Ohio AG Tags Home Improvement Firm With Allegations Of Shoddy, Incomplete Work; Accused Of Pocketing Upfront Customer Money, Failing to Give Refunds

From the Office of the Ohio Attorney General:

• Ohio Attorney General Richard Cordray filed a lawsuit [last week] charging Akron Asphalt, a driveway paving company, with failing to deliver promised services and performing shoddy work. The complaint, filed in the Summit County Court of Common Pleas, charges the company with several violations of Ohio consumer law. "We received several complaints from consumers who said this company took their money without delivering promised results," Attorney General Cordray said. "After investigating the company's business practices, we discovered that it routinely failed to deliver and did unprofessional work."

• The Attorney General's Office currently has four unresolved consumer complaints against Akron Asphalt. In the complaints, consumers said they hired the company for asphalt installation, grading work, seal coating and other driveway repairs. They paid anywhere from $750 to $4,000 but said the company failed to complete the work and refused to refund their money.

For the entire press release, see Cordray Sues Akron Home Improvement Company for Fraud.

For the lawsuit, see State of Ohio v. Sands, Akron Asphalt.

Condo Renters Live In Limbo In Boston "Triple Decker" As Investor/Landlords Stiff Mortgage Lenders & Go AWOL

In Boston, Massachusetts, Open Media Boston reports:

• Wanda Castle does just about everything the owner of a Boston triple-decker would do to maintain her property, including basic repairs and paying for water and electricity in common areas of the building. And if this were a normal situation, Ms. Castle – who has lived in this building on the Roxbury/Jamaica Plain border as a tenant for two and a half years - would be paying a regular, stable, rent to live there.

• But the situation is anything but normal. Wanda Castle, her fourteen year old daughter, and her neighbor Inell Mendez, are living in limbo as the banks and mortgage service companies that own the three separate condo units of this triple-decker figure out what to do with these properties sitting on the edge of foreclosure; known in banking parlance as “non-performing assets.” The mortgages, apparently, are in default, but according to Ms. Castle, she and her neighbors have not received an official notification of foreclosure or eviction.

For more, see Tenants Left In Limbo by Missing Condo Owners; Advocates Call On Banks To Help Create Housing Coops. RentSigmaSkimming

Penn. Man Accused Of Torching Home In Alleged Attempt To Use Insurance Proceeds As A "Foreclosure Bailout" Of Delinquent Mortgage; Blames God For Fire

In Lackawanna County, Pennsylvania, WNEP-TV Channel 16 reports:

• They say desperate times mean desperate measures, and perhaps the saying can apply to an arson case in Lackawanna County. Tuesday police arrested Manfred Lennartz, 60, of Jermyn. Investigators said he torched his own home to avoid foreclosure. Lennartz insists the fire that destroyed his home near Chapman Lake was an accident. "It was an act of God," he said. "They should have arrested God, because a tree fell on my power line," Lennartz said as he was led from the Lackawanna County courthouse.

• Police said he did it for the insurance money. The home was destroyed by fire in the early morning hours of March 23. Investigators said the home was supposed to go up for sheriff's sale the very next day. Neighbors who spoke to police said the fire started around 1 a.m. One neighbor told police he saw Lennartz's small, black car pull away from the home moments before flames engulfed the house.

For the story, see Man Charged with Torching Home.

NYC Cop Charged With Attempted Section 8 Rent Subsidy Ripoff

In New York City, The Associated Press reports:

• A New York City police officer has been arrested on charges she forged pay stubs to be eligible for city subsidized housing. The Manhattan District Attorney's office says Simone Smith was charged Wednesday with welfare fraud and forgery and has been placed on modified duty. She became an officer in 2007. The city's Department of Investigation says Smith submitted pay stubs claiming she earned only $32,258 in 2008, when she really made over $58,000. DOI says Smith, who's lived in Section 8 housing since 1998, stood to get more than $7,000 in rental subsidies she wasn't eligible for. She faces four years in prison if convicted.

Source: NYPD cop arrested on welfare fraud charges.

"Blowout Bash" Promoter Suspected Of Hijacking Vacant Million Dollar Homes For Sale Or In Foreclosure To Throw All-Night Teen Parties

In San Diego County, California, North County Times reports:

• When the market got down, apparently, so did some kids. But the party may be over for a jailed San Marcos man, charged Wednesday with breaking into upscale but empty North County homes to throw large and destructive bashes for profit. Jovan Peter Araujo, 21, pleaded not guilty to two felony counts each of burglary and vandalism.

• Prosecutors suspect he was organizing and promoting blowout bashes, breaking into vacant homes and ---- putting the "band" in abandoned? ---- threw parties, charging party-goers $5 a head to attend. Fallbrook Sheriff's Detective Jeff Lauhon said Araujo and friends allegedly scouted secluded million-dollar homes that were either for sale or in foreclosure. [...] "They'd go out and find houses that were vacant, no neighbors, long driveways ---- you know, ideal party houses," Lauhon said. Authorities say the crews used MySpace to alert teens about upcoming parties, and provided phone numbers for kids to call on the day of the party to get the address. Officials say the raves ---- all-night dance parties ---- left trashed homes in their wake, with unsuspecting real estate agents and property owners shocked to find the mess.

For the story, see San Marcos man charged with throwing parties in vacant upscale homes.

In a related story, see Deputies target ‘party crews’ (Vacant homes trashed by throngs of revelers).

Association With Legal Profession Bad For Pit Bulls' Image, Or Vice Versa???

Texas attorney John Browning, a partner in the Dallas office of Gordon & Rees, LLP, offers his commentary on the topic of lawyer advertising in a recent issue of The Southeast Texas Record:

• As anyone who's ever watched daytime or late night television can attest, "classy" is not a word one would associate with most lawyer advertising. Whether they're calling themselves things like "The Hammer," riding in tanks or promising you big money for your injuries (whether you know you've been injured or not), lawyers in many commercials come across as well, kind of sleazy.

***

• Some states restrict advertising that reflects poorly on the legal profession, such as the Florida Supreme Court's decision to discipline the lawyers who used a pit bull logo and "1-800-PIT-BULL" phone number in their advertising. Ironically, the only non-lawyer who had complained was a pit bull breeder who felt that being associated with lawyers was bad for the dogs' image!

For more commentary on lawyer advertising, see Legally Speaking: Low Points in Lawyer Advertising.

For the Florida Supreme Court's "pit bull" ruling (imposing discipline on two attorneys for using television advertising devices invoking the pit bull breed of dog which, according to the court, "demean all lawyers and thereby harm both the legal profession and the public’s trust and confidence in our system of justice"), see Fla. Bar v. Pape, 918 So. 2d 240; 2005 Fla. LEXIS 2287 (2005).

Federal Court Ruling May Complicate Loan Modifications As Investors In Securitized Trusts Assert Their Rights Against Mortgage Servicers

The New York Times reports:

• A federal judge in Manhattan has rejected an argument by Countrywide Financial seeking certain protections from investor lawsuits under new legislation intended to encourage modifications of home loans. Countrywide, the big mortgage company, had argued that the legislation automatically voided its pledges to buy back loans from investors if those loans were modified for troubled borrowers.

• The ruling is a win for holders of mortgage-backed securities who sued Countrywide in December after the company, now a unit of Bank of America, agreed to modify thousands of loans in a settlement with state attorneys general. The opinion, by Judge Richard J. Holwell of Federal District Court in New York, was made public on Tuesday. The case against Countrywide is being closely watched by pension funds, insurance companies and other investors in mortgage securities who contend that loan servicing companies that agree to change the terms of mortgages are breaching contractual obligations to owners of those loans.

***

• Bank of America, which took over servicing of the investors’ loans when it bought Countrywide in 2008, is defending the case. It argued that the matter belonged in federal court and that any contractual obligations to repurchase modified loans were trumped by the Helping Families Save Their Homes Act of 2009. Under that law, servicing companies that agree to modify loans receive some protection from liability arising from the loan changes.

For more, see Countrywide Loses Ruling in Loan Suit.

(1) Reportedly, Judge Holwell ruled that the immunity granted under the legislation did not prevent Countrywide’s investors from trying to enforce their rights under the mortgage securities contracts. The investors must prove that Countrywide’s pooling and servicing agreement covering their loans does indeed require it to repurchase mortgages the bank modifies, the judge said, ruling that the case belongs in state court.

Indianapolis Feds Indict Ex-Waiter For Alleged Role In Running Massive Mortgage Fraud Scam Involving 110+ Fraudulent Real Estate Deals

In Indianapolis, Indiana, The Indianapolis Star reports:

• A former waiter who became a high-profile Indianapolis real estate investor in the easy-money era of the 2000s has been indicted by a federal grand jury in a mortgage fraud case that set off mass home foreclosures on the Eastside. Robert Andrew Penn, 44, was charged with conspiracy to commit wire fraud, wire fraud and conspiracy to launder money, the U.S. attorney's office in Indianapolis announced Monday.

• Penn, now living in Naples, Fla., had owned and operated several businesses that borrowed $12.6 million from 2003 to 2005 to carry out what officials allege were 114 fraudulent real estate transactions, including the highly publicized Windsor Village deal. Its collapse pushed dozens of homes in the modest Eastside Indianapolis neighborhood into foreclosure.

For more, see Investor indicted in mortgage fraud (Case is linked to string of foreclosures on Eastside).

Canadian Authorities Turn Over Apprehended Fugitive Accused Of Running Loan Modification Racket To State Department For Shipment Back To California

In Niagara Falls, Ontario, The Niagara Falls Review reports:

• A U. S. man wanted in California for fraud and larceny has been arrested at the Rainbow Bridge. Canada Border Services Agency notified their U.S. counterparts Thursday that a 25-year-old man was being returned stateside. U.S. Customs and Border Protection was told the man was living in Toronto under an assumed name when he was arrested in July and charged with importing false documents.

• CBP officers verified the man was the subject of a U.S. Department of State Diplomatic Securities Service warrant for passport fraud and is also wanted on nine felony counts of larceny. According to the CBP, the suspect had operated a business named Legal Support Services which offered foreclosure prevention services to clients on the brink of foreclosure. Charged with various offences is Amir Rashidifar. Rashidifar was turned over to agents with the Diplomatic Security Service pending extradition to California.

Source: Man sent to U. S. on fraud, larceny charges.

In a related story, see Niagara Gazette: Customs agents make second arrest for fraud:

• U.S. Customs and Border Protection agents have made a second arrest in connection with a California mortgage fraud case. Mary Margaret DelVecchio, 28, of San Jose, California, was taken into custody Wednesday at the Rainbow Bridge. DelVecchio had been deported from Canada earlier in the day for violating her visitor status. Customs agents said DelVecchio is wanted on nine felony counts involving theft of personal information, false personation and conspiracy to commit a crime. Agents said DelVecchio admitted that she is the girlfriend of Amir Rashidifar, who was arrested by CBP Officers on Aug. 13 for similar outstanding warrants in California.

Would-Be First Time Homebuyers Begin Running Out Of Time For $8K Income Tax Credit

The Baltimore Sun's Real Estate Wonk blogger writes:

• Determined to get the $8,000 tax credit for first-time buyers?(1) Keep in mind that the Nov. 30 deadline isn't about signing a contract -- you need to get to closing no later than that day. So says the IRS, which specifically uses the word "close."(2) This matters because you'll want to allow at least 30 days -- and probably more like 60 -- for a normal transaction to go from contract to closing. Even if there's nothing unusual about the home you're buying, you could find yourself delayed by issues relating to the loan, the appraisal, the home inspection -- you name it. That goes double if you want something more complicated, such as a foreclosure. What if you're having a home built for you? The IRS says you have to be physically occupying the place by Nov. 30. More Q&As here.

• Some real estate sites, wanting to remind you that "now is the time to buy," have countdown clocks. [...] Do you feel the pressure? Or do you have a "whatever will be will be" philosophy on the credit? (Or perhaps you're purposely waiting until the credit's gone?) The Wall Street Journal, sounding a cautionary note,(3) profiles a first-time buyer who recounts all the things he did wrong in the rush to get the $8,000. For instance, getting into a bidding war on a foreclosed home he saw only briefly, and not "taking into consideration taxes, homeowners' association fees, and the cost to fix up and maintain a distressed property."

For the story, see The clock is ticking on the $8,000 tax credit.

(1) Believe it or not, an individual need not actually be a first time homebuyer to qualify for the First Time Homebuyer Credit. Any individual who has not owned another principal residence at any time during the three years prior to the date of purchase can qualify for the credit. So, for example, if you owned a home and lost it to foreclosure, say, four years ago, and have since been either renting, shacking up with your girlfriend or boyfriend (or both) at their place, living in your mother's unheated/un-air conditioned basement, or otherwise freeloading off of somebody, you are considered to be a "first time homebuyer" for purposes of qualifying for the First Time Homebuyer Credit. Also, a taxpayer who owned a principal residence outside of the United States within the last three years is not disqualified from taking the credit for a purchase within the United States. For more infomation, See Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers: Basic Information (Who is considered to be a first-time homebuyer? Would I be considered a first time homebuyer if I owned a principal residence outside of the United States within the previous three years?).

By the way, the credit is claimed on new IRS Form 5405, First-Time Homebuyer Credit, and filed with your 2009 federal income tax return. According to this form, the credit is available on the purchase of a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence, provided you make it your main home (the one you live in most of the time).

Also, for those thinking of rushing out and buying and living in a tent, a tree house, an old dilapidated recreational vehicle or mobile home, or other form of "low cost housing" in order to "game the system" and grab the $8,000 income tax credit, the amount of the credit is limited to 10% of the home's purchase price, if the purchase price is less than $80,000. For more information, see IRS Form 5405. For those seeking to "game the system" anyway, see IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud.

If two unmarried people buy a house together, IRS Notice 2009-12 provides guidance for allocating the first-time homebuyer credit between taxpayers who are not married.

(2) In cases involving certain so-called "rent-to-own" and other deferred payment situations where a seller retains legal title to the home until all payments are made, an actual "closing" may not be necessary for a would-be first-time homebuyer to qualify for the tax credit, provided that the arrangement causes a sufficient passing of the "benefits and burdens" of home ownership from the seller to the would-be buyer. The IRS addresses the passing of the "benefits and burdens" of ownership in the following Q&A (See First-Time Homebuyer Credit Questions and Answers: Basic Information):

• Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?
  .
  A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

In some so-called "rent-to-own" situations in which a would-be homebuyer enters into a purchase contract with the seller that calls for an extended closing date (ie. a "slow close"), and where the homebuyer obtains immediate possession of the premises and begins making "rent" payments to the seller in the interim, he/she may be entitled to the tax credit in such a situation, provided a sufficient amount of the "benefits and burdens" of ownership (as described in the IRS Q&A, above) have passed to him/her.

(3) See The Wall Street Journal: Rookie Home Buyer Mistakes (Rushing to grab the tax credit and caught up in a bidding war over a distressed property, a first-time home buyer omits the basics).

Wisconsin Mortgage Broker License Eligibility Nearing An End For Drug Dealers, Embezzlers, Extortionists, Forgers, Killers & Other Assorted Felons???

The Milwaukee Journal Sentinel reports:

• Drug dealers, embezzlers and extortionists would be among the felons banned for life from obtaining a mortgage broker's license, according to legislation introduced Tuesday by Rep. Jon Richards (D-Milwaukee). The bill, which has 11 co-sponsors in the Assembly and Senate, also would slap the lifetime prohibition on those convicted of felonies involving theft, forgery, perjury or deceit. Richards said in March that he would bring the legislation after the Journal Sentinel reported that more than 340 admitted criminals - including drug dealers, burglars, thieves and a killer - held broker's licenses last year. Brokers take loan applications - documents that contain a person's detailed financial history - and arrange mortgage loans.

For more, see Bill would ban some felons from mortgage broker licenses.

Arizona Mortgage Broker Cops Plea In Loan Fraud Conspiracy; Will "Sing" To Feds In Prosecution Of Alleged Cohorts; Foreclosing Lenders Take $1M Hit

From the Office of the U.S. Attorney (Phoenix, Arizona):

• Jake David Abegg Whitman, 33, of Mesa, Ariz., pleaded guilty on August 18, 2009, to one count of Conspiracy to Commit Bank Fraud and seven counts of Bank Fraud. Whitman played a leadership role in the underlying conspiracy, which involved 19 unimproved residential properties in the greater Phoenix area. The objective of the conspiracy was to obtain mortgage loans that were substantially larger than the actual value of the properties—often by hundreds of thousands of dollars. Whitman owned 10 of the properties and served as branch manager of the mortgage broker, Academy Mortgage, that processed the loans.

• As part of the conspiracy, Whitman worked with a hand-picked appraiser to obtain inflated appraisals for the properties. He also recruited buyers to purchase the properties at those inflated prices. The buyers typically lacked the income and assets to provide the down-payment or to make the mortgage payments. To overcome this, Whitman secretly supplied the down-payment to the buyers (without disclosing this arrangement) and also provided “cash back” to the buyers at closing. The properties eventually went into foreclosure and cost lending institutions nearly $1,000,000 in losses. Whitman is cooperating with authorities in the prosecution of others.(1)

For the entire press release, see Mortgage Officer Pleads Guilty To His Role In Cash-Back Mortgage Fraud Scheme.

(1) According to the press release, Whitman’s plea is part of an initiative called “Operation Cash Back” in which 40 defendants were indicted and arrested, including many real estate professionals, in June 2008. To date, 18 have entered guilty pleas.

Residents In Western Pennsylvania Mobile Home Park Face Eviction After Land Owner Loses Property To Foreclosure

In Robinson, Pennsylvania, the Pittsburgh Tribune Review reports:

• Off Route 22 in Washington County, doors and loose siding on empty trailers rattle in the summer breeze, and 12 families find themselves facing an eviction order. Many tenants of Maple Grove Trailer Park in Robinson live month-to-month on fixed incomes; some are slowed by age or illness; others own trailers too old to move or that can't be moved because of additions and renovations. But on Aug. 5, a constable handed out papers saying they had until Thursday to move, on the orders of the latest in a succession of owners.(1)

***

• Under the state's Mobile Home Park Rights Act, the residents' legal rights could hinge on their lease and the new owners' plans for the property, said Kenneth Hirsch, a professor at the Duquesne University School of Law. "As long as it's a trailer park, the residents have the right to stay on forever as long as they comply with park rules and pay their rent," Hirsch said. "The exception is if the new owner intends to close down the trailer park. That has to be at the end of the lease period, and they have to be given more than 15 days." No applications for development or a change in use at the park have been filed with the township, Dorsey said. However, if the lease is for less than a year or the tenants are staying from month to month, the 15-day notice could be legal, Hirsch said.

For more, see Maple Grove Trailer Park residents ordered out by new owner.

(1) According to the story, the trouble began after the trailer park's previous owner David Dewald died of cancer in 2007 and his wife, Celeste, took over, residents said. Financial trouble sent the property into foreclosure, and it was sold to Bayview in a sheriff's sale in July 2008, said Capt. Jim Altman, who oversaw the Washington County Sheriff's Auction.

Beware Of Mortgage Loan Servicers Bearing Gifts: Hi-Credit Score Homeowners Get Slammed After Receiving Loan Mods Despite Never Missing House Payment

A recent story in The Oregonian serves as a cautionary tale to those "high credit score" homeowners who are current on their mortgage payments, but nevertheless considering seeking a loan modification:

• Here's a twist: What if your lender actively encouraged you to modify your loan -- and then reported you as delinquent, prompting credit card companies to treat you as a deadbeat? That's what happened to two local CitiMortgage Inc. customers. Both spent hours on the phone trying to straighten out the mess, and one is still unresolved.(1) It's still the Wild West out there when it comes to staving off foreclosure.

For the details of how two Oregon homeowners were (temporarily) screwed over on their credit histories after receiving loan modifications they were encouraged to take from their loan servicers, despite never having missed any mortgage payments, see Modifying loans creates credit mess, not relief.

In related stories, see:

• Credit.com: Credit Reporting Industry's Decision on Loan Modifications Boxes in Consumers,
• Bloomberg News: Cheaper Mortgages Trigger Lower FICO Scores for On-Time Payers,
• Mortgage Servicer Encouragement To Default On House Payments To Qualify For Workout A Common Complaint From Homeowners Seeking Loan Modifications.

(1) I have been informed that, subsequent to the original publication date of this story in The Oregonian, the remaining unresolved credit report mess for one of the homeowners has now been cleaned up by CitiMortgage (apparently, the folks over at CitiMortgage read The Oregonian). An example of a mortgage lender or loan servicer feeling shamed by the media spotlight into doing the right thing, maybe???

Loan Modification Nightmares Begin to Pile Up

McClatchy Newspapers reports:

• A story Sunday on how lenders aren't following through on promises of modifying distressed mortgages, prompted an outpouring of comments and e-mails from others with similar tales of woe.

For some of their stories, see More nightmares from the world of mortgage modifications (Borrowers still have little chance of getting payments lowered).

Bogus Fee Complaints Continue Rolling In Against Loan Servicer Despite Settlement In Class Action Lawsuit

ConsumerAffairs.com reports:

• Four months after [Goldman Sachs-owned] Litton Loan Services settled a class action accusing the company of imposing bogus late fees,(1) complaints about Litton continue to roll into ConsumerAffairs.com. Some consumers allege that Litton failed to timely post payments to their accounts, the main issue in the class action. Still others get the run-around from the mortgage servicing company on the possibility of receiving a loan adjustment, leading to confusion and, in many cases, the threat of foreclosure.

***

• In April, Litton settled a class-action lawsuit alleging that the company failed to credit borrowers' mortgage payments in a timely fashion, then turned around and charged late fees for the purportedly tardy payments. In some cases, consumers' accounts were put into default. The suit covered all homeowners whose mortgage transaction was transferred or sold to Litton between October 2002 and February 2009, and who were charged erroneous late fees within 60 days of the transfer.(2)

For more, see Litton Loan Complaints Continue Following Settlement (Distressed homeowners target Goldman Sachs subsidiary).

(1) According to the story, in July 2007, a federal judge in California certified a class of plaintiffs alleging claims under the Real Estate Settlement Procedures Act, or RESPA. The case was settled in April; as part of the agreement, Litton agreed to create a settlement fund containing $537,500, from which plaintiffs can draw up to $60 each. The narrow definition of the class and relatively small settlement amount likely left some consumers disappointed, but it at least signaled that Litton was willing to put the issue to rest.

(2) Litton Loan Servicing has recently been targeted by ACORN's "Home Wreckers" campaign targeting mortgage lenders that aren't adjusting loans under the Obama administration's $75-billion Making Home Affordable program and other home-saving efforts from the federal government. See Los Angeles Times: ACORN protests Litton Loan Servicing outside foreclosed home in L.A.

NYC Convicted Deed Thief, Welfare Cheat Now Faces New Charges In Alleged Straw Buyer Scam

In New York City, the New York Daily News reports:

• Old con men never die - they just find a new scam. Herbert Steed, who famously went to jail in the '90s for collecting welfare while living large in a Trump Tower pad,(1) is now charged with a fresh $1.5 million mortgage ripoff. The 78-year-old fraudster faces up to 65 years in prison for allegedly using fake buyers to purchase properties in Harlem and Richmond Hill, Queens.(2) [...] In addition to the federal charges, Steed is awaiting sentencing for forging a deed and stealing a Queens woman's house.

For more, see Herbert Steed, who once collected welfare while living in Trump Tower, charged in mortgage scam.

(1) According to the story, Steed applied for and received public assistance in the early '90s when he was living in a spacious 37th-floor Trump Tower apartment with marble baths. Steed plunked down a $27,000 deposit, which he allegedly swindled from a tour group, to land the swank pad, which he shared with a 23-year-old girlfriend. On his welfare application, Steed claimed he had no job and no income and lived in a small apartment in Queens. Steed was tried and convicted for the scam. He was sentenced to 5-to-15 years in prison for scamming welfare and the tour group. He was paroled in 1999 after serving the minimum.

(2) According to the story, the federal court complaint states that $206,000 from the alleged dirty deals went to Home Mergers LLC, a shady foreclosure firm. It in turn wrote a check for $20,000 to an entity Steed controlled called Pan African Tours. Prosecutors said Home Mergers was run by Maurice McDowall, a Brooklyn man who last year pleaded guilty to swindling dozens of people out of their homes in foreclosure rescue, equity stripping scams. He was sentenced to 10 years in prison.

Another Foreclosure Screw Up Forces South Florida Family Into Temporary Homelessness

In Homestead, Florida, NBC Miami reports:

• You know times are tough when people are getting kicked out of their house when it’s not even for sale. That’s what happened to Anna Ramirez after she found all of her stuff out on the front lawn of her Homestead home last week and a strange man demanding she get out of his newly purchased house. The eviction came after Ramirez’s home was mistakenly auctioned off to the highest bidder by her bank, Washington Mutual. [...] What's worse is her husband, daughter and grand children were also kicked out by Homestead and Miami-Dade police officers, said Martha Taylor, who witnessed the unexpected eviction.

***

• Ramirez and her family had three hours to get out of the house, police ordered. They had to stash their belongings at multiple locations and shacked up with a friend for the night as cops chained the doors of their home.

• With Taylor's help, Ramirez appeared before a judge two days later to explain what happened. "I had all my stuff scattered everywhere," she said. "They did this in front all my neighbors. It was so embarassing." A mistake in the Miami-Dade Clerk's Office appears to be behind the mishap, which landed Ramirez homeless for more than 24 hours.

• The sale was eventually reversed by a Miami-Dade judge, allowing Ramirez to return to her old digs. Ramirez said she wants to sue for the damage to her furniture.(1) Ramirez has lived in the house for three years and recently refinanced the home with the bank.

For the story, see My Bad! Woman's House Mistakenly Auctioned by Bank (A Homestead woman's home was auctioned to the highest bidder).

(1) In a related post where the Nevada Supreme Court approved a court judgment of over $1 million for a homeowner involved in a similar foreclosure screw up, see Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure.

For the Nevada Supreme Court decision, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008). ForeclosureLockOuts

State High Court Task Force Issues Report & Recommendations On Florida Foreclosure Crisis

In Tallahassee, Florida, the Miami Daily Business Review reports:

• Florida Supreme Court task force is calling for uniform mandatory mediation for all residential foreclosure cases in the state to deal with the tide of foreclosures that has swamped courthouses. The proposal, obtained by the Daily Business Review, calls for all circuits to implement a mediation process modeled on a program used by the Miami-Dade Circuit Court and two others, where lenders pay for the mediation and borrowers provide their financial information to the lenders.

***

• If the proposals are adopted by the Florida Supreme Court, it would be the first instance of a uniform statewide effort in Florida to handle the glut of foreclosure cases clogging courthouses. [...] In cases where borrowers aren’t located, the task force also recommends a new form for process servers to fill out to demonstrate they undertook a diligent search to find the borrowers.(1)(2)

For the story, see Mandatory mediation urged to help streamline process.

See also, The Wall Street Journal: Florida Court Wants Mandatory Mediation on Foreclosures.

Go here for the Florida Supreme Court Task Force's Final Report And Recommendations On Residential Mortgage Foreclosure Cases.

(1) This recommendation reflects the apparent concern the task force has in curbing "sewer service" by unscrupulous process servers. See Miami Daily Business Review: Judge grapples with her discovery of 15,000 unserved foreclosure cases.

(2) Other recommendations include: adopting uniform statewide forms and procedures; creating a central statewide foreclosure Web site to provide basic information now "strewn haphazardly across the Internet"; consumer education on avoiding foreclosure scams; and aggressive prosecution by the Florida Bar of attorney misconduct.

Show Me The Original Note And I Will Show You The Money!

On the Credit Slips blog, consumer bankruptcy attorney O. Max Gardner III writes:

• As mortgage delinquencies rise each month, and as the number of foreclosures increase each quarter, the “new mantra” of many pro-se and represented consumers is to demand that the mortgage servicer “prove up the original note.” Is this just some new and creative gimmick that has been sold to the desperate homeowners and to a few lawyers who have attended “progressive” seminars or is there really something to it? I submit that there is really something to it.

For more, see Show Me the Original Note and I Will Show You the Money.

For more from consumer bankruptcy attorney O. Max Gardner III, see:

• What Does RESPA Have to do with Consumer Bankruptcy Cases? (How a standard 10-question "Qualified Written Request" can provide the attorney for the Chapter 13 debtor with some of the very best discovery outside of a contested case or Adversary Proceeding),

• Max Gardner’s Top Resasons for Wanting a Pooling Servicing Agreement (20 reasons you need to request through formal discovery in any mortgage-related lawsuit the PSA Agreement and why it is relevant).

Go here to view the ABC News' Nightline story in which ABC News reporter Vicki Mabry interviews attorney O. Max Gardner III and nationally renowned mortgage servicing fraud victim's advocate Mike Dillon on how some mortgage servicers go about giving homeowners a real screwing over in the handling of their house payments. For the ABC News' story transcript, see 'Playing the Odds' (Lawyer Max Gardner Says Some Mortgage Servicers May Be Taking Homeowners for a Ride).

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the Credit Slips post.

Claims Of Deception, Illegal Practice Of Law Unfounded, Says NY-Licensed Attorney In Response To Connecticut AG Probe Into Loan Modification Firm

In East Berlin, Connecticut, the Connecticut Law Tribune reports:

• Kent Gross said he can’t be done with Connecticut soon enough. For him, it’s become impossible to do business here. The New York-licensed attorney said [First Legal Group, a] company he helped set up in East Berlin to assist homeowners facing foreclosure has been unfairly targeted by state grievance officials and Attorney General Richard Blumenthal.

***

• “To come out and say we misled people and that no work was done on the files is ridiculous,” Gross said from Florida last week. “There’s proof that we did work, and it’s voluminous.” He said an online case management system accessible by clients provides that proof. Gross, the managing attorney for First Legal Group, said there were actually 38 Connecticut clients who paid $69,000 in fees. He said the company would start refunding money and returning case files to clients late last week, and he stressed his cooperation with the Statewide Grievance Committee and the Attorney General’s Office.

• And the claims of illegally practicing law in the state are unfounded, Gross said. “None of us are Connecticut lawyers and none of us said we are,” Gross said. “I basically don’t practice law. I deal with the executive officers at banks to work on modifications.”(1)

For more, see Modifying Loans Or Scamming Homeowners? (Attorney-run, Florida-based foreclosure service comes under fire in Connecticut).

(1) According to the story, Chief Disciplinary Counsel Mark Dubois revealed the company’s business practices in a lawsuit filed by his ofice stop First Legal Group, a Florida-based outfit, from operating in Connecticut. Dubois also raised the specter of possible larceny charges. Dubois targeted Gross and Florida attorney Nicola Zagarolo as the leaders of the company. Two Connecticut attorneys got involved with the business after Dubois first contacted First Legal Group in July, Dubois said. Hartford attorneys Evan Fitzpatrick and Andrew Cates worked as local counsel to provide “limited legal services,” designed to make the operation seem more legitimate in case clients needed to make court appearances, Dubois said. Both attorneys are recent law school graduates who passed the bar last summer. Their contract provided $100 payments for every Connecticut client the company attracts and to receive an additional $100 for each court appearance. Both attorneys backed out of the arrangement when they began to feel uneasy about the business model.

Missouri AG Accuses Mobile Home Operator Of Pocketing Buyers' Money & Failing To Deliver Homes; Also Allegedly Swiped Proceeds Of Brokered Sales

From the Office of the Missouri Attorney General:

• Attorney General Chris Koster has charged Edna Kay Jackson of Kirbyville with 12 felony counts for allegedly deceiving people who did business with her to buy or sell mobile or modular homes. The charges, filed in Greene County, accuse Jackson, doing business as Dogwood Homes, of taking money for the purchase of homes and not delivering either the homes or the clear titles to homes to the customers. Jackson is also charged with brokering homes for individuals and not giving them or their bank the money from the sale.

For the Missouri AG press release, see Attorney General Koster files criminal charges against Taney County woman (Attorney General charges her with 12 counts related to defrauding modular and mobile home sellers, buyers).

Maryland Homebuilder Gets 12 Years For Pocketing Customer Deposits & Loan Proceeds, Failing To Build Homes

In Prince George's County, Maryland, The Washington Post reports:

• A District Heights developer was sentenced Monday to 12 years in prison for collecting more than $1 million from banks and home buyers for houses that were never built. Leon Coleman promised 11 buyers that he would build homes in Kings Grant, a new subdivision in Upper Marlboro, but he never built them. Instead, prosecutors said, Coleman pocketed $206,000 and used some of the rest of the money to buy land and pay closing costs.

***

• In 2005, the Maryland attorney general's office won a civil lawsuit against Coleman and his wife, Emma, who were ordered to pay about $500,000 in fines and to repay about $1 million of the money they obtained. The Colemans never complied. The Prince George's County state's attorney's office pursued the case as a criminal matter after being contacted by the home buyers.(1)

For more, see Developer Gets Prison for Theft From Buyers.

See also, Maryland Gazette: Upper Marlboro homebuilder sentenced to 12 years (Man ordered to pay restitution after swindling millions from buyers):

• In his sentencing, [Judge Leo E. Green Jr.] said he considered Coleman's lengthy criminal background, which dates to 1989 and includes embezzlement convictions in Baltimore and Virginia; a 1990 dishonorable discharge from the Army for larceny and forgery; and a 2002 grand larceny conviction, for which Coleman received a year of probation. [...] His case is the first to be prosecuted in Prince George's County under Maryland's Custom Homebuilder Act, which was enacted in 1986, and Green said he wanted to send a message to developers that misspending the money of hard-working, middle-class residents will not be tolerated.

(1) According to the story, would-be buyer Glenn Miller said his savings are depleted, his credit score has plummeted and his dream of sending his daughter to college has nearly evaporated. Ranah Harris Johnson, another buyer, said she believes that the stress caused her to miscarry one of her twins. Another buyer, Jennifer Lewis-Gooden, said "a very fragile marriage fell apart" in part because of the couple's financial turmoil.

North Carolina AG Adds Rent Skimming Rackets, "Subject To" Deed Conveyances To Its "Foreclosure Rescue" Radar

In Charlotte, North Carolina, The Charlotte Observer reports:

• Like others across North Carolina, [77-year-old Ruth Barbour] fell victim to a type of mortgage scheme that's become more common as businesses target homeowners desperate to get out of their houses. [...] The businesses, which say they buy and close on homes quickly, have captured the attention of state regulators and legislators, who are now considering legislation that would make tracking these cases easier.

***

• Typically, this is how the scheme works: A distressed homeowner, who can't sell his house and may be facing foreclosure, agrees to sell his home to a company in exchange for a small cash settlement and the title to the house. The homeowner doesn't realize he is still named on the mortgage. The company brings in a renter, who pays a significant deposit. The company may or may not continue to pay the mortgage. When it can no longer find a renter, it abandons the property, for which the original homeowner is still liable.

• It's the latest in a number of schemes that regulators are battling as distressed homeowners look for a way out of an overwhelming mortgage or impending foreclosure. The N.C. Department of Justice has been cracking down on foreclosure “rescue” outfits that require an upfront payment and promise to work with a lender to modify a delinquent loan. Now it's also taking aim at businesses that promise to take over mortgage payments if the homeowner signs over the deed or title (ie. deed conveyances that are "subject to" one or more existing mortgages on the home being deeded over).(1) About four dozen of these businesses, which sometimes use the slogan “We Buy Homes,” operate in Charlotte and around the state, according to the Better Business Bureau of Southern Piedmont.

For more, see Home scam stings owners (Businesses advertise as buyers. They take over a home's title but not the mortgage, and some can leave distressed owners in foreclosure).

(1) Typically, these transactions are consummated without regard to any "due on sale" restriction that may be contained in the existing mortgage(s) that the property is subject to, and sometimes involve transfers to a newly formed trust in an attempt to conceal the deal from the existing lenders as long as possible.

Mortgage Servicer Encouragement To Default On House Payments To Qualify For Workout A Common Complaint From Homeowners Seeking Loan Modifications

In Washington, D.C., McClatchy Newspapers reports:

• Nearly three years into the deepest U.S. housing slump in generations, lenders are modifying only a small number of problem mortgages, and rising foreclosures are restraining the economy's recovery. The Obama administration has stepped up pressure on lenders and their mortgage servicers, who act as bill collectors on behalf of investors who own mortgage bonds. The administration on Aug. 4 unveiled the first of what will be monthly "name and shame" exercises, publishing data on the loan-modification efforts of about three dozen companies.

***

• McClatchy's Washington Bureau received calls and e-mails from borrowers across the nation in response to a recent story about the "name and shame" effort. In subsequent interviews with them, a common theme emerged: Virtually all say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications. Then the modifications never came, however. These borrowers burned through retirement savings, destroyed their credit ratings and suffered mental and financial hardship.

For some of their stories, see Homeowners tell how banks failed to modify mortgages.

"We Will Be Bringing More Lawsuits As Needed" Says Ohio AG To Mortgage Servicers Who Fail To Provide Reasonable Loan Mods To Eligible Borrowers

Statement from Ohio Attorney General Richard Cordray:

• “[A recent] report from the U.S. Treasury further demonstrates that most mortgage loan servicers are not doing enough to live up to their commitments to help keep people in their homes. What is it going to take to get these companies to change their behavior and take responsibility? [Recently], Ohio broke new ground by filing a lawsuit against Carrington Mortgage Services for violating Ohio consumer law and for failing to abide by its agreement with the state to provide reasonable loan modifications to eligible borrowers.(1) The numbers released [...] further justify that approach. As noted [in the Treasury Department report], other loan servicers also are falling well short of expectations. In Ohio we will not just stand by. We will be bringing more lawsuits as needed in the future.”

Source: Cordray Reacts to U.S. Treasury Report on Mortgage Servicers.

(1) For the Ohio AG lawsuit, see State of Ohio v. Carrington Mortgage Services LLC. For the Ohio AG press release announcing the lawsuit, see Cordray & Ohio Department of Commerce First in Nation to Sue Mortgage Servicer for Unfair Practices.

310-Unit Condo Conversion Complex Struggles To Stay Afloat; Considers Using "Blanket Receivership" To Grab Rents Away From Deadbeat Owner/Landlords

In Miami, Florida, The Miami Herald reports:

• Dealing with an ongoing crisis, the company that manages cash-strapped Mirassou Condominium wants to start a blanket receivership system to collect association fees from deadbeat owners.(1)(2) [...] As budgets continue to worsen in South Florida condo associations, Mirassou's situation underscores the consequences communities are facing when unit owners enter foreclosure and discontinue paying association fees. Those fees normally cover flood and hazard insurance, maintenance, utilities and garbage collection.

• By law, South Florida condominiums are required to have master hazard and flood insurance, which covers common areas and the exterior of the buildings. But Mirassou doesn't have any. The hazard insurance expired six months ago and the flood insurance expired in July, residents are saying. [...] When a community association has no insurance, owners cannot sell or rent their property.

For more, see Mirassou Condo seeks new system to collect owners' fees (A troubled Northwest Miami-Dade condo development seeks a new strategy to collect payments from delinquent owners).

In a related story, see The Miami Herald: South Florida condo conversions collapse.

Go here for other posts on the problems plaguing the Mirasou condo conversion complex.

(1) According to the story, if the court approves and appoints blanket receivership at Mirassou, a third party or "receiver'' could ask tenants for their rent, and leave the deadbeat landlord out of the equation, [attorney Angelica] Young said. The receiver would file a report with the court every quarter. Florida's Third District Court of Appeal reportedly ruled in favor of this strategy last month to help community associations collect rents and fees from delinquent owners. At least 18 condo associations in Miami-Dade and Broward counties use blanket receivership, the story states.

(2) Reportedly, out of the 310 units in Mirassou, 172 are in foreclosure.

Overleveraged Apartment Buildings Falling Into Foreclosure Threaten Tenants, Jeopardize Neighborhoods Throughout NYC

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

• Linda Kemp remembers when the hallway floors at Robert Fulton Terrace were waxed regularly, when tulips, not weeds, bloomed in the garden, and when mold wasn't growing in the bathrooms of apartments in the 18-story complex that once was the envy of the Morrisania section of the Bronx. [...] That was before April 2007, when New York real estate investor Mark Karasick spent $44 million to acquire the building and its sister property two miles north, Fordham Towers.

• Tenant leaders suspected that Mr. Karasick, whose deals are often seeded by San Francisco-based private equity vehicle SFF Realty Fund, had grossly overpaid for his prize and that income from the two buildings' 490 rent-regulated units would not come close to covering expenses. Canada-based bank CIBC lent Mr. Karasick $36.5 million for the deal in 2007 [...].(1) In a letter to Bronx Rep. Jose Serrano last October, the bank's general counsel called tenant concerns “unwarranted.” But cuts in service—maintenance staff was slashed from nine to three—had immediately followed the sale. Then, this past May, the tenants' prediction came true: Robert Fulton and Fordham Towers fell into foreclosure.

***

• Now, hundreds of other rent-regulated buildings in New York City purchased at the height of the real estate boom may end up in similar distress. Optimistic underwriting enabled investors, often backed by private equity, to snap up rental buildings at bloated prices in highly leveraged deals. In many cases, the new landlords had unrealistic expectations for raising rents, and now some 70,000 units are in jeopardy. That's left government officials seeking ways to stem what some are calling the greatest threat to the city's neighborhoods since the widespread landlord abandonments of the "70s. “It's a looming disaster, and if it explodes to even half the level of the prediction, it's going to be a huge problem,” says Emily Yousouf, an ex-investment banker and former president of the city's Housing Development Corp. who is consulting for the Partnership for New York City and the Rockefeller Foundation on the issue. “It's not only the tenants who suffer and the buildings that go downhill, but suddenly the neighborhoods deteriorate as well.”

For more, see Bronx is burning over failed deals (Overleveraged buyers of rent-regulated apartments create one big mess across city).

See also:

• The New York Times: Struggling Landlords Leaving Repairs Undone,
• New York Daily News: Tenants stuck in dilapidated buildings as landlords flee.

Go here for other stories on overleveraged NYC apartment buildings.

(1) Reportedly, a CIBC spokesman would not comment on the financing, since the bank sold the loan to J.P. Morgan Chase, which in turn packaged it as part of a commercial mortgage-backed security that includes more than $3 billion in loans for apartment buildings, office complexes and retail strips. Overleveraged NYC Buildings

Man Ripped Off Absentee Owners Of Title To Mortgage-Free Properties, Pocketing Proceeds Of Fraudulently Obtained Mortgages In The Process, Say Feds

From the Office of the U.S. Attorney (Orlando, Florida):

• United States Attorney A. Brian Albritton announces the arrest yesterday of Edwin M. Lugo-Abreu (age 34, of Orlando) on an indictment(1) charging him with mortgage fraud. If convicted on all counts, Lugo-Abreu faces a maximum penalty of 20 years in federal prison. According to the indictment, Lugo-Abreu devised a scheme to defraud E-Loan, The Lending Group Inc., and WMC Mortgage Corporation by falsifying and fraudulently applying for mortgage financing and fraudulently transferring title ownership of properties used to secure the mortgage financing.(2)

For the U.S. Attorney press release, see Orlando Man Arrested For Mortgage Fraud Conspiracy.

(1) Three other individuals, Alexis Izazaga, Carlos Valentin and Yariel Valentin, have entered guilty pleas and been sentenced in connection with this scheme.

(2) The indictment alleges that Lugo-Abreu identified properties that were unencumbered by mortgage liens that were owned by absentee owners and used bogus quit claim deeds to fraudulently transfer the titles thereto out of their names (Indictment, paragraphs 7-11). DeedContraTheft

"There Is Zero Time To Waste" Says Indiana AG In Continuing Effort To Eliminate Loan Modification Scams Targeting Hoosiers

In Indianapolis, Indiana, The Indianapolis Star reports:

• The Attorney General's Homeowner Protection Unit has filed a lawsuit in Hamilton County against a Jacksonville, Fla.-based foreclosure consulting company. The lawsuit against National Foreclosure Counseling Services Corp., also known as American Financial Corp.,(1) includes 11 consumers from Allen, Hamilton, Johnson and Marion counties and reported losses of more than $10,000.(1) The lawsuit says the company asked for up-front fees and failed to modify mortgages.

***

• The lawsuit claims the company did not obtain a required $25,000 surety bond to demand payment upfront from customers, and failed to register as a business in Indiana. The release says attorney generals in Florida, Illinois and Minnesota have also filed similar lawsuits against the company. "Considering the economic climate we are in, there is zero time to waste on this issue. We are taking an aggressive stand and we won't wait for more people to be victimized or lose their homes through these illegal practices," Zoeller said in the press release.

For more, see Zoeller sues another 'foreclosure consultant'.

For the Indiana AG press release, see Attorney General Greg Zoeller urges Hoosiers to avoid illegal foreclosure consultants.

For the lawsuit, see State of Indiana v. National Foreclosure Counseling Services Corp.

(1) Other defndants: Robert Dallavia and Raymond Paulk, both of Jacksonville, Florida. The suit alleges violations of the Indiana:

• Credit Services Organizations Act, Ind. Code 8.24-5-15-1 et seq.;
• Mortgage Rescue Protection Fraud Act, Ind. Code 8.24-5.5-1 et seq., and
• Deceptive Consumer Sales Act, Ind. Code 8.24-5-0.5-1 et seq.

(2) The lawsuit is the eighth filed by Attorney General Greg Zoeller against what a press release issued by his office calls "illegal foreclosure consultants." Three of the first seven cases have reached resolutions in which the sued companies agreed or were ordered to pay restitution:

• A settlement was reached in June with You Walk Away, Inc., located in California. In exchange for the case being dismissed, You Walk Away agreed to pay $4,000 in restitution to four Indiana consumers and $2,000 to the State for costs and fees.
• On June 29, a Delaware County court ordered California-based American Mitigation Group, Inc. to pay $4,064.45 in consumer restitution payments to five Indiana consumers and $33,000 to the State for civil penalties.
• On July 27, a Marion County Superior Court ordered Foreclosure Relief Agency, LLC. to pay $53,002.34 in consumer restitution to 52 Indiana consumers and $2 million in civil penalties to the State of Indiana.

"Zero Tolerance" For Loan Modification Scams, Says Missouri AG As Civil Charges Brought On Outfit Allegedly Charging Upfront Fees & Failing To Deliver

In Kansas City, Missouri, Missourinet.com reports:

• Missouri has filed suit against a Kansas City firm, claiming that it is preying on people who are desperate to save their homes. Attorney General Chris Koster has filed suit against Premier Credit Services of Kansas City and principals Michael and Angela Eads. Koster accuses the couple of promising homeowners facing foreclosure that they could drop their interest rate, lower their house payment and repair their credit.

• Koster says his office has mounted a "zero tolerance" campaign against mortgage fraud. "There's no doubt that the mortgage fraud scams that we're seeing are spiking as a result of the economy," Koster says. "In the first six months of this year, we have seen twice as many complaints come into the Attorney General's office as we saw in all of 2007 and 2008 combined."

• Koster accuses Premier of engaging in two practices that should be red flags for fraud: charging up-front payments and portraying themselves as being part of the federal government.

Source: AG files suit against KC firm, claiming mortgage fraud.

For the Missouri AG press release, see Attorney General Koster files lawsuit against Kansas City company (Continues Zero Tolerance Campaign against mortgage fraud).

Using "Qualified Written Requests" In Consumer Bankruptcy Cases

On the Credit Slips blog, consumer bankruptcy attorney O. Max Gardner III writes:

• I have trained over 350 attorneys at my Bankruptcy Boot Camps and to my surprise less than 10 percent know what I mean when I refer to a "QWR." This is shocking in that a reasonable QWR can provide the attorney for the Chapter 13 debtor with some of the very best discovery outside of a contested case or Adversary Proceeding. The QWR can be used to find out how the servicer for the securitized trust is applying the debtor's money and the disbursements on the arrearage claim from the Chapter 13 Trustee. It can also be used to identify all of the "ancillary fees" and "collateral charges" that mortgage servicers are so fond of unilaterally adding to the debtor’s mortgage account, without any notice or the right to a hearing. [...] In my bankruptcy practice, I have only 10 questions in my standard QWR.(1)

For more, see What Does RESPA Have to do with Consumer Bankruptcy Cases?

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the Credit Slips post.

Illicit Loan Proceeds From Alleged Long Island Sexual Fantasy Club-Based Mortgage Fraud Ring Now Up To $82M, Says Suffolk County DA

In Suffolk County, New York, Newsday reports:

• A dominatrix, her male personal assistant, two employees at her Manhattan sexual fantasy club and her 65-year-old mother are among the latest defendants charged as part of an $82-million mortgage fraud scheme in which a former Suffolk legislator is accused of having a central role. Former Suffolk Legis. George Guldi, 56, of Westhampton Beach, pleaded not guilty Tuesday in a Riverhead courtroom to 23 counts of a 130-count indictment against him and 16 others.

• When his arrest was announced in March, prosecutors described the scale of the scheme to be $50 million. Suffolk District Attorney Thomas Spota said the investigation has "become more expansive," now involving more than $80 million, and it could be bigger. "We're not finished," he said, adding it is the largest mortgage-fraud ring uncovered in Suffolk County.

• The scheme involved the fraudulent purchase of 60 homes from Cold Spring Harbor to Bridgehampton by straw buyers using fake employer information and phantom bank balances, Spota said. Donald MacPherson, 65, of Manhattan, publisher of the SoHo Journal magazine, was central to the scheme, prosecutors said. They claim he recruited straw buyers and provided fake employment information using his corporations, including the magazine and the sexual fantasy club he owns with his wife.

For more, see DA: Guldi mortgage fraud scheme 'more expansive'.

For earlier post on this story, see Lawyer, NYC Dominatrix Bagged In Alleged $50M Mortgage Scam; Scores Of High End Homes End Up Foreclosed; Fetish Customers "Posed" As Straw Buyers: DA.

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

Feds Convict Two In Beverly Hills Mortgage Fraud Scam Resulting In $40M+ In Lender Losses

From the Office of the FBI (Los Angeles, California):

• A federal jury [...] convicted a prominent Beverly Hills real estate agent and a licensed real estate appraiser on federal charges for their roles in a massive mortgage fraud scheme that caused more than $40 million in losses to federally insured banks. After a five-week trial, the jury convicted Kyle Grasso, 38, formerly of Santa Monica, and Lila Rizk, 42, of Trabuco Canyon, of conspiracy, bank fraud and numerous loan fraud charges for their roles in the mortgage fraud scheme. Additionally, Grasso was convicted of three counts of money laundering. The evidence presented at trial showed that Grasso and Rizk were part of a scheme that obtained inflated mortgage loans on homes in some of California's most expensive neighborhoods.

***

• The wide-ranging and sophisticated scheme defrauded mortgage lenders by obtaining inflated mortgage loans on expensive homes in some of California's most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars higher than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.

***

• A third defendant who went to trial, Joseph Babajian, 56, another Westside real estate agent, was acquitted on 13 criminal counts, and the jury was unable to reach a verdict on eight additional counts.

For the FBI press release, see Two Real Estate Professionals Convicted in Massive Mortgage Fraud Scheme That Led to $40 Million in Losses.

Ex-Real Estate Agent Gets 15 Years In I.D. Theft, Mortgage Fraud Scam; One Unwitting Victim Left Broke

In Minneapolis, Minnesota, the Star Tribune reports:

• Former Twin Cities real estate agent Larry Maxwell received a 15-year prison sentence Thursday from a Hennepin County judge who said Maxwell's extensive mortgage and identity fraud scheme merited the term. Judge Regina Chu could have sentenced Maxwell to about 10 years in prison, but she said the gravity of his conduct and his "total lack of remorse" made the longer sentence appropriate. Maxwell has been in custody since a jury convicted him in April after a six-week trial.(1)

• Chu also ordered Maxwell to pay restitution in an amount to be determined to John Foster, who spoke for 45 minutes about how Maxwell's theft of his identity left him broke and depressed. [...] For Foster, of Plymouth, the ordeal began in 2006 when he received a mortgage statement by mail for a north Minneapolis house about which he knew nothing. A Bloomington property also was purchased in his name, and he and his wife say they lost their good credit as well as retirement and college funds as a result of the scheme.

For the story, see Fraud earns ex-real estate agent a 15-year sentence (Judge says lack of remorse merited a longer prison term. He also was fined $500,000).

(1) Reportedly, the jury convicted Maxwell of nine counts of theft by swindle, six of aggravated forgery, two of identity theft and one of racketeering. Two other participants in the scheme pleaded guilty earlier.

Cleveland Grand Jury Brings 96-Count Indictment Against 12 In Alleged $14M+ Straw Buyer, Mortgage Fraud Racket; Left Home Sellers Clipped Out Of $3M

In Cleveland, Ohio, The Plain Dealer reports:

• A Cuyahoga County grand jury indicted 12 people and three companies Friday in what prosecutors say was a brazen $14.7 million mortgage fraud scheme involving seven upscale houses - some with waterfront views. Prosecutors say a California woman orchestrated the scheme, enlisting the help of real estate agents, title agents, mortgage brokers, an appraiser and buyers who were all also indicted. Prosecutors said the enterprise involved fraudulent mortgage applications, exorbitant seven-figure loans - and a scam that resulted in the theft of more than $3 million from sellers who were misled into believing they were paying a relocation fee for the buyers.

• In addition to alleged ringleader Susan Alt, 56, of Santa Monica, those indicted included two other California women - one described as the primary straw buyer - mortgage brokers from Florida and Texas, and six people working in Northeast Ohio at the time of the deals.(1)

***

• The 96-count indictment follows an investigation by the Cuyahoga County Mortgage Fraud Task Force, which is composed of 16 federal, state and local enforcement agencies.

For more, see Cuyahoga County grand jury indicts 12 people, 3 companies in mortgage fraud scheme.

(1) According to the story, the companies that were indicted are: Equator Group, described by prosecutors as the shell company Alt used to launder money, and two companies that share a suite of Beachwood offices: Century 21 Homestar Realty and Homestar Title. Other individuals who were indicted include: Anthony Geraci, 39, of Mayfield, who prosecutors say owned and operated Century 21 Homestar; Deborah Brazalovics, 56, and her son Paul Brazalovics, 33, both of Wickliffe and both listed as having worked for Homestar Title; real estate agent Charlotte Gill, 38, who worked at Century 21 Homestar and who prosecutors now show with a Maine address, real estate agent Richard Kilfoyle, 51, of Chester Township, and appraiser William Werner, 39, of Cleveland.