,000 Faulty Judgments Statewide and Provide Restitution to Victims).

For more from the NY AG on this lawsuit, see:

• Lawsuit: In re Honorable Ann Pfau v. Forster & Garbus, et al. (28 pages),
• Go here for Statewide Map of Default Judgments by Region,
• Go here for the NY AG's press release en Español.

Go here for other posts on "sewer service."

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) The law firms and debt collectors named in the lawsuit are: Forster & Garbus; Sharinn and Lipshie; Kirschenbaum & Phillips, P.C.; Solomon and Solomon, P.C; Goldman & Warshaw, P.C.; Eltman Eltman and Cooper; Eric M. Berman, P.C.; Stephen Einstein & Associates, P.C.; Fabiano and Associates; Jones Jones Larkin O’Connell; Panteris & Panteris, LLP; Zwicker and Associates; Relin, Goldstein & Crane; Woods Oviatt Gilman; Leschack & Grodesnky; Hayt Hayt & Landau; Pressler & Pressler; Jaffe & Asher; Mullen & Iannarone; Arnold A. Arpino & Associates; Houslanger & Associates; Mann Bracken, LLC; Smith Carroad Levy & Finkel; McNamee, Lochner Titus & Williams; Thomas Law Office; Fleck, Fleck & Fleck; Eric Ostrager; Cohen & Slamowitz, LLP; Cullen and Dykman LLP; Winston & Winston, P.C.; Cooper Erving & Savage, LLP; Robert P. Rothman, P.C; Gerald D. DeSantis; Greater Niagara Holdings, LLC; Rodney A. Giove; Advanced Litigation Services, LLC; and Jason L. Cafarella.

(2) According to his press release, the NY AG alleges that, ALP, as a legal process server, was hired by high-volume debt collection law firms in New York to serve legal papers, usually a summons and complaint, notifying individuals that they are being sued and must answer the complaint. ALP, however, allegedly engaged in “sewer service,” where process servers take advantage of individuals facing lawsuits by failing to properly alert them and denying them the chance to respond. As a result, tens of thousands of judgments were obtained against unsuspecting New Yorkers, many of whom first learned they were being sued when they found their bank accounts frozen or their wages garnished. ALP covered up the fraud by falsifying sworn affidavits of service in courts across New York. The law firms and debt collectors sued then used these false affidavits to obtain default judgments against NY consumers. The Attorney General’s Office estimates that the average default judgment totaled approximately $5, 474 (based on this average amount, these default judgments apparently were not obtained in connection with foreclosure actions; one can only wonder how rampant sewer service is in foreclosures).

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

(4) Carolyn Coffey, an attorney with MFY Legal Services, a nonprofit provider of free legal services in New York, said: “Over and over again we see hundreds of the most vulnerable New Yorkers -- the elderly, disabled, and working poor -- blindsided by default judgments in lawsuits that they never even knew about until after the cases were over. Our justice system is built on the basic premise that everyone has a right to be heard in court before a judgment can be entered against them, and the debt collection law firms that engage in sewer service deny New Yorkers this fundamental right. MFY commends Attorney General Cuomo for taking these steps to remedy the devastating effects of sewer service, and for sending the message to debt collection law firms that they must comply with the most basic requirements of due process.”

MFY’s 2008 report, Justice Disserved, documented many victims of improper service who had judgments unknowingly entered against them, often to devastating effect. SewerServiceAlpha

Unauthorized Practice Of Law, "Running & Capping" & "Lawyer Renting" Among The Issues Raised In Recent Loan Mod Lawsuit By California AG

In a recent lawsuit brought by the Office of the California Attorney General against a group peddling loan modification services, allegations of unauthorized practice of law, "running and capping," (ie. the practice of non-attorneys hustling up business for an attorney) and "lawyer renting" (ie. a loan modification firm's use of an attorney or law firm as a "front" for its activities where the attorney does little or no work, and has little or no contact with the financially distressed client desiring a loan modification, typically used to avoid prohibitions against clipping homeowners for upfront fees) have found their way into the complaint filed in this matter.

In People v. Home Relief Services LLC, et al,(1) the California Attorney General makes the following general allegations:

• As many other foreclosure rescue companies have done, in an attempt to avoid statutory prohibitions on collecting fees before any services have been rendered, Defendants have included one or more attorneys in their scheme. Noting the alarming trend in the number of complaints issued against attorneys involved with foreclosure rescue companies, the State Bar has issued an ETHICS ALERT cautioning attorneys from lending their names to loan modification companies when non-lawyers purportedly negotiate with the lenders on the customers’ behalf but actually provide little to no services; meanwhile, the non-lawyers also collect fees from the consumers and provide distressed homeowners with reckless and harmful advice on how to deal with their lenders (see Cal. AG lawsuit, paragraph 2),

***

• Defendants also falsely tell consumers that attorneys affiliated with Defendants review customers’ financial paperwork and also negotiate with the lenders on their behalf. Indeed, as a result of Defendants’ solicitation, some of Defendants’ customers are pressed by Defendants’ representatives to sign or otherwise unwittingly sign contracts with Defendants Diener and Diener Law Firm, believe the contracts are with Defendant HRS or another entity. These contracts obligate consumers to pay Defendants Diener and Diener Law Firm a fee and authorize Defendants Diener and Diener Law Firm to hire the other Defendants, even though the consumer has never spoken with nor ever heard of Defendants Diener and Diener Law Firm. Customers are not given any opportunity to speak with or have any contact with any attorneys affiliated with Defendants about their loans, and neither Defendants Diener and Diener Law Firm nor any other attorneys affiliated with Defendants review customers’ financial documents or negotiate with lenders on their behalf. Moreover, Defendants’ customers are informed by their lenders that the lenders have not been contacted by Defendants Diener and Diener Law Firm, or any of their lawyers, on the customers’ behalf (see Cal. AG lawsuit, paragraph 41).

In connection with the foregoing general allegations, the following violations of law against the non-attorney defendants have been alleged (see Cal. AG lawsuit, paragraph 65(j) and (k)):

• Violating Business and Professions Code sections 6151 and 6152, by engaging in "running and capping," the practice of non-attorneys obtaining business for an attorney,
• Violating Business and Professions Code section 6155, by some Defendants in directly or indirectly referring potential clients to Defendants attorney Christopher Diener and Diener Law Firm without seeking registration as a lawyer referral service by the State Bar, and by Defendants Diener and Diener Law Firm in accepting referrals of such potential clients,

In connection with the foregoing general allegations, the attorney defendants have been alleged to have violated Business and Professions Code section 17200 (relating to prohibitions against unlawful, unfair or fraudulent business acts or practices) by: (a) Violating the fiduciary duty and duties of good faith and fair dealing owed to their clients/customers by failing to review financial documents or negotiate with lenders on their behalf; and (b) Violating California Rules of Professional Conduct (or, in the alternative, try here):

• rule 1-320(A) by directly or indirectly sharing legal fees with a non-lawyer;
• rule 1-320(B) by compensating persons or entities for the purpose of securing employment or as a reward for having made a recommendation resulting in the employment of Defendants Diener and Diener Law Firm by a client;
• rule 1-300(A) by aiding persons or entities in the unauthorized practice of law;
• rule 3-110(A) by intentionally, recklessly, or repeatedly failing to perform legal services with competence; and
• rule 4-200(A) by entering into an agreement for, charge, or collect an illegal or unconscionable fee.

See Cal. AG lawsuit, paragraph 73(a) through(f).

(1) 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, and Does 1-100). UnauthPractOfLawTheta

Washington AG Uses Courtesy Letter To Inform 138 Loan Mod Firms They're On The Radar Screen; Urges Compliance With State Law To Stay Out Of Hot Water

Washington Attorney General Rob McKenna recently announced that his office has joined the Federal Trade Commission and other states in a nationwide crackdown on foreclosure rescuers and loan modification rackets that charge hefty upfront fees and often provide no help. He further announced that his office has filed five new cases against these firms,(1) bringing the number of foreclosure-assistance actions filed by the Attorney General’s Office to nine since 2007, and has sent civil investigative demands, which are similar to subpoenas, to four additional businesses that provide mortgage-related services.

So as not to leave any other firms in the industry with the false impression that they have dodged the AG's "mortgage-related scam radar screen," AG McKenna has also announced that his office is sending a "gentle reminder" to 138 businesses that market foreclosure assistance, loan modification services or other mortgage-related services, listing various state laws they are expected to comply with, as well as listing many of the unfair, deceptive and otherwise illegal trade practices they better refrain from if they're planning on staying out of hot water.

Go here for the Washington AG's courtesy letter.

See State, federal sweep slams loan-mod scams (Firms operating in Washington state in government crosshairs for taking advantage of homeowners facing foreclosure) for the Wasington AG's press release announcing its participation in the "Operation Loan Lies" nationwide crackdown on foreclosure rescuers and loan modification businesses who screw financially desperate homeowners out of their money for bogus services.

(1) The five operations targeted by AG McKenna are:

• MASON CAPITAL GROUP (California),
• G SERVICES GROUP, doing business as GUARDIAN SERVICES (California),
• GODSEND SECURITY FUNDING, APRIL LANE AND JOEL SEVERSON (Seattle) (involve sale/leaseback foreclosure rescue deals),
• INTELLISOURCE AND RENA CAROLYN MCGILL (Issaquah) (involve sale/leaseback foreclosure rescue deals),
• PROPERTY RESEARCH SPECIALISTS, TONY BROWN AND KARMA SIMONS (Richland).

Battle For Bankuptcy Cramdown Legislation - Round 2 Begins In U.S. Senate

The Washington Independent reports:

• Roughly three months after Senate lawmakers killed legislation empowering homeowners to escape foreclosure through bankruptcy, some upper-chamber Democrats are looking to revive the corpse. They hope to pressure the White House into spending valuable political capital on a cause fallen by the wayside. Up to now, policymakers have relied on programs that subsidize lenders and mortgage servicers who volunteer to alter loans to keep homeowners afloat. Yet those voluntary modifications lag far behind the rising tide of foreclosures. Indeed, only 160,000 homes have been propped up this year under the largest such program — a figure dwarfed by the more than 1.5 million foreclosure filings since January.

For more, see Band of Senate Dems Pressures Obama on Cramdown (Durbin Hearing Makes Case for Addressing Foreclosure Crisis in Bankruptcy Court).

See also:

• Rethinking Cramdowns as Foreclosures Roll On,
• Mortgage Cramdown Redux (Among other things, this story reminds us that judges already hold this "cramdown" power for pretty much any type of secured debt, like auto loans or vacation homes, but not for most borrowers’ primary residences),
• One Is the Loneliest Number (A Senate Judiciary subcommittee hearing on a proposal to allow bankruptcy judges to modify the mortgages of troubled borrowers kicked off Thursday with just one senator in attendance - the subcommittee chairman, Sen. Sheldon Whitehouse, D-R.I., who was leading the hearing).

Judge Orders Shutdown Of Loan Mod Firm Accused In $8M Ripoff; Garbage Bag Full Of Shredded Docs Given As Proof Outfit Is Destroying Evidence In Probe

In West Palm Beach, Florida, WPEC-TV Channel 12 reports:

• Late Friday a judge in West Palm Beach granted the state Attorney General's request for a temporary injunction, shutting down FHA All Day and three other mortgage modification companies.(1) Jason Vitulano and his four companies are accused of ripping off customers to the tune of $8 million dollars. Friday lawyers with the state Attorney General's office came to court with a garbage bag full of shredded documents. The state says it's proof the companies tried to destroy evidence.

For more, see Judge shuts down mortgage modification companies temporarily.

For a story of one of FHA All Day's alleged victims, see Mortgage Fraud Victim Speaks Out, A Warning to All Homeowners.

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

Orange County DA Raids Homes Of Foreclosure Rescue Operators Currently Facing Civil Suits By State AG Alleging Bogus Loan Modifications, Short Sales

In Southern California, the Orange County Register reports:

• Investigators with the Orange County district attorney early Thursday morning searched three Ladera Ranch homes believed tied to a foreclosure rescue scam. Agents served search warrants on two homes on Roshelle Lane and one on Merrill Hill. The homes are connected to Terence Green Sr. and Stefano Marrero of Home Relief Services and Christopher Diener of the Diener Law Firm.(1)

***

• The District Attorney’s Office declined to comment. [...] Alan Gordon, assistant chief trial counsel of the California State Bar, confirmed that the Orange County district attorney and some other agencies served search warrants today. He said the bar has been “working closely with several agencies” investigating potential loan mod scams.

For the story, see D.A. raids Ladera homes in loan-aid scam probe.

(1) California Attorney General Jerry Brown last week filed a civil lawsuit against these same men (go here for California AG press release),alleging that they charged homeowners $4,000 in upfront fees and then failed to get them cheaper payments on their home loans. Brown also charged that the companies sometimes promised to arrange a short sale — when a lender agrees to accept less than the debt owed on a property — but instead attempted to use customers’ personal information for the companies’ own benefit.

Sleazy, Shifty Appraisers Booted From Industry Now Shifting Into Real Estate Sales?

The Tampa Tribune reports:

• Some appraisers who lost their licenses after unethical behavior during the housing boom are staying in the real estate business. They're becoming real estate agents, according to a report by the national Center for Public Integrity. Instead of appraising homes for sale, some just obtained a license to sell homes for a living. The center's report found that in Florida and California, among the states hardest-hit by the foreclosure crisis, hundreds of individuals whose appraisal licenses were revoked have received other licenses that allow them to continue to represent the public in real estate sales.

For more, see Unethical appraisers now becoming real estate agents.

For the report from The Center For Public Integrity, see Rebuked Appraisers Reborn as Real Estate Agents (Appraisers with Revoked Licenses Still Profit in Real Estate Industry).

California Regulator To Consumers Saddled With Unaffordable Mortgages: Stay Away From Loan Modification Outfits Engaged In "Lawyer Renting"

A recent New York Times' story featuring the loan modification operation Federal Loan Modification Law Center(1) contains this excerpt describing an arrangement that some might refer to as "lawyer renting," in which a company, attempting to circumvent laws prohibiting the collection of upfront fees for its services, enters into a deal with an attorney that allows the outfit to conduct its activities as a law firm (attorneys are generally not prohibited from pocketing upfront fees for their services):

• The three original [Federal Loan Modification Law Center] partners brought in Mr. [Nabile "Bill"] Anz to gain a crucial asset: his law license. Having a lawyer in charge enabled them to market their venture as a law firm and thus collect upfront payments under California rules. “Jeff [partner Jeffrey Broughton] asked me how I could, for lack of a better word, legitimize it,” Mr. Anz said.

• The California Department of Real Estate warns consumers that many dubious loan modification companies have organized themselves as law firms solely to allow them to collect upfront fees, even though the lawyers have little, if anything, to do with the services provided. The department cautions consumers against hiring such companies.(2)

For the story, see Subprime Brokers Back as Dubious Loan Fixers.

(1) Federal Loan Modification Law Center (aka FedMod) has been tagged by the Federal Trade Commission with a lawsuit alleging violations of Federal law in offering loan modification services to the general public. Go here for links to the FTC press release and some of the relevant court documents filed against FedMod.

(2) 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.

Memphis-Area Sheriff, Legal Services Firm Join To Spread Word Of New Federal Rights For Renters Facing Foreclosure Eviction

In Shelby County, Tennessee, the Memphis Buisiness Journal reports:

• As a result of the rise in foreclosures and evictions in the city, the Shelby County Sheriff’s Office and Memphis Area Legal Services are working to educate citizens on the subject. As part of the partnership, sheriff’s deputies and civil process servers are delivering pamphlets about the process to property owners and renters summoned to court. [...] The partnership was created as part of the [Federal] Helping Families Save Their Homes Act signed into law [by President Obama] in May. The law requires 90 days before tenants can be forced out.(1)

• Webb Brewer, director of advocacy for Memphis Area Legal Services, said the most important part of the process is that renters or homeowners open and read all letters about the properties they inhabit. Legal services will offer assistance to anyone who asks. The goal of the partnership, said Shelby County Sheriff Mark Lutrell, is to tell renters about their rights. “Some renters have not been told by landlords about a pending eviction,” Lutrell said in a statement. “Our goal is to ensure property owners, especially tenants, understand their legal options before they’re evicted.”

Source: Shelby County Sheriff, Memphis Area Legal Services partner to educate renters on foreclosure, eviction.

See also Memphis Commercial Appeal: Sheriff's initiative aims to protect renters from foreclosure eviction.

For Shelby County tenants facing foreclosure evictions, see Brochure: What You Need To Know About Foreclosures and Evictions.

(1) In addition, except where the purchaser will occupy the property as a primary residence, the terms of any bona fide lease also remains in effect. See Helping Families Save Their Homes Act of 2009, Title VII - Sections 701 through 704 (Title VII of the new law is known as the Protecting Tenants At Foreclosure Act of 2009).

See also: HUD Notice PIH 2009-17, Protecting Tenants At Foreclosure: Notice Of Responsibilities Placed On Immediate Successors In Interest Pursuant To Foreclosure Of Residential Property, in which HUD emphasizes that the responsibility for meeting the new tenant protection requirements applies to all successors in interest of residential property, regardless of whether a federally related mortgage is present. The immediate successors in interest of a residential property, which is being foreclosed, bear direct responsibility for meeting the requirements of the law.

Unwitting Prospective Buyer Gets Caught Up In Controversial Short Sale Flipping Attempt Involving Vacant Home In Foreclosure

In DeWitt, Michigan, columnist John Schneider of the Lansing State Journal recounts the story of a local woman who got screwed over in an attempt to buy a vacant home in foreclosure from a local real estate operator, himself attempting to acquire the property through a short sale, to be followed by an immediate "flip" of the home at a higher price to the woman (all without the apparent knowledge of the lender that was being asked to approve the short sale).

• Reeling from a traumatic divorce-in-progress, Christina Thelen moved, with her three children, into her aunt's basement. That was in February. In March, things started looking up for Thelen when she made an offer on a three-bedroom ranch in foreclosure on Rambler Road in DeWitt. The vacant house had been on the market since August. The price had dropped, in increments, from $159,000 to $128,900 - with no takers. Thelen offered $118,000, or so she thought.

• Responding to my inquiry Wednesday, Bank of America's Jumana Bauwens said bank records indicate the offer was only $74,000 - and was rejected. When I told Thelen that Wednesday, she was shocked. "I can understand why they would reject that," she said.

***

• Working through a company that specializes in short sales - EZ Home Ownership Realty of Grand Ledge - the agent representing the seller, Steve Osmar of the RE/MAX office in Delta Township, was informed that Countrywide, the mortgage holder at the time (later acquired by Bank of America) had verbally accepted the deal. Jerry Ballard of EZ Home Ownership told me Wednesday that Countrywide had, indeed, OK'd his offer verbally. However, Bauwens said a verbal acceptance would run contrary to standard practice.

• As for the difference between the $118,000 Thelen was willing to pay and the $74,000 EZ Home Ownership offered, when I asked Ballard about it, he didn't have immediate access to his records, so he couldn't confirm the $74,000 figure. He did say, however, that the difference between what a buyer is willing to pay [him] and the offer his company gets a bank to accept represents various fees and expenses, plus his profit. Listing the various agents involved, Ballard said, "None of us is a charity."

• Based on the belief there was a verbal acceptance - plus the fact that Thelen was, as Osmar put it, in a "housing crisis" (her and her three kids living in a basement) - Osmar drew up a lease agreement that allowed Thelen and her kids to move into the Rambler Road home the final week of May. "This home meant so much to us," she said. Thelen expected to close on the house in June, and began fixing it up. She painted, repaired the air conditioning, rehung kitchen cabinet doors, spread mulch ... About $1,200 worth, she figured.

• On Father's Day, Thelen got the bad news: The deal had fallen through. She and her children would have to vacate the house.

For the story, see Short sale stumble gives would-be homeowner 'short end'.

For other posts involving similar types of short sale flipping deals as the one described above, see:

• Shaky Loan Modifications That Turn Into Questionable Short Sales?
• ATIF Refuses To Issue Title Insurance On Controversial Short Sale Deals Involving Simultaneous Investor "Flips",
• NY Feds Indict Four In Alleged Short Sale, Flipping Fraud Targeting Homeowners In Foreclosure; Unwitting Straw Buyers Left Holding The Bag,
• Detroit Feds Indict Five In Alleged Straw Buyer Scam Involving Fraudulent Short Sales Of Luxury Condos.

NYC Woman Busted For Clipping $50K In Upfront Rent Deposits From Low Income Residents Seeking Help In Obtaining Affordable Section 8 Rentals, Say Cops

In New York City, the New York Post reports:

• A slick-talking woman posing as a real-estate agent conned about $50,000 from low-income residents looking for affordable housing in Manhattan and The Bronx, cops said [Wednesday]. Josie Almonte, 32, a blond-haired beauty with a sophisticated look, would approach her victims promising to help them expedite their applications for Section 8 housing, sources said. She would ask them for a rent deposit up front to put down on an apartment, then never file their application and keep the money, the sources said. She was busted Monday.

Source: 50G SCAM IS UN-REALTOR.

Lender Reverses Position After Media Applies Heat; Now Agrees To Waive $9K Prepayment Penalty For SW Florida Couple Nearing Foreclosure

In Charlotte County, Florida, WINK News reports:

• Punished for paying a mortgage early? That's what one Charlotte County couple says happened with their lender, but now WINK News Call for Action helps that couple avoid foreclosure. [...] Janice and Rick Brooks could no longer afford their Charlotte County home, so they put it up for sale. [Now] it will officially sell, and they'll settle their debt with their lender. But that almost didn't happen. "We would literally have been out that door with no where to live or we would have been stuck in here, forced into foreclosure," Janice Brooks says.

• That's because they owed the bank an additional $9,000 -- a penalty for paying their mortgage before it's due. The Brooks say they were punished for always paying on time. "(The lender) said if I had been 90 days in [arrears], they would be more apt to waive the penalty because it would show that we're in a hardship case," Janice Brooks says. The Brooks begged to have that penalty waived in lieu of the alternative -- foreclosure. "They denied us four times. Four times," Janice Brooks says.

• That's when WINK News got involved -- calling and sending emails to their mortgage company, wanting to know why it would rather a homeowner go into foreclosure than accept a payment that covered all of the debt -- minus that pre-payment penalty, that under contract, the lender could -- and in this case -- did choose to waive. [...] The couple says no one from their mortgage company would return their calls until WINK News started asking questions.

For the story, see WINK News saves family from foreclosure.

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

Feds, State AGs Go On Attack Against Debt Settlement & Collection Firms Engaged In Allegedly Fraudulent Activities

From the Office of the Florida Attorney General:

• Attorney General Bill McCollum [last week] announced that a settlement has been reached in a case brought by Chase Card Services against affiliated Hess Kennedy companies which engaged in fraudulent debt settlement activities. Under the settlement approved earlier this week, Chase will release the credit card debt of approximately 13,000 consumers nationwide, including over 900 Florida residents, who contracted with the Hess Kennedy companies for the fraudulent services. Laura Hess and the Hess Kennedy Companies are currently in Receivership as a result of a lawsuit filed by the Attorney General’s Office in February 2008.

For the entire Florida AG press release, see Third Agreement Reached in Hess Kennedy Debt Settlement Case.

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

From the Office of the Texas Attorney General:

• Texas Attorney General Greg Abbott [earlier this month] charged a Houston-based credit repair firm with violating the Texas Deceptive Trade Practices Act. The state’s enforcement action names Jubilee Financial Solutions LP, also known as The Credit Card Solution (TCCS) - a self-proclaimed “debt invalidation” business - its parent company, Jubilee Financial Management LLC, and the companies’ owner, Robert Mitchell Lindsey. [...] Marketing materials obtained by state investigators shows the defendants claimed their “debt invalidation” program can eliminate customers’ debt in as little as 12 to 18 months by relying upon federal consumer protection laws. In videos on the defendants’ Web site, Lindsey claims that TCCS has “gotten rid of $150 million of credit card debt.”

For the entire Texas AG press release, see Texas Attorney General Abbott Charges Houston “Debt Invalidation” Firm with Unlawful Conduct.

For the Texas AG's lawsuit, see State of Texas v. Jubilee Financial Solutions LP, dba The Credit Card Solution, et al.

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

From the Office of the Ohio Attorney General:

• Ohio Attorney General Richard Cordray [last week] filed a lawsuit against Solon-based National Enterprise Systems, Inc. (NES) for harassing Ohioans. The collection agency is accused of using egregious methods in attempts to collect alleged debt from Ohio consumers. "Everyone has the right to be treated fairly under Ohio law, regardless of possible debt owed," Attorney General Cordray said. "More than 200 consumers filed complaints with my office saying NES used threats, harassment and deception to collect debts. These practices are unacceptable and will not be tolerated." [...] The [Ohio AG's] investigation revealed a pattern of illegal practices, such as calling and harassing consumers' coworkers and family members, calling before 8 a.m. and after 9 p.m., using a busive language, attempting to collect debts consumers did not owe, failing to verify debts and making unauthorized withdrawals from consumers' bank accounts.

For the entire Ohio AG press release, see Cordray Takes on Ohio Debt Collector for Harassment.

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

From the Office of the West Virginia Attorney General:

• A Braxton County woman authorized an Ohio collection agency to charge $5,000.00 to her credit card because the company was threatening to have her daughter arrested at work. The same collection agency told the father of a Kanawha County woman that his daughter would be "arrested for fraud of the federal government" unless she made an immediate payment of $5,000.00 toward a student loan. Such strong-arm collection tactics are effective, but much like holding a gun to someone’s head, they are illegal. It is precisely this type of conduct that Attorney General McGraw seeks to stop by filing a lawsuit today against the company that allegedly made these threats to several West Virginians, National Enterprise Systems, Inc. ("NES") of Solon, Ohio. McGraw’s complaint alleged a wide range of other unlawful conduct, including adding unlawful collection fees to tuition owed by students to West Virginia colleges and universities.

For the West Virginia AG press release, see Attorney General McGraw Sues Ohio Collection Agency, National Enterprise Systems; Asks Court to Stop Firm from Making Unlawful Threats.

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

From the Office of the Washington State Attorney General:

• Attorney General Rob McKenna [...] praised the Federal Trade Commission for tackling a Tacoma company that preyed on financially strapped consumers. He urged consumers to take advantage of low-cost credit counseling services. “When you’re drowning in debt, you’re desperate,” McKenna said. “But if you’re not careful, your chosen rescuer may toss you an anvil instead of a life preserver.” [...] Mutual Consolidated Savings in Tacoma was sued by the FTC for allegedly using robo-calls to aggressively target consumers then charging fees of $690 to $899 while providing little help. The FTC froze the assets of the company’s owners. “Mutual Consolidated Savings has been the source of numerous consumer complaints,” McKenna said. “The Federal Trade Commission’s move to shut down its Tacoma call center means that fewer consumers will be misled by the company’s promises to bail them out of debt.”

For the entire Washington State AG press release, see McKenna warns consumers about debt-relief scams (Attorney General praises FTC for shutting down Tacoma company).

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

(1) According to the Florida AG, the lawsuit against Laura Hess was filed by the Attorney General’s Economic Crimes Division and named Hess’s Broward County law firm and several other Florida-based companies she controlled. The lawsuit accused Hess of signing thousands of credit card debtors up for debt management services and claiming the law firm would provide legal services to cancel debts for pennies on the dollar. Representatives of Hess allegedly told consumers that the companies had audited the consumers’ accounts and found numerous violations under the Fair Credit Billing Act, then sent notices to creditors disputing all charges. Consumers were falsely told that once these notices were issued, the consumers did not have to pay creditors and creditors could not sue or otherwise take action against them. This deception led to lawsuits and other actions against several debtors.

“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).