Tuesday, August 04, 2009

Queens Homeowner Fights To Hold Onto Home Stolen In Deed Theft Scheme; May Lose House Anyway Despite Successful Forgery Prosecution Against Scammers

In Queens County, New York, The Black Star News reports on the story of Sun-Ming Sheu, a local resident and immigrant from Taiwan who had his home ripped off from out from under by scammers in 2001 in a straw buyer scam which utilized a forged power of attorney to complete a fraudulent trandfer of the title to the house. The scammers then obtained a mortgage against the home, failed to make the mortage payments, and Sheu has been fighting off a foreclosure ever since.

To add insult to injury, the scammers were actually busted by the New York City police, and they ultimately copped pleas to forgery. However, the mortgage lender that was duped into financing the fraudulent sale and the title insurer that issued the lender's title insurance policy have ignored the successful criminal prosecution and all the evidence produced demonstrating that the signatures on the documents in the fraudulent sale were forged, and have continued to move forward on the foreclosure of Sheu's home, acting as if the fraudulent closing was authentic. A reportedly accomodating judge, Queens Supreme Court Justice Joseph Golia, has allowed the foreclosure to proceed.

Most recently, Sheu reportedly met twice with a criminal investigator at the U.S. Attorney’s Office in Manhattan in June, 2009 for a total of about four hours and discussed his case and submitted documentation. “We cannot confirm or deny that we are investigating this case,” the investigator told The Black Star News, when contacted by phone.

For the story (which is part one of a series), see Alleges: "Junk Justice" System And Mortgage Fraud.

For the follow-up stories, see:

Use Of "Deadbeat Lists" Gaining In Popularity With Florida Condo Associations Seeking To Boost Unpaid Maintenance Collections From Delinquent Owners?

In South Florida, the South Florida Sun Sentinel reports:
  • In defiance of state laws, some condo associations are seeking to use all means at their disposal to get condo owners who are behind on fees to pay up, including public humiliation. A few years ago, not many boards would have asked to see a list of condo owners who were behind on association fees, because not many were delinquent. But in the midst of South Florida's foreclosure crisis, some associations have posted "deadbeat lists" in common areas in hope of turning up the heat on slow-to-pay owners — a move many say is illegal, unfair and unethical.(1)

***

  • Tempers are heating up in South Florida as threats are being made against both the association members who try to collect debts and those who feel victimized by the harsh tactics. Board members' cars have been keyed, and amenities such as gyms and pools have been declared off-limits, assistant condo ombudsman Bill Raphan said. "Give me one good reason for putting these lists up. You put their name up, but it can be dangerous," Raphan said. "Boards want to keep [delinquents] out of the pool ... but you just can't do that in a condo."(2)

  • Recently, courts have given better options to associations, particularly in the case of nonpaying landlords who lease out their units. One legal answer includes seeking a court-appointed receiver, or unbiased intermediary, who can bypass the foreclosed or delinquent owner and collect rent directly from the tenant, in place of having the tenant pay rent to the owner.(3) The funds are deposited into a receivership account, where they are then divided up between those to whom the owner owes money. [...] Receiverships are popping up in areas hit hard by the foreclosure crisis, said local receiver Seth Heller of Heller and Company.

For more, see Condo deadbeat lists may be effective, but also illegal.

(1) F.S. 559.72(14) of the Florida Consumer Collection Practices Act specifically prohibits the use of deadbeat lists within the state of Florida when collecting what it defines as a "consumer debt" (see F.S. 559.55(1)), but does not apply to the collection of any debt not falling within the "consumer debt" definition, including debts owed on units owned by business entities (ie. corporations, partnerships, joint ventures, etc. - see F.S. 559.55(2)). Unpaid maintenance fees owed by an owner-occupant (ie. a natural person using the apartment either as a principal residence, or as a part-time second home) appear to fall within the definition of "consumer debt." It is arguable, however, whether or not such unpaid maintenance fees owed by a rent-skimming, non owner-occupant (ie. a natural person owning the unit as an investment or business) leasing the premises out for profit as a landlord would fall within the statutory definition of "consumer debt."

The Florida Commercial Collection Practices Act (F.S. 559.541 et seq.), which regulates the business of collecting "non-consumer debts" within the state of Florida does not contain any specific prohibition against the use of "deadbeat lists" in the debt collection process.

The Federal law regulating debt collection practices throughout the U.S., the Fair Debt Collection Practices Act, applies only to "consumer debt" (which is defined in the same way as in Florida law), which is an obligation to pay money by a natural person (as opposed to a corporation, partnership, joint venture, etc.) arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes. (15 USC 1692a(3), 1692a(5)).

(2) If some condo associations are so intent on spreading the word about delinquent unit owners with "deadbeat lists," simply mailing out copies of the information to all the unit owners (but not tenants), without publicly posting the information on the premises, is a preferable method of doing so. This information, along with copies of any other business record of the association, is something the unit owners are legally entitled to obtain by written request anyway, so mailing the information (preferably after receiving a written request from a unit owner) without an actual public posting of it should dodge the prohibitions of the debt collection statutes.

(3) See South Florida Business Journal: 3rd DCA upholds use of condo receivers.

Builder's Unpaid Bill From Stiffed Sub Leaves New Home Buyer Stuck With Unrecorded $42K Mechanics Lien & Unprotected By Title Insurance

In Fayetteville, Arkansas, the Northwest Arkansas Times reports:
  • Banks aren't the only ones losing money thanks to the developer who built the mostly empty luxury condo development near Dickson Street known as the Legacy Building. A Fayetteville couple faces possible foreclosure of their home because one of troubled developer Brandon Barber's companies did not pay for the materials to build it.(1) Scott and Donna Powers have made more than $15,000 of improvements to their 2,850-square-foot home they purchased in February 2008 in phase two of Deer Path Estate subdivision.

***

  • The Powers moved into the house in December 2007, soon after it was completed. Before closing, they went to National Home Centers to pick out the carpet, some mirrors and a ceiling fan, never knowing Barber's account was past due there, he said. Soon after closing, Powers said that he found out about the materialman's lien. He was surprised to learn that his owner's title insurance policy did not protect him.

  • "We all think we bought a house and we're safe, but the dirty little secret is that title insurance does not protect you from materialman's liens," he said. Powers said no one ever explained to him that you had to pay extra to get coverage against outstanding bills that might not be paid at the time of closing.(2)

***

  • Powers said that he plans to file a criminal complaint and ask authorities to file felony charges against Barber for signing an affidavit saying that all of the bills had been paid.

For more, see Couple could lose house over Barber's unpaid bill (Buyers not protected at closing from unrecorded liens).

(1) They reportedly face a materialman's lien involving more than $42,000 in past due bills owed by the builder.

(2) According to the story, Ed Young, an attorney for Elite Title Company, which handled the closing, explained that a general owner's policy will not protect a buyer against unrecorded liens. He said that subcontractors and suppliers can file a lien against a property within 120 days. That's why title companies and banks always insist on a bills-paid affidavit from the builder at closing. He said that home buyers can get "affirmative lien coverage" for an additional 10 percent fee, but that the two title underwriters that Elite buys coverage through no longer offer this type of coverage on new homes. Young said that he does not believe that the companies were offering this enhanced coverage when Powers closed on the home. The title underwriters are getting away from it because of the added risk. "They all took some big hits last year," he said. title insurance legal issues

California Man Charged With Using Forged Docs To Swipe Estranged Wife's Share Of Home; Notary Stripped Of Commission, Faces Felony For Role In Scam

From the Office of the San Bernardino County, California District Attorney:
  • Investigators from the San Bernardino County District Attorney's Real Estate Fraud Prosecution Unit arrested Omar Paz, 52, of San Bernardino [...]. Co-defendant, Christi Fry, 56, of West Covina was also arrested [...]. The pair was arrested for real estate fraud-related criminal charges.(1)

  • Paz and his former wife had owned a home in the city of Rancho Cucamonga. Paz decided to sell their home after a domestic dispute and filed for divorce. During the real estate transaction, Paz forged his former wife’s signature on the disclosure forms, escrow instructions and grant deed.

  • Fry, also formerly known as Christi Martin, was the escrow officer and public notary for the fraudulent transaction. The property sold for approximately $470,000. The excess proceeds, in the amount of $83,538.66, was wired into the joint account of Paz and his former wife. Approximately 10 days later, Paz transferred $77,054 into his personal money market advantage account for which his former wife did not have access. She discovered her name had been forged on the disclosure forms, escrow instructions, and grant deed during her divorce proceedings.

  • The California Secretary of State's Notary Division conducted a separate administrative investigation and revoked Fry's notary commission due to this fraudulent transaction.

For the San Bernardino DA press release, see Pair Arrested for Real Estate Fraud.

(1) According to the DA's press release, Paz was charged with Conspiracy, Forgery, Grand Theft, Money Laundering and Offering a forged document to be recorded. Fry was charged with (1) Count of Conspiracy. Paz' bail was set at $850,000.00 and Fry's bail was set at $450,000.00. DeedContraTheft

NY Homeowner Tired Of Crappy Conditions Living Next To House In Foreclosure With Failing Septic System

In Putnam Valley, New York, The Journal News reports:
  • Belynda Rella has a really smelly problem and she can't seem to get it fixed. She lives at 17 Oriole St., and her neighbor's septic at 19 Oriole drains into her yard, which is a health hazard and downright unpleasant. [...] Rella and her pre-teen daughter won't go into their yard or jump on a new trampoline without wearing heavy-duty paper face masks. [...] Since April, she has been contacting various officials. The bubbling sludge site in her yard is covered with a blue cloth. Her mother, Darlene Kahrs, who lives there, too, is also upset. "I don't want to see my 10-year-old granddaughter sick from this crap, literally," she said.(1)

  • The offending house looks appealing, with log-cabin siding. But along with a failed septic, it is in foreclosure and is set to be auctioned Aug. 12 by SunTrust Mortgage of Irvine, Calif., which claims it is due $223,344. Attempts to reach the homeowners, Thomas Antonucci and Linda Rosenzweig of Hopewell Junction, were unsuccessful.

For more, see Neighbor's failed septic a noxious problem.

(1) According to the story, failing septics are an increasing issue in Putnam, where exceptionally wet weather has stressed marginal systems and where summer enclaves with small cottages are now year-round homes. "Many of these homes were only meant to be used in July and August. This is a massive problem," said county Legislator Sam Oliverio, D-Putnam Valley, admonishing officials for not having kept a closer watch on changing communities and zoning.

Monday, August 03, 2009

Illinois Charges Wells Fargo Of Race Bias In Home Loan Originations; Minority Neighborhoods Became "Ground Zero For Subprime Lending" Says State AG

In Chicago, Illinois, the Chicago Sun Times reports:
  • Illinois filed a lawsuit on Friday against Wells Fargo & Co. accusing it of discriminating against black and Latino homeowners by employing racially biased lending practices.(1) San Francisco-based Wells Fargo & Co. allegedly sold high-cost subprime mortgage loans to minorities while white borrowers with similar incomes received lower-cost loans, according to the lawsuit, filed in Cook County Circuit Court by Illinois Attorney General Lisa Madigan. “As a result of its discriminatory and illegal mortgage-lending practices, Wells Fargo transformed our cities’ predominantly African-American and Latino neighborhoods into ground zero for subprime lending,” Madigan said.

***

  • Madigan said the lawsuit was the first in the nation filed by an attorney general against Walls Fargo — though Baltimore and the NAACP have filed a similar suits.

For more, see State sues Wells Fargo for alleged loan bias.

For the Illinois Attorney General press release, see Madigan Sues Wells Fargo For Discriminatory And Deceptive Mortgage Lending Practices (Illinois Attorney General Alleges Lender Steered African-Americans, Latinos Into Subprime Loans).

For the lawsuit, see People v. Wells Fargo And Company, et al.

(1) The complaint alleges violations of the Illinois Human Rights Act, the Illinois Fairness in Lending Act, the Illinois Uniform Deceptive Trade Practices Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act, and asks the court to rescind all contracts entered into between Wells Fargo and Illinois consumers by the use of methods and practices declared unlawful and to grant full restitution to the consumers. DiscriminationPredatoryLendingAlpha ghetto loans

Ohio AG Tags Loan Servicer With Suit For Failure To Work Out Delinquent Mortgages; Follows Thru On Promise To Sue Foot-Dragging Lenders On Loan Mods

From the Office of the Ohio Attorney General:
  • Ohio Attorney General Richard Cordray [Friday] filed a joint lawsuit with the Ohio Department of Commerce against Carrington Mortgage Services, LLC. The lawsuit alleges that Carrington breached its agreement with the state to offer reasonable loan modifications to eligible borrowers. The lawsuit also alleges that Carrington violated Ohio's Consumer Sales Practices Act by providing incompetent, inadequate and inefficient customer service in connection with its servicing of Ohio mortgage loans.

  • Cordray is the first Attorney General in the nation to file suit against a mortgage servicer in the wake of the foreclosure crisis. "This lawsuit makes it clear that we have reached zero tolerance for this kind of behavior from loan servicers," said Cordray. "We've tried to work with them, but now we must take action. I am determined to see that mortgage servicers step up, take responsibility and start making it right with Ohioans. No more excuses."

For the entire Ohio AG press release, see Cordray & Ohio Department of Commerce First in Nation to Sue Mortgage Servicer for Unfair Practices.

For the Ohio AG lawsuit, see State of Ohio v. Carrington Mortgage Services LLC.

For a related post, see Foreclosing Lenders To Face Lawsuits For Failing To Deliver On Promises Of Loan Modification Help, Says Ohio AG.

State High Court Slams Ohio Lawyer With "6-Month Time Out" For Bad Acts Committed While Associated With Loan Modification Foreclosure Rescue Operator

The Ohio Supreme Court announced last week:
  • The Supreme Court of Ohio [Thursday] suspended the law license of Hamilton attorney John T. Willard for one year, with the final six months of that term stayed, for professional misconduct arising from Willard’s participation in a “foreclosure rescue” business in which he accepted client referrals and shared legal fees with non-attorneys who engaged in the unlicensed practice of law.

  • The Court adopted findings by the Board of Commissioners on Grievances & Discipline that Willard violated multiple provisions of the Rules of Professional Conduct by partnering with the non-attorney owners of a company called Foreclosure Alternatives. The company identified homeowners against whom mortgage foreclosure actions had been filed and contacted them offering to negotiate a settlement with the lender that would halt the foreclosure process. Under Willard’s arrangement with Foreclosure Alternatives, when a homeowner responded to the company’s solicitation, the company would forward a power of attorney signed by the client and information about the foreclosure action to Willard, who would prepare and file an answer to the lender’s foreclosure complaint without meeting or speaking with the homeowner for a flat fee of $150 that he received from Foreclosure Alternatives.(1) All negotiations with the lender and virtually all subsequent information and advice provided to homeowners about their cases was provided by the company’s non-attorney employees.

In at least 28 cases in collaborating with the non-attorney owners of Foreclosure Alternatives, Willard was found to have violated the Ohio Code of Professional Responsibility rules that prohibit:

  • requesting a third party to promote or recommend an attorney’s professional services, DR 2-103(C);
  • aiding a non-lawyer in the unauthorized practice of law, DR 3-101(A);
  • forming a partnership with a non-attorney, DR 3-103(A), and sharing legal fees with a non-attorney, DR 3-102(A);
  • handling a legal matter without adequate preparation, DR 6-101(A)(2); and
  • failing to pursue the lawful objectives of a client, DR 7-101(A)(1).

For the Ohio Supreme Court announcement, see Supreme Court Suspends Hamilton Attorney.

For the court's ruling, see Disciplinary Counsel v. Willard, Slip Opinion No. 2009-Ohio-3629 (July 30, 2009).

For other cases of Ohio attorneys getting slammed for associating with loan modification firms, see:

(1) According to the Ohio Supreme Court ruling (see Disciplinary Counsel v. Willard, paragraphs 7-8):

  • Under [Willard's] usual protocol for these cases, he would receive a copy of the foreclosure complaint filed against the client and the limited power of attorney from Foreclosure Alternatives. He would then file an answer to the complaint or a motion to strike and send a copy to the client along with a letter stating: “This is a response I filed on your behalf. I had a referral from Foreclosure Alternatives. If there are any other defenses you can think of, feel free to call me.” This letter was the first communication with the client, and, in fact, usually the first occasion for the client to learn the name of his attorney. Out of the 28 or more Foreclosure Alternatives clients, [Willard] discussed cases with only three or four of them. Negotiations with the lender were conducted by Foreclosure Alternatives; [Willard] was not even informed of their progress. The next action [Willard] would take was to notify the company when he received a motion for summary judgment filed by the lender. If the client had no defense, [Willard] sent a letter to the client stating: “A motion for summary judgment was filed. I suggest that you consider a Chapter 13 bankruptcy or a bankruptcy.” [Willard] did not otherwise personally communicate with the client. UnauthPractOfLawTheta

Report: Loan Modification Firm Used Craigslist To Round Up "Lawyer Renting" Prospects; "Rents" Ranged Between $125-$300 Per File

A recent lawsuit was filed jointly by the Federal Trade Commission and the Attorneys General for the states of California and Missouri against a group accused of clipping homeowners for upfront fees while purportedly peddling loan modifications through the use of an alleged boiler room operation, and the use of a relationship with a pair of attorneys to create the impression that lawyers were intimately involved in the loan modification process. As part of the lawsuit, a preliminary report was issued by the temporary receiver appointed by the court to take over the business and determine whether it can be operated lawfully as a going concern.

According to the temporary receiver, the loan modification firm's "relationship with two different lawyers was nominal at best and served primarily as a cover to dignify the business and invoke the attorney exception to advance fee prohibitions." (see Preliminary Report Of Temporary Receiver, page 2 - line 28 thru page 3 - line 2).

In the following excerpt from the report, the temporary receiver describes how the loan modification operation allegedly went about activities that can be described as "lawyer renting"(1) in conducting its business (see Preliminary Report Of Temporary Receiver, pages 7-8):
  • The current structure of the business evolved from previous businesses of Defendant George Escalante. After contact from the Orange County District Attorney in October, 2008, Escalante began the process of dissolving USFR [U.S. Foreclosure Relief Corp.] (and its various dbas). Shortly afterwards, however, he placed an advertisement on Craigslist for an attorney. That search led to Defendant Adrian Pomery, a relatively recent law school graduate, who formed Pomery & Associates as the nominal law firm linked to the business. The servicing arm adopted a new dba - HE Servicing Company. Consumers paid their $2,500 fee to Pomery who remitted $2,375 to HE and kept $125. Pomery did visit the HE office - twice a day in general - and was involved in communication with at least some consumers. But, he had no employees involved in the business.

  • In April, 2009, Escalante set out to find a new attorney when Pomery expressed a desire to withdraw from the business as he saw it as high risk.(2) Escalante ran another Craigslist ad and this time found Brandon Moreno, Stanford Law class of 2004, and they together came up with a new name - Homeowners Legal Assistance ("HOLA," a dba of Cresidis Legal, Moreno's Professional Corporation) and Escalante formed a new service entity - H.E. Servicing, Inc. Moreno cut a better deal than Pomery - under his arrangement, he retained $250 for each file. As with Pomery, all payments were made to HOLA and placed in the Cresidis Trust Account; Moreno then disbursed $2,250 to HE. Credit card payments were processed through Escalante's merchant account and from there disbursed to the lawyer's trust accounts. At the time of my appointment, Moreno and Escalante had agreed to increase the consumer fee to $2,950, prohibit any further refunds, and increase the Moreno/HOLA share to $300 per client. As best we can tell, Moreno was an infrequent visitor to the office. Moreno had no employees on site at the Katella operation. The Negotiations Manager - Suki Arcebido - reported to us that she had only seen Moreno once. To a person, the other seven negotiators working with us this week have reported that they have had no contact with Mr. Moreno, and some cannot recall actually ever having seen him. Despite Defendants' limited efforts to create the illusion, this was not a law firm owned or operated by Pomery or Moreno/HOLA. It was Escalante's business. He paid the rent, hired the employees, outfitted the offices, ran the finances, and ultimately controlled the operations.
Source: Preliminary Report Of Temporary Receiver.

For the lawsuit, see FTC, et al. v. U.S. Foreclosure Relief Corp., et al. (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).

(1) 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.
.
(2) Pomery's sudden "cold feet" may have been attributable to the "hot water" he possibly realized he might be facing after the issuance of a February, 2009 advisory by a committee of The State Bar of California informing its members what arrangements between attorneys and loan modification firms could violate the Bar's rules of professional responsibility and conduct. See ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications. UnauthPractOfLawTheta

Connecticut Feds To Form Mortgage Fraud Task Force; Focus To Be On Fraudulent Foreclosure Rescue Deals, Short Sale Scams

In New Haven, Connecticut, The Associated Press reports:
  • Federal authorities are creating a mortgage fraud task force in Connecticut to investigate schemes that contributed to the economic crisis and emerging crime trends associated with the growing tide of foreclosures. Prosecutors in the past year have brought charges or secured convictions in several major mortgage fraud cases with the help of federal and state law enforcement agencies. Authorities said the task force will help coordinate those efforts. [...] The task force will focus on "foreclosure rescue" schemes and "short sale" schemes.

  • Foreclosure rescue schemes prey on desperate homeowners by persuading them to sign over the deeds to their homes to a "specialist" who promises homeowners that they can stay in their homes, make "rent" payments and eventually repurchase the homes. Instead of passing along the rent payments to a mortgage company, however, the "specialist" illegally retains the payments along with extra fees and the homes continue into foreclosure and the homeowners suffer additional losses.

  • In a short sale scheme, a buyer purchases a home with no intention of making payments and often keeps additional money included in the purchase loan that was supposed to go for improvements. After a few months, the buyer informs the lender that the house will foreclose and presents the lender a possible pre-foreclosure buyer who, unknown to the lender, is part of the fraud scheme and offers to purchase the home at a price below the current loan amount.

For the story, see Federal authorities create mortgage fraud team (if link expires, try here).

Sunday, August 02, 2009

Supreme Court Nominee Faces Attack By Some Over Non-Issue Involving Homestead Tax Exemptions For Florida Property

In Broward County, Florida, the South Florida Sun Sentinel reports:
  • Political bloggers are demanding an investigation of property tax exemptions that U.S. Supreme Court nominee Sonia Sotomayor’s family receives on a condo in Margate. But local officials say there is no problem. At issue is whether Sotomayor’s mother and step-father are entitled to a homestead exemption after deeding their home to her eight years ago. Property Appraiser Lori Parrish is maintaining that state property tax law allows residents to create life estates and keep their tax breaks for the rest of their life.

  • Parrish and the web site, webofdeception.com, have traded e-mails over the propriety of the tax breaks and access to the family’s tax records for two weeks. The site’s operator, private investigator Joseph Culligan, is now threatening to ask a judge to demand a review,(1) and his reports have been picked up on a couple of other blogs.

***

  • Debra Boje, a law partner in Ruden McClosky’s estate planning division, and Jennifer Drake, a lawyer who heads up the real estate division at the Becker & Poliakoff law firm, said the Sotomayor family used an extremely common estate planning technique in Florida. Such a life estate guarantees seniors keep their tax breaks while also simplifying the inheritance process, they said. “Really and truly, Judge Sotomayor is entitled to the property only upon the death of the life estate owners,” Drake said.

For the story, see Sotomayor family tax breaks in Broward face questions.

(1) Rather than demanding a judge to review this matter, Mr. Culligan would be well advised to first familiarize himself with Section 196.041 of the Florida Statutes. Subsection (2) of the statute provides:

  • "A person who otherwise qualifies by the required residence for the homestead tax exemption provided in s. 196.031 shall be entitled to such exemption where the person's possessory right in such real property is based upon an instrument granting to him or her a beneficial interest for life, such interest being hereby declared to be "equitable title to real estate," as that term is employed in s. 6, Art. VII of the State Constitution; and such person shall be entitled to the homestead tax exemption irrespective of whether such interest was created prior or subsequent to the effective date of this act."

See also Rule 12D-7.009(1), Florida Administrative Code, stating that a life estate will support a claim for homestead exemption.

The Florida law on homesteads has acquired some notoriety over the years as a result of a myriad of stories about those seeking to abuse it (whether it be those seeking to dodge payment of real estate taxes, or wealthy people in financial trouble seeking to protect their cash assets by purchasing a homestead within the state, thereby putting said assets out of the reach of their hotly-pursuing, frustrated creditors). This is not one such story.

Anaheim Woman Fights To Recover Home Lost To Scammers; Forged Documents Used In Refinancing Racket

In Anaheim, California, Southern California Public Radio (KPCC 89.3 FM) reports:
  • Swindlers have been bilking homeowners in trouble since the housing market meltdown began. But some scam artist are getting bolder. They figured out a way to “steal” houses through forged signatures and phony appraisals. And once they win the title to a property, they squeeze out the equity. Then they vanish.

For more about an Anaheim woman who’s trying to recover her “stolen” home, see Swindlers steal houses in foreclosure scam. DeedContraTheft

Arkansas Regulator Sues California Outfit For Illegally Targeting State Homeowners For Loan Modifications

In Little Rock, Arkansas, ArkansasBusiness.com reports:
  • Avoid doing business with 21st Century Legal Services Inc., Arkansas Securities Commissioner A. Heath Abshure warned Thursday, after taking the company to court.
    The Rancho Cucamonga, Calif., company promises mortgage loan modification services to people in foreclosure or in danger of foreclosure. The Securities Department issued a cease-and-desist order against the company and two of its agents, Sandy Ayala and Michael Herried, on June 24.

  • A continuing investigation on whether the company was still defrauding Arkansas consumers found it was soliciting money after the cease-and-desist order. On Wednesday, Abshure filed a complaint in Pulaski County Circuit Court seeking temporary and permanent injunctions against 21st Century Legal Services as well as monetary fines. On Thursday, the court issued a temporary injunction prohibiting the company from engaging in any mortgage loan activity.

For more, see Securities Chief Files Complaint Against 21st Century Legal Services.

For more on this case from the Arkansas Securities Commissioner, see:

Florida Appeals Court OKs "Blanket Receivership" In Condo Association Battle Against Rent Skimming Unit Owners, Deadbeat Investors

In Miami, Florida, the South Florida Business Journal reports:
  • Condominium associations faced with increasing delinquencies now have an appellate court ruling that backs their right to appoint receivers to collect rent on delinquent condo units. Florida’s 3rd District Court of Appeal recently validated the use of "blanket receivership," which has been used by at least 18 condo associations in Miami-Dade and Broward counties. Blanket receivership allows a court-appointed receiver to collect rent directly from tenants when their units are in foreclosure.

  • The appellate court denied an appeal from a condo unit owner at the Village at Dadeland, who protested the appointment of a receiver because he said he was not given proper notice. According to motions filed by the condo association, the [targeted] unit owner owns 17 condos at the Village and was delinquent on his association fees, even though he allegedly received rental income from the units. The condo association had filed foreclosure actions against the 17 units.(1)

  • The court decided unanimously to deny the unit owner’s petition. This will put an end to him collecting rent while being under foreclosure,” said Ben Solomon, a member of the Association Law Group of North Bay Village, which has handled several receivership appointments for condo associations.

For more, see 3rd DCA upholds use of condo receivers.

(1) According to the association’s court responses, it was facing extreme financial hardship because 267 of the 410 condominium units were 60 days or more delinquent in the payment of maintenance assessments, the story reports. The delinquency reportedly totaled $863,063, preventing maintenance of the common property.

RI State Cops Bust Alleged Flipping Fraud Investment Scam Coupled With Rent To Own Racket; Investors Left In Financial Ruin, Homes Fall To Foreclosure

The Rhode Island State Police recently announced:
  • [Thursday], members of the Rhode Island State Police Major Crimes Unit, in conjunction with the United States Postal Inspector’s Office and Office of Attorney General, arrested Pierre (“Peter”) Chabot, age 75, of [...] North Providence, Rhode Island on the strength of a Statewide Grand Jury indictment [...].(1)

***

  • During this investigation, Chabot arranged for 25 investors to buy 73 properties in Rhode Island valued at $16,745,400.00. Chabot is believed to have grossed approximately $2,919,784.00 by assigning properties to investors at an inflated appraised price, and omitting the fact that he previously contracted with purchase options with the sellers at a bargained price.

  • All Investors were advised by Chabot that their investment property would be rented out and that they would be “completely protected” for one-year by a “lease option agreement” (LOA) whereby the renter would cover all expenses. Chabot further advised that the investors would receive $5,000.00 at the time of the closing. Chabot promised investors that their credit scores would be improved and their investment properties would be sold to those renting the properties within one year. None did, and the majority of the properties were foreclosed.

  • Once this scheme was discovered, Chabot was left free and clear of over $16,460,000.00 in bad loans, and the investors were all left in financial ruin. Subsequently, the lending institutions sustained tremendous losses.

For the press release, see Orchestrator of Multi-Million Dollar Predatory Mortgage Fraud Scheme, Pierre "Peter" Chabot Arrested.

(1) Others bagged in the indictment were:

  • Closing Attorney Jon A. Mills, age 60, of Lincoln, Rhode Island. Mills maintains a practice identified as the Law Office of Campanella and Mills located in Warwick, RI.
  • Mortgage Broker Joseph H. LeMay, age 59, of Blackstone, Massachusetts. LeMay operates Back Bay Mortgage located in Warwick, RI.
  • Property Appraiser Sharon B Kosciusko, age 57, of Warwick, Rhode Island. Kosciusko operates Appraisal Services of Rhode Island.

Saturday, August 01, 2009

Attorney For The Poor Squeezed By Philly Budget Cuts Now Faces Foreclosure; Says City Is Stiffing Him Out Of $10-15K For Work Representing Abused Kids

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
  • THIS WEEK, 1,500 frantic state workers rallied in Harrisburg to protest the state's budget impasse, which has resulted in them receiving only partial paychecks this month. Until a deal is done, future paydays may also be slashed or even postponed.

  • Neil Krum understands workers' terror, because he's living it. He's a lawyer who makes his living as a court-appointed attorney representing children in Family Court. It's been three months since the city cut him a check for the important work he does for a revolving caseload of about 100 clients. And that check - for a skimpy $60 - is a fraction of the $10,000-to-$15,000 he says the city owes him for representing poor kids who've been abused or neglected.

  • His home in Ambler is about to go to foreclosure. He has wiped out his savings on routine household expenses and for services for his autistic son. He can barely afford gas and parking downtown, for hearings and client meetings.

For more, see Lawyers who help the poor are feeling the pinch.

In a related story, see The Legal Intelligencer: Court-Appointed Attorneys File Emergency Motion to Demand Pay.

Unanswered Questions As To Possible Displacement Of Buried Bodies In Cemetery Facing Foreclosure Sale

In Oklahoma City, Oklahoma, NewsOK.com reports:
  • An Oklahoma City cemetery was foreclosed on recently, prompting questions about what will happen to bodies buried there. Adding to the plight is a possible FBI investigation into mortgage improprieties by the matriarch of the family that owns the cemetery.

  • Riverside Gardens Cemetery, [...] was foreclosed on in May. Linda Johnson buried her brother there three weeks ago. "Oh my God — don’t tell me that,” Johnson said of the cemetery’s foreclosure. She cried, and speaking of her brother, asked: "What do I do with him now?” The answer is unclear. Numerous attorneys and cemetery owners did not know what could happen to buried bodies at Riverside Gardens if it is sold to a new owner at a court-ordered auction.

For more, see Oklahoma City cemetery foreclosure raises many questions (Burials have happened recently).

Landlord's Troubles Leave Tenants Fearing The Boot; Water Bill Unpaid, Building Conditions Deteriorating, Mortgage Fraud Suspected

In Pickens, South Carolina, WSPA-TV Channel 7 reports:
  • When we first met Windwood Gardens apartment manager Donna Bryant she was worried her tenants would have their water cut off. That all changed when the City of Pickens decided to work with the property owner and give him 30 days to pay off a $10,000 water bill. Click here to see a copy of the water billI just feel bad for these tenants out here,“ Bryant said. “They pay their rent faithfully and the owner needs to step up and take care of them. It’s his job.“

  • We took a harder look at the management company and learned the owner, Kevin Flessner of Sarasota, Florida, is being sued for millions for mortgage fraud. See lawsuit hereAccording to the complaint that we have it was an elaborate scheme which involved several people,“ said News Channel 7 legal expert attorney Ken Anthony. “It looks like it involved some attorneys or some title insurance agents as well and it was a concerted effort to deceive the lender.“ Anthony said the lawsuit claims Kevin Flessner and others deceived Imperial Capital Bank. He told us the bank says Flessner got more money than originally agreed upon to buy apartment complexes in Oklahoma and South Carolina. We found one of them is Hillandale Apartments on Poinsett Highway in Greenville which went into foreclosure. In the lawsuit the bank says Flessner’s original deal was to buy Hillandale Apartments for $ 2.6 million dollars. But the suit claims he tricked the bank into lending him a million dollars more by using a fake contract.

For More, see Apartment Complex Owner with $10,000 Water Bill May Be Facing Bigger Problems.

Abrupt Shutdown For Purported Non-Profit, “Christ-Centered Foundation” Peddling Loan Modifications After Feeling Heat From Florida AG Probe

In Fort Myers, Florida, The News Press reports:
  • A Fort Myers foreclosure-relief business is a target in the state attorney general’s investigation of 81 mortgage help companies statewide. Foreclosure Help Center Inc., a nonprofit organization [...] faces allegations of collecting fees before completing services, according to the Office of the Attorney General. The Foreclosure Help office was closed and vacated Tuesday.

***

  • The Florida Department of State Division of Corporations lists the business’ principal as Manny Romero. Romero could not be reached for comment Tuesday, and the business number was no longer in service. According to the business’ Web site, Foreclosure Help Center was aimed at providing information and counseling to people facing foreclosure. The site describes the organization as a “Christ-centered foundation.”

For more, see Fort Myers foreclosure-relief firm investigated for fraud.

Error In Condo Docs Could Leave "White Shoe" Law Firm Holding The Bag As Disgruntled Buyers Demand Deposit Refunds; Tab For Typo Could Run $100M

In New York City, the New York Post reports:
  • The law firm that drew up a contract now at the center of a dispute between the residents and developers of a new apartment tower finds itself in hot water after a typo may cost the developers as much as $100 million.

  • Stroock & Stroock & Lavan, a 125-year-old law firm, could find itself having to write a big check to Extell Development Co. and The Carlyle Group after a 732-page offering plan for the Rushmore, a new building at 80 Riverside Blvd., stated buyers could get their money back if the building wasn't ready by Sept. 1, 2008, instead of Sept. 1, 2009, as Extell and Carlyle say they intended. At least 25 people so far have filed applications with the Attorney General's office to get back more than $10.3 million in downpayments on purchases totaling $71 million. At press time, at least four more people were also considering following suit, sources told The Post.

  • While Extell and Carlyle argue the typo caused the mix-up, a lawyer representing 24 of the buyers who want their deposits back said the offering plan amounts to a document that should be enforced. "We don't see this as a typographical error. It is a contract that needs to be enforced," said Richard Cohen, the lawyer. The gaffe exposes Stroock to the real possibility of having to pay back Extell and Carlyle out of its own pocket because sources said that if the developers sue Stroock, it's unlikely its insurer will pick up the tab.

For the story, see WRONG NUMBER (Contract Typo Could Cost Firm $100M).

Friday, July 31, 2009

Miami Feds Bag 41 Suspects In Fraud Scams Involving Double HUD-1s, Complicit Straw Buyers, "Shotgun" Apps, I.D. Theft, Forgery, Pocketing Loan Payoffs

In Miami, Florida, the South Florida Business Journal reports:
  • State and federal agents announced that charges have been filed against 41 people in six separate cases(1) totaling more than $40 million in fraudulent mortgages. Tuesday’s announcement is part of a crackdown on mortgage fraud, begun in September 2007, that has targeted mortgage brokers, bank employees, title agents, attorneys and straw buyers.

The following are some of the highlights of the six alleged scams, according to the press release from the U.S. Attorney's Office:

  • Recruiting complicit straw buyers, title agents, lender employee.
  • Preparation of fraudulent mortgage loan applications on behalf of complicit straw borrowers using false employment verifications, pay stubs, income and funds on deposit, and IRS Forms W-2,
  • Use of "double HUD-1s" - false duplicate HUD-Settlement Statement Forms created and submitted to the lending institutions, which grossly inflated the true purchase price of the properties,
  • Use of "shotgun" loan applications - obtaining near-simultaneous loans for the same piece of property from multiple lenders,
  • I.D. theft / forgery scam - entirely false real estate sales were concocted by stealing the identities of unwitting home owners, forging the sales documents in their names, and using complicit straw purchasers to obtain mortgages, all without the real property owners’ knowledge or consent,
  • Pocketing loan payoffs - involved legitimate borrowers seeking to re-finance and payoff existing mortgages. Unbeknownst to the borrowers, defendant allegedly kept the loan proceeds for himself and did not use the funds to pay off the borrowers’ pre-existing loans.

For more, see:

(1) Those implicated in the alleged scams are:

  • Indictment #1: Mayra Rodriguez, 31; Lucia Peluffo, 29; Nelson Bermudez, 36; Yamile Segurola, 24, all of Miami; Carlos Rodriguez, 29, of Homestead; Mayelin Salas, 36, of Miami Springs; Nelida Rodriguez, 48, of Opa Locka; Sonya Balmaseda, 35, of Hialeah; Jorge Egeraige, 38, of Hialeah; Jaime Rojas, 39, of North Miami Beach; Alejandro Rabelo, 49, of Miami Beach; Pedro Huezo, 58, of Opa Locka; Jose Arriete, 53; Gerard Wenzel, 50; Elias Fleites, 55; Marcelo Fernandez, 41; Lucy Segurola, 51; Ricardo Segurola, 51; and Jorge Lugo, 46, all of Miami. According to the Indictment, defendants Mayra Rodriguez, Mayelin Salas, Nelida Rodriguez, Yamile Segurola, and Lucia Peluffo were employed at companies owned by Magile Cruz (Cruz previously pled guilty and was sentenced in January 2009 to 120 months’ imprisonment for her participation in this scheme). Cruz’s companies included Star Lending Mortgage, State Mortgage Lending, Sherley Title Services, Doral Title Services, and Professional Title Express, all in Miami-Dade County.
  • Indictment #2: Bryan A. Guarch, 29, Richard Pi, 27, Edwin Garcia, 30, Carlos Martinez, 29, Wayne Bermudez, 29, Oscar Quintero, 28, Sunsy Garcia, 29, Ryan Barouh, 27, Jason Cuza, 30, Anthony Silverio, 26, all of Miami, Rafael Jaramillo, 32, of Hialeah Gardens, Mario Estrada Mora, 25, of Miami Beach, and Vanessa Negron, 27, of Boiling Springs, South Carolina.
  • Indictment #3: Sixto Figueroa, 57, and his wife Susy Figueroa, 44, Rolando Herrera, 63, and Manuel Garcia, 40, , Yolanda Garcia-Montes, all of Miami.
  • Indictment # 4: Fielding Dameron, 60, of Miami.
  • Indictment # 5: Stephen LaLonde, 42, of Fort Lauderdale.
  • Indictment # 6: Milennys Foira, 35, of Doral, FL, and Richard Diaz, 26, of Miami, FL, (recruited Jean Claude Cahen, who was previously charged and convicted, to use his identity and credit to buy a selected property in Miami, Florida). EscrowRipOffKappa shotgunning

Milwaukee Mortgage Scam Probe Triggered By Torched Home In Foreclosure; Owner Suspected In Attempt To Force Insurer To Pick Up Tab For Loan Payoff

In Milwaukee, Wisconsin, WISN-TV Channel 12 reports:
  • Milwaukee Police are trying to unravel a mortgage fraud scam involving rundown homes on the city's north side. The investigation started after a house fire investigators ultimately determined was arson. The house [...] went up in flames last April. According to court records, police started looking into the home's history after the fire was declared arson. Neighbors and police were shocked to learn the owner bought the home for $94,000, nearly $40,000 more than its assessed value. It was also in foreclosure.

  • Police suspect the woman burned the house down so the insurance company would have to pay off her mortgage and find her a new place to live.(1) In fact, the owner bought a second house the same day she bought the one that burned. [...] The woman's court record reveals a history of unpaid bills, which should have disqualified her from any legitimate mortgage. Police are now subpoenaing all her financial records to determine who might have stood to profit by approving her mortgages.

***

  • Police are also trying to determine if this is part of larger scheme of others who got mortgages they weren't entitled to or brokers who took fees for selling risky mortgages.

Source: Police Investigate Loan Fraud (April Fire May Have Been Mortgage Scheme).

(1) Some insurance companies cannot be relied on to freely dole out the cash to mortgage lenders when paying out on fire damage claims involving homes in foreclosure without first trying to find a loophole to get out of paying. For an example, see Court OKs Stiffing Of Lender On Fire Loss Claim; Servicer's Failure To Notify Insurer Of Commencement Of Foreclosure Action Voids Coverage.

Caretaker Holding POA Charged With Ripping Off ALS Victim; Failure To Make House Payments Leaves Home Facing Foreclosure, Say Cops

In New Orleans, Louisiana, The Times Picayune reports:
  • A Kenner woman has been booked with theft for allegedly stealing money from a woman with Lou Gehrig's Disease that she helped take care of, Kenner police said. Cherri A. Desporte, 43, lived in the victim's house [...] in Kenner between July 2007 and May 2009, according to a police report. The victim, a 49-year-old woman, has Amyotrophic Lateral Sclerosis, or ALS, also known as Lou Gehrig's Disease, the report said.

  • The victim entrusted Desporte with a power of attorney to pay her home mortgage and medical expenses with medical disability benefits that were directly deposited into an account she shared with Desporte, according to police. The disability benefits were more than enough to cover her expenses, said Lt. Wayne McInnis, Kenner Police Department spokesman.

  • The victim learned about the alleged theft when her mortgage was in foreclosure because of 23 failed payments, the police report said. An investigation revealed $9,093.63 in unpaid bills and a negative balance in the shared account, the report said.

For more, see Kenner woman with Lou Gehrig's disease robbed by caretaker, police say. FinancialAbuseOfElderlyAlpha

SW Florida Man Accused Of Pocketing Cash At Real Estate Closings In Exchange For Seller-Held Promissory Notes, Then Stiffing Sellers With Hot Checks

In Collier County, Florida, the Naples Daily News reports:
  • After he was charged with felonies relating to alleged shady real estate practices twice in a week’s time, it appears that things may still get worse for Douglas Lee Carter. [...] Carter, 63, 1100 Dana Court, Marco Island, who was charged [...] on July 16, with three counts of obtaining goods and services with worthless checks totaling more than $10,000, was charged [July 22] with another felony, obtaining property by fraud in excess of $50,000.

***

  • Detectives with the Sheriff’s Office allege the following, according to the release: “Carter purchased six homes in Collier from the three victims. Using the down real estate market as leverage, detectives say Carter asked the victims to provide him cash as closing to finance other deals. In exchange for their money, he issued them second and third mortgages.” The release goes on to say that Carter told the victims that he needed the money to purchase other properties and promised them interest, adding that his only attempts to pay were in the form of worthless checks, totaling $680,000.

***

  • In 2007, he was involved in a number of real estate deals on Marco Island that led to a 31-person indictment.(1)

For the story, see More charges of real estate fraud added to Marco man's rap sheet.

(1) According to a July, 17, 2009 story (see Marco Island man jailed amid charges of bad deals, broken promises), Carter was allegedly the man behind the real estate deals on that prompted a 2007 indictment involving 31 people — homeowners, mortgage companies, appraisers, real estate agents, bankers and “straw buyers” — who would artificially inflate home prices and then pocket the difference. Many of the homes went into foreclosure. The indictment reportedly contended they’d identify homeowners willing to overstate their home’s values and set them up with “straw buyers” who would allow their identities and credit to be used in exchange for a fee. The case resulted in numerous plea deals and sentences ranging from a low of two months in federal prison up to seven years, in addition to probation after release. Restitution for those bogus loans totaled $6.6 million.

Reportedly, these charges aren't Carter's only scrapes with the law. The Naples Daily News reports that he is currently on probation out of Georgia — seven years for interstate forgery, according to authorities. Since 1984, Carter has been involved in a laundry list of land deals, including mortgage foreclosures and judgments in excess of $30 million. He has been sued on numerous occasions, and was jailed in 1992 on federal marijuana dealing charges. He was released in 1996.

Taxable Income From Debt Cancellation Not An Issue For Many "Underwater" Homeowners Where Lender Refuses To Cancel Unpaid Loan Balance On Short Sales

Many people owing more on their mortgages than what their homes are worth are often concerned about the income tax they may have to pay in a short sale if their mortgage lender agrees to accept less than what is owed in order to agree to such a sale.

However, before a homeowner starts wondering how much income tax may have to be paid on such a transaction, he/she must first find out if the lender will actually agree to cancel the unpaid balance in the first place (ie. no debt cancellation = no income tax). Regrettably, many short sellers are entering this type of deal simply assuming that the bank, in accepting less than what's owed, is letting them off the hook for the unpaid balance of the loan.

For the story of one unpleasant "eleventh hour" surprise for a short-seller (ie. it wasn't until after a prospective buyer was found that a real estate agent for a homeowner learned that his client was to be left on the hook for about $170K ), see San Francisco Business Times: Sellers owe balances after short sales.

See also:
------------------

For those "lucky" underwater/upside down short-sellers able to squeeze a "debt cancellation concession" from their lenders and be let off the hook for the unpaid balance, the following information from the Internal Revenue Service may come in handy in determining how much income tax may be owed to the Feds, and more importantly, whether a homeowner can qualify for one of the law's exceptions from taxation (ie. exception for taxpayers for acquisition or home improvement debt forgiven on their principal residence if the balance of their loan was $2 million or less, insolvency exception, & bankruptcy exception are the three most common) that will allow him/her to dodge the tax either entirely, or at least partially:

Thursday, July 30, 2009

Lenders, Mortgage Servicers Continue To Force Borrowers To Waive Legal Rights As Part Of Loan Modification Process

The Washington Independent reports:
  • Even as the Obama administration presses the lending industry to get more mortgage loans modified, the practice of forcing borrowers to sign away their legal rights in order to get their loans reworked is a tactic that some servicers just won’t give up on. Waivers requiring borrowers to give up any legal claims related to their mortgages, even in cases where borrowers may be victims of predatory lending, are showing up sporadically in loan modification agreements under the Obama administration’s Making Home Affordable plan, consumer attorneys say. They were stunned to find the legal waivers still being used, despite more than a year of efforts – including calls from lawmakers – to get rid of them.

  • It was shocking to see that people are still being asked to waive their legal rights,” said Bruce Dorpalen, national director of housing counseling for ACORN Housing Corp. “I mean, this should be abolished. It’s incredible that it’s still in there.” [...] The Treasury Department’s published guidelines for the $75 billion taxpayer funded program specifically prohibit the waivers. Mortgage giants Fannie Mae and Freddie Mac removed the waivers from their standard loan modification agreements earlier this year. But Diane Thompson, an attorney with the National Consumer Law Center, said she has seen legal waivers resurface in loan modification agreements by Aurora Loan Services, Ocwen Financial Corp., and other firms. She also is getting complaints about waivers in Bank of America agreements. “The waivers continue to be an issue,” Thompson said.(1)

For more, see Loan Servicers Work the Fine Print in Obama Foreclosure Plan (A Year After Calls for Reform, Borrowers Still Forced to Waive Legal Rights for Loan Modifications).

(1) It may be time for the Obama administration to stop throwing money at the lenders and servicers for loan modification programs and redirect the cash towards establishing and supporting foreclosure defense programs for financially strapped homeowners the way Florida Attorney General Bill McCollum recently did. See Attorney General Launches Multi-Million Dollar Grant Program for Foreclosure Defense Assistance (The Florida Bar Foundation will help administer $4 million in grants to legal services applicants).

The thought of having to deal with "producing the notes," and otherwise establishing proper legal standing to initiate foreclosures, as well as addressing allegations of fraud and violations of the applicable consumer protection laws is sure to get the attention of the mortgage industry, in my view. After all, why else are the loan servicers so intent on getting homeowners to waive their legal rights?

Lust For Late Fees Keeping Mortgage Servcing Companies From Making Loan Modifications?

The New York Times reports on what many industry insiders are saying as the real reason mortgage servicers are dragging their feet on modifying delinquent home loans:
  • [I]ndustry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

  • Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

  • It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”

***

  • The rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify,” concluded a recent paper published by the Federal Reserve Bank of Boston.(1)

For more, see Lucrative Fees May Deter Efforts to Alter Loans.

Foreclosure Rescue Bailout Schemers Are "Opportunistic Thieves" Says NJ FBI Agent As Charges Are Filed Against Equity Stripping, Straw Buyer Operation

From the Office of the Federal Bureau of Investigation: (Newark, New Jersey):
  • FBI Special Agent In Charge Weysan Dun announced [Monday] the arrest of Daniel Verdia, Don Apolito, Jaye Miller, and Chrystal Paling (all on Tuesday, July 21), as well as the surrender of Robert Gorman and Philip Blanch (on Friday, July 24)—all in connection with a mortgage fraud scam(1) operated out of an office in Hasbrouck Heights, New Jersey. All of the arrests occurred without incident. The six defendants are each charged with one count of wire fraud, in a joint investigation between the FBI and IRS titled “Operation Follow The Money.(2)

***

  • The following outline is based on allegations made in the criminal complaint. In the simplest terms, a victim home owner [...] was convinced by one of the defendants named above to either sell or refinance his or her home through Monarch Mortgage Services, LLC as part of a foreclosure bailout scheme. The defendants then recruited a straw buyer who was promised a sum of $5,000 for his or her participation. The defendants explained to the straw buyer that the original owner would repurchase the home after a short period of time when the owner had recovered from financial difficulties. The defendants also told the straw buyers that the mortgage payments for the newly purchased properties would be paid by Monarch. The defendants then falsified the financial information in the paperwork associated with the transaction.

***

  • Once the loans were approved, the mortgage lenders wired funds to Blanch’s attorney trust account. At Blanch’s direction, Palings, would then wire all or most of the proceeds to CIS as a fee or payment. In the end, three of the victim homeowners received no compensation whatsoever for the sale of their homes. Furthermore, one of those three victims suffering financial hardship was lead to believe he was refinancing his home when in reality, he sold it for a 100% loss. The other two victims received a fraction of the money they were legitimately owed. The defendants, however, all received financial compensation for each of the five transactions. None of the resulting mortgages from these five transactions were ever paid and all of them went into default. The total fraud in these five transactions is estimated at $1 million.

For the entire FBI press release, see Six Mortgage Industry Insiders Charged by FBI and IRS.

(1) According to the press release, the alleged scam was perpetrated in two phases. The first phase involved misrepresenting to the buyers and sellers the terms of the mortgage financing the purchase, the disbursements of the mortgage proceeds, and the source of the proceeds to pay off the mortgages, among other details. The second phase of the fraud involved falsifying information on the mortgage loan applications—namely the income and assets of the purchasers on the loans, the source of the down payments on new purchases, and the disbursements of cash related to the mortgage proceeds. The defendants allegedly accomplished their misdeeds through numerous interstate wire transfers.

(2)Those who are engaged in foreclosure bailout schemes are opportunistic thieves,” said FBI Special Agent In Charge Weysan Dun. “The defendants in this matter are charged with preying on the financially weak and desperate, our lending industry, and ultimately the taxpayers. To swindle people out of the roofs over their heads is just deplorable. But we will continue working with our partners in uncovering these schemes, bringing the fraudsters to justice, and educating the public.”

Court Stalls Eviction Of Elderly Chicago Woman Victimized In Sale Leaseback, Foreclosure Rescue Ripoff While She Fights To Recover Home

In Chicago, Illinois, WLS-TV Channel 7 reports:
  • A 75-year-old Chicago woman will be allowed to stay in her South Side home - at least for now. Lessie Town's bungalow is threatened by foreclosure. Towns and others say she is the innocent victim of mortgage rescue fraud. Lessie Towns will be able to stay - for now - in her South Side home of 40 years.

  • Four years ago, Ms Towns, who is 75, was facing foreclosure, and she signed what she thought was a refinancing agreement to keep her home. In reality, the papers she signed authorized the sale of her home.(1) [...] Towns continued to live in what she thought was her home even though it had been sold, not once, but twice. "Ms. Towns home was sold for a fraction of its value and the cost was jacked up and sold to another person and the person in the middle collected all that windfall. This was a classic mortgage rescue scheme," said Brent Adams, Illinois Department of Financial and Professional Regulations.

  • Facing possible eviction, Lessie Towns won a small victory in court on Tuesday. The foreclosure action against her will continue, but she'll be allowed to stay in her home while she attempts to prove she did not know she was selling her home when she signed her name four years ago. [...] Ms. Towns still faces what her attorney concedes is a serious challenge. For Ms. Towns bears the burden of proving to the court that she didn't know she was selling her home.(2)

  • No criminal charges have been filed in this case though the department of finance and professional regulation and the attorney general's office are investigating over a dozen similar cases involving the same lender.

For the story, see Woman allegedly swindled out of home allowed to stay.

For an earlier story on this case, see Chicago owner loses home in mortgage scam.

(1) Of the foreclosure rescue operator that ripped off her client, Sabrina Herrell, Towns' attorney, said "I think they understood that she doesn't understand certain terminology and they used that to their advantage to get what they wanted."

(2) Any attempt to successfully void both her unwitting title transfer to the straw buyer and any subsequent title transfers (and any mortgage liens created incident thereto) to subsequent purchasers and encumbrancers could turn on whether the subsequent purchasers and encumbrancers can be charged with inquiry notice of the alleged fraud and/or any other unrecorded rights (ie. equitable mortgage) the scammed homeowners can establish that they had at the time of the relevant conveyances.

Under Illinois law, the continued open and visible possession of the home by the scammed homeowners after being duped by the foreclosure rescue operator may be sufficient to charge those subsequently acquiring title and security interests in the home with notice of the fraud, and thereby disqualifying them from bona fide purchaser status. An Illinois appeals court ruling in Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 467 N.E.2d 277 (1st Dist. 1984) addresses this point:

  • Illinois courts have uniformly held that the actual occupation of land is equivalent to the recording of the instrument under which the occupant claims interest in the property. (Bullard v. Turner (1934), 357 Ill. 279, 192 N.E. 223; Beals v. Cryer (1981), 99 Ill. App. 3d 842, 426 N.E.2d 253). The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take subject to the rights of the person in possession. Williams v. Spitzer (1903), 203 Ill. 505, 68 N.E. 49.

Likewise, citing heavily to the Illinois state case law, a Federal bankruptcy court in In re Cutty's-Gurnee, Inc., 133 B.R. 934 (Bankr. N.D. Ill. 1991) made this observation on the effect of continued possession on subsequent purchasers and encumbrancers:

  • It is clear that where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the subsequent lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection. Miller [v. Bullington], 381 Ill. [238] at 244, 44 N.E.2d [850] at 853; Burnex Oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539, 544 (1st Dist. 1969); In re Ehrlich, 59 Bankr. 646, 650 (Bankr. N.D. Ill. 1986).

Go here for more on the effect of continued possesion on bona fide purchaser/encumbrancer in Illinois.

For cases that support the proposition that possession of real estate by one other than the seller is enough to trigger this imposition of the duty to inquire as to possible unrecorded rights of the possessor, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Schumer To Private-Equity Landlord That Abandoned 19 Bronx Buildings: "You Are The Lowest Of The Low!" - Also Slams Fannie For Facillitating Bad Deals

In The Bronx, New York, the New York Daily News reports:
  • The vultures are coming home to roost. Affordable housing advocates sounded the alarm during the real estate boom, as private equity firms bought up dozens of rent-controlled buildings across the Bronx. The advocates warned the investment firms would seek to maximize their returns by pushing existing tenants out and jacking up rents. After the boom went bust, an even worse effect of "predatory equity" came to light: Overleveraged landlords are simply abandoning their buildings altogether.

  • Last week, Sen. Chuck Schumer, joined by Rep. Jose Serrano and Borough President Ruben Diaz Jr., came to 1804 Weeks Ave. to support its tenants, who were abandoned by their landlord, Ocelot Capital Group.

  • "You are the lowest of the low. You are vultures preying on these tenants," Schumer said of Ocelot, which has abandoned 19 Bronx apartment buildings to disrepair and foreclosure. Schumer also slammed Fannie Mae, the government-backed mortgage broker, for facilitating Ocelot's original overleveraged loan and then planning to sell the foreclosed buildings in an online auction, which Schumer called an invitation to more speculators. [...] Schumer pointed out the original Ocelot mortgages did not even meet Fannie Mae's own criteria.

***

  • According to tenant advocates, Ocelot's 19 buildings have a total of 2,000 C violations - the most life-threatening kind - including broken locks, broken windows and ceiling holes.

For the story, see Tenants stuck in dilapidated buildings as landlords flee.

Click here to see a slideshow of conditions at one building.

In related stories, see:

  • City Limits: How To Structure A Good Purchase Of Bad Debt (As a group of decrepit buildings in the Bronx moves closer to getting a new owner, housing officials, developers and activists negotiate the best way to obtain reliable management),
  • Crain's New York Business: 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). Overleveraged NYC Buildings

West Virginia Woman Accuses Ex-Fiance Of Swiping Her Interest In Real Property Through Forgery, Then Pledging It As Collateral For Mortgage Loan

In Ripley, West Virginia, The West Virginia Record reports:
  • The ex-fiancee of a Charleston businessman says she never really was his fiancee, and before he claims any interest on property they own in Jackson County, he needs to account for an alleged slight-of-hand he pulled on another piece of property they own in Kanawha County.

***

  • In addition to answering [her ex-boyfriend's Donald L. Tate's] complaint, [Annetta S.] Fields filed a counter-claim against Tate. In it, she alleges he fraudulently gained sole possession of a piece of real estate they jointly owned in Charleston. Her counter-claim alleges she and Tate bought property [...] in Charleston [...] on Aug. 14, 2007. Records show they paid $40,000 for it.

***

  • About a year after they bought the property, records show it was sold again on Sept. 22. However, this time Fields alleges it was done without her knowledge or consent. According to her counter-claim, Fields alleges she was "divested of her ownership in the property by a conveyance to [Tate] of all her right, title and interest…for less then One Hundred Dollars ($100) consideration." The new deed, which also is included as an exhibit, showing her transferring sole ownership to Tate, is "a forgery and a fraud," Fields alleges, since she "never authorized any individual to sign her name to the deed." Fields avers that "her name is misspelled" and she "only became aware of the deed recently after it was discovered by a third party." According to Fields, the new deed "was signed after the parties were no longer purportedly engaged."

  • Furthermore, Fields alleges she was informed that Tate used the [...] property as collateral for a loan to acquire [a car] dealership in Ripley. [...] In addition to never consenting to the conveyance, Fields maintains she "never consented to the pledge of this property as security of a loan of such purpose at any time." Tate's "fraudulent conduct," Fields alleges, has "unjustly and unlawfully deprived of her valuable property."

For the story, see Ex-fiancee files counter-claim against Tate. DeedContraTheft

Soon-To-Be Ex-Real Estate Agent Cops Plea To Forging Name Of Unwitting Victim On Loan Documents To Acquire & Finance Home Purchase

In San Bernardino, California, the Contra Costa Times reports:
  • Chino Hills real estate agent who forged more than $900,000 in loan documents to purchase a home pleaded guilty to two felonies Friday in San Bernardino Superior Court. As part of a plea bargain reached with prosecutors, Anita Andres Mendoza, 44, will be sentenced to 90 days in jail and be placed on probation for three years, Deputy District Attorney Vance Welch said. She will be required to pay back $180,000 lost by a mortgage company victimized in her scheme, Welch said.

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  • The forgery was discovered when a lending institution contacted the woman whose signature Mendoza allegedly forged. Welch said that prosecutors offered Mendoza a relatively lenient plea bargain because she confessed completely when contacted by investigators. [...] Welch said that because of her convictions, Mendoza will likely lose her real estate license.

For the story, see Chino Hills woman pleads guilty to forging home loans.

Wednesday, July 29, 2009

Frank Threatens To "Cramdown" Lenders, Mortgage Servicers For Foot-Dragging On Loan Modifications

The Associated Press reports:
  • A senior House Democrat threatened banks Wednesday that if they don't volunteer to save more homeowners from foreclosure, Congress will make them. In a sternly worded statement, Rep. Barney Frank said Congress will revive legislation that would let bankruptcy judges write down a person's monthly mortgage payment if the number of loan modifications remain low. Frank, chairman of the House Financial Services Committee, also said his committee won't consider legislation to help banks lend unless there is a "significant increase" in mortgage modifications. Frank's statement was aimed at adding momentum to a deal struck Tuesday between Treasury Secretary Timothy Geithner and more than two dozen mortgage companies. The two sides agreed to set the goal of adjusting 500,000 loans by Nov. 1.

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  • "People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different," Frank said.

For more, see Frank threatens banks to stop foreclosures.

Florida AG To Make $4M Available To In-State Non-Profit Legal Services Firms For New Foreclosure Defense Assistance Program

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum and The Florida Bar Foundation [Tuesday] announced a new foreclosure defense assistance program, funded by money obtained by the Attorney General through a settlement with Countrywide Financial. A total of $4 million will be available over two years to fund additional lawyer and paralegal positions devoted to providing free assistance to homeowners facing foreclosures who cannot afford legal defense. [...] The funds are being distributed through The Florida Bar Foundation in the form of annual grants awarded to non-profit organizations that have their applications approved. The grants will vary in size depending on the number of foreclosures experienced in a particular area. A total of $2 million is available for distribution this year, and another $2 million will be available next year.

For more, see Attorney General Launches Multi-Million Dollar Grant Program for Foreclosure Defense Assistance (The Florida Bar Foundation will help administer $4 million in grants to legal services applicants).