Wednesday, October 21, 2009

Manhattan Feds: "Mortgage Stacking" Scam Pulled Off By Corrupt Title Agent

In New York City, the Office of the U.S. Attorney recently announced criminal charges against 41 suspects in eight separate cases involving a variety of mortgage and real estate fraud. The allegations in one criminal complaint describe the conduct of one allegedly corrupt title agent:
  • Poui Land acted as the title agent for many of the closings charged as part of this case, generating significant fees for the defendants, including, in one instance, approximately $68,000. In some cases, the Complaint alleges that the defendants failed to record the mortgages on the properties, or to properly transfer the titles, which permitted the defendants to obtain additional mortgage loans on the properties.(1)(2)

For the criminal charges in this case, see Complaint - U.S. v. Johnson, et al.

For the U.S Attorney press release, see Manhattan U.S. Attorney Charges 41 Defendants In Coordinated Mortgage Fraud Takedown Across New York State.(page 6).

(1) Scams involving the fraudulently-obtaining of multiple mortgages on the same property through different lenders (not necessarily done simultaneously), and/or by failing to record the new mortgages and without paying off the existing loans, often go by the label of "mortgage stacking" (When the mortgages are fraudulently obtained simultaneously, the scam is referred to by some as "shotgunning"). The use of bogus title reports in these scams stating that no first mortgage existed on the properties in question is referred to by some as "title washing."

(2) The six indicted suspects are: Beverly Andrea Johnson (aka Beverly Johnson, Beverly Samuels, Andrea Johnson), Carone Johnson (aka Carone Johnson-Holt, Carone Morris), Carianne Johnson, Carell Johnson, Oliver Anderson, Bradley Skierkowski.

CalPERS On The Hook For $600M In Failing NYC, Northern California "Predatory Equity" Real Estate Schemes Designed To Force Tenants From Their Homes?

NewsBlaze reports:
  • CalPERS(1) will lose hundreds of millions of dollars in predatory real estate investment schemes according to recent reports in the New York Times, the Wall Street Journal, the San Jose Mercury News, and other publications. What has not been adequately reported is that these schemes are classic examples of what housing advocates call "predatory equity," overleveraged investments that rely on the displacement of tenants from rent-regulated housing in order to turn profits. CalPERS has effectively invested (and lost) the retirement funds of working people in projects that were designed to displace working people from their homes.

***

  • CalPERS, the nation's largest pension fund, will lose $600 million in two separate real estate investment deals: one in New York City with partners Tishman Speyer Properties and BlackRock Realty(2) and another in East Palo Alto, CA with partner Page Mill Properties. Both investments have been the subject of considerable controversy as they have involved the mass displacement of low and moderate income tenants from their homes. They have also spawned multiple lawsuits and raised the ire of tenants, community organizations, public officials, and labor groups.

For more, see CalPERS Loses $600M in Schemes Designed to Displace Tenants.

In a related post on the NYC fiasco, see City Concerned About Effect On Tenants From Unwinding $5.4B Purchase Of 11,000+ Unit Apartment Complexes Gone Bad.

(1) The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that manages pension and health benefits for more than 1.6 million California public employees, retirees, and their families.

(2) Other big players which can be heard "sucking wind" around the globe on the New York City alleged "predatory equity" deal involving a massive 56-building, 11,000-unit apartment complex, according to a recent Wall Street Journal report [see An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default)], are:

  • Government of Singapore Investment Corporation (GIC), a global investment management company established to manage Singapore's foreign reserves - reportedly on the hook for a loss estimated at $575 million;
  • Florida State Board of Administration, the outfit which manages, invests and safeguards assets of the Florida Retirement System Trust Fund and other funds for the State of Florida and local governments - reportedly ready to eat a loss estimated at $250 million;
  • California State Teachers Retirement System (CalSTRS), primarily responsible for providing retirement related benefits and services to teachers in public schools and community colleges - about to flush the toilet on an estimated $100 million;
  • Hartford Financial, an insurance company facing a reported estimated $100 million;
  • DG HYP, a Germany-based commercial real estate lender reportedly on the hook for close to $100 million; and
  • The Church of England, which reportedly "donated" an estimated $70 million in pursuit of profit in this apparently now-hopeless cause.

NYC Man Charged With Making Deals To Sell Uptown Building He Didn't Own

From the Office of the Manhattan District Attorney:
  • Manhattan District Attorney Robert M. Morgenthau announced [...] the indictment of a realtor for conducting a real estate fraud scheme in which he struck several deals to sell a commercial building that he did not own. The defendant, HENRY VARGAS, 35, was indicted on charges of scheme to defraud, grand larceny and forgery.

***

  • The investigation leading to the indictment revealed that more than two years ago, VARGAS began fraudulently passing himself off as the owner of 21-41 Lenox Avenue, a commercial building just north of Central Park. In fact, the building was wholly-owned by Manuel Duran, Jr. Using false representations and forged documents, VARGAS duped numerous real estate developers, business people, architects, attorneys and property owners into believing that he, not Duran, owned a controlling interest in the property.

Go here for the entire Manhattan DA press release.

See also, The New York Times: Man Charged in Scheme to Sell Harlem Property.

Ohio Lawmaker Seeks To Strip Lenders Of Right To Foreclose On Abandoned Homes Forced Into Legal Limbo

In Dayton, Ohio, the Dayton Daily News reports on the havoc being created by lenders and their loan servicers who, after initiating foreclosure actions, abandon the lawsuits after finding out the homes are abandoned and the cost of making repairs, paying delinquent real estate taxes, and paying off fines for code violations exceeds the property value. An Ohio state lawmaker has offered a solution to this problem of abandoned homes being left in legal limbo(1) by these financial institutions:
  • State Rep. Dennis Murray, D-Sandusky [is] preparing a bill that would give lenders a set amount of time — say, 60 days — after filing a foreclosure on an abandoned property to do something with it or be stripped of their legal interest in it. Other provisions of the bill give judges more leeway in dealing with foreclosure cases. [...] He said he’s optimistic he can get the bill passed.

For the story, see Owners of abandoned properties are hard to track down.

In related stories from the Dayton Daily News, see:

Go here for other posts on homes being left in legal limbo (when a lender intentionally delays completion of a foreclosure to avoid taking title to the repossessed collateral, or fails to record its deed after foreclosure sale).

(1) A March 3, 2009 National Public Radio story (see Banks Refusing To Take Back Foreclosed Properties) reported that Cleveland, Ohio Housing Court officials said they have seen homeowners take matters into their own hands when dealing with the abandonment of foreclosure lawsuits by lenders. One instance is cited involving a foreclosing lender that was reluctant to complete the foreclosure process and repossess a dilapidated property. In that case, the homeowner simply deeded back the property to the lender by preparing a deed, naming the lender as grantee, and recording it.

Such a conveyance may ultimately be found to be ineffective because the mortgage lender surely would assert that it never "accepted" the deed conveyed by the owner of the dilapidated wreck collateralizing its loan (ie. to be effective, a deed must be both "delivered" by the grantor-owner, and "accepted" by the grantee-lender; in other words, no acceptance = no conveyance). However, recording a deed in the name of the unwitting lender may, under state law, create a legal presumption that it has been "accepted" by the lender (see, for example, Janian v. Barnes, 284 A.D.2d 717, 718; 727 N.Y.S.2d 182 (N.Y. App. Div. 3d Dep't 2001)) until such time that it straightens out the mess by going into court, presenting evidence to a judge that there was no actual acceptance, and obtaining a judgment declaring the deed to be void. Unless and until it does so, the lender could arguably be treated as the legal owner of (and find itself legally responsible for the code violations on) its abandoned dilapidated loan collateral. Inasmuch as many mortgage holders, their loan servicers, and their assembly line foreclosure mill attorneys have proven themselves to be quite clumsy when handling the paperwork relating to their mortgages, it could be quite some time before they discover that title to the loan collateral has been put in their name - probably when they start getting tagged with the code violations - and possibly even longer before they figure out what to do. Accordingly, recording the paperwork necessary to deed the title to a dilapidated home in foreclosure back to the bank may be seen by some as a practical, low cost way for a homeowner of an abandoned home to shift (albeit, maybe only temporarily) the liability for code violations (and possible jail time for failure to cure the violations) away from themselves and onto the lender. responsibility code violations foreclosure BetaVacantForeclosure

Short Sales May Lead To Unintended Consequences For Home Seller

A recent column in the Contra Costa Times offers this warning to underwater homeowners who are considering unloading their homes through a short sale:
  • There can be real benefits to sellers in conducting a short sale. Sellers still need to be cautious when they're considering a short sale. There can sometimes be unintended consequences from a short sale.

  • For example, Sellers can get ready to close a short sale only to find out that their lender won't release them from personal liability on their loan. If the seller completes such a short sale, then the lender may pursue the borrower for any deficiency between the loan amount and the sales price. This actually happens, and some lenders pursue borrowers in such situations who have participated in a short sale.

  • This can be true even though the same borrower would have had no personal liability had a nonjudicial foreclosure been conducted.(1) The lender's not in the business of advising the borrower as to the most advantageous or best course of action for the borrower.

For the column, see Short sales, foreclosures require care.

(1) California and Arizona are two states that prohibit chasing foreclosed-upon homeowners for the foreclosure sale deficiency in certain situations.

Tuesday, October 20, 2009

Manhattan Chief Federal Prosecutor To Mortgage & Foreclosure Rescue Scammers: "We Will Find You, Arrest You, & Send You To Jail!"

In announcing the indictments last week of 41 suspects in connection with eight separate mortgage fraud indictments, Preet Bharara, the United States Attorney for the Southern District of New York, issued this declaration of war against mortgage and foreclosure rescue scammers:
  • "As the U.S. economy struggles, we will continue to have a zero tolerance policy for those who defraud financial institutions and prey on homeowners on the brink of foreclosure. The type of criminal conduct charged today constricts the credit markets and makes it harder for honest people to realize the American dream of home ownership. It is especially alarming when lawyers, loan officers, and mortgage brokers treat their professional licenses as license to loot banks and profit from other people's pain. Particularly in this down economy, the message to those professionals and their alleged criminal cohorts is simple: we will find you, arrest you, and send you to jail."

For the Manhattan U.S. Attorney's press release, see Manhattan U.S. Attorney Charges 41 Defendants In Coordinated Mortgage Fraud Takedown Across New York State (Defendants Charged With Fraudulently Obtaining More Than $64 Million In Residential Mortgages On More Than 100 Properties; Lawyers, Mortgage Brokers, And Loan Officers Among Those Arrested In "Operation Bad Deeds").

Go here for links to the "OPERATION BAD DEEDS" Charging Documents for each of the eight cases.

California AG: "Loan Modification Upfront Fee Loophole Has Now Been Closed!" - Law Violators To Get Up To 1 Year In Jail; $50K In Fines Possible

In Southern California, the Orange County Register reports:
  • Attorney General Jerry Brown said [...] he will go after companies that violate the state’s new ban on collecting an advance fee for helping someone avoid foreclosure. [...] Governor Arnold Schwarzenegger [last week] signed several bills meant to curb lending abuses, including SB 94, which prohibits anyone from taking an advance fee for help getting a loan modification.

  • AG Brown said [...] in a release, “Over the past two years, unscrupulous attorneys and real estate brokers have abused their trusted roles and exploited desperate homeowners seeking to avoid foreclosure. The loophole that allowed this abusive practice to continue has now been closed, and homeowners should avoid any person charging up-front fees for foreclosure relief services.”

  • Anyone who violates the ban can be fined up to $10,000 and imprisoned for up to one year. Corporations can be fined up to $50,000.

For more, see AG Brown to enforce ban on advance fees for mortgage aid.

For AG Brown's press release, see Brown Alerts Homeowners that New Law Prohibits Up-front Fees for Foreclosure Relief Services.

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

In a related story, see The Recorder: Lawyers Vexed by New Law Barring Upfront Fees for Mortgage Modification Work:

  • [R]eal estate attorneys say the new rules have created a host of unanswered questions. Can a firm accept a litigation retainer and later secure an unanticipated loan modification? Can lawyers place fees in a trust and draw on them when they finish the work? [...] Bar spokeswoman Diane Curtis said Bar attorneys are working on a document that will answer members' questions about the new law. The law calls for violators to face Bar discipline.

Oregon DOJ Task Force Begins Criminal Prosecutions Of Alleged Mortgage & Loan Modification Scammers; First Defendant Hit With $500K Bail

In Marion County, Oregon, the Statesman Journal reports:
  • A Salem mortgage broker has been charged with using clients' personal information to purchase two homes. Julian James Ruiz III, 38, of Keizer was arraigned [last week on 17 counts] of mortgage fraud, aggravated theft, forgery and identify theft.

  • Ruiz's criminal case is the first to be prosecuted by Oregon Attorney General John Kroger's Mortgage Fraud Task Force. [...] "The idea behind the task force is to not allow scammers to pick up steam," he said. [Oregon Department of Justice spokesman Tony] Green described the group as a coalition of criminal and civil attorneys, district attorneys, police and sheriff's offices, and investigators from throughout the state. The task force is investigating more than a dozen mortgage fraud and foreclosure scam cases across Oregon, he said.(1)

For more, see Keizer mortgage broker charged.

(1) According to the story, Ruiz' bail was set at $500,000. Julia Alavez, one of Ruiz's alleged victims, reportedly attended Thursday's hearing. "I went to him so he could help me with a loan modification on my home," Alavez, a cannery worker, said afterward. "I paid him $2,500 that he said he needed to pay fees to attorneys that would do the work," she said. "It's sad because you work long and hard for your money, and then someone just takes it away."

Columnist To Florida Law Enforcement: Enough Already With The Civil Suit Probes; Start Criminally Prosecuting Foreclosure Rescue Scammers

In Sarasota, Florida, a recent column by Tom Lyons in the Sarasota Herald Tribune calls for Florida law enforcement authorities to stop limiting their efforts in combatting foreclosure rescue scams to civil investigations, and begin bringing criminal prosecutions against the perpetrators:
  • The average citizen is no expert in real estate law, and doesn't want to be. It's pretty dry stuff. [Gulfcoast Legal Services attorney] Elizabeth Boyle was glad a civil jury hung in there as she presented document after document to show how a company called Profitmax had taken advantage of a desperate Sarasota County woman. [...] The jury awarded [homeowner Wanda] Costa $93,000 [see Home rescue was a scam, jury says].(1) But "awarded" doesn't really mean the woman will ever get the money, which is supposed to pay her back for lost equity and other costs. The judge hasn't even approved the verdict yet, and who knows if the money would ever be paid anyway.

  • I congratulate the jury on the attempt and I hope it helps. But here's what I really wonder: If a jury can figure out that Costa was scammed, why the heck can't law enforcement and prosecutors do the same? How about filing criminal charges in cases like this, and going for jury verdicts that foreclosure-help sharks would really care about?

***

  • Florida's attorney general's office claims to be paying attention. It organized a task force that has 73 active investigations, supposedly. But I am underwhelmed. I must see 50 suspicious-looking roadside signs advertising foreclosure assistance every time I drive to work. Heck, the AG's office says it has 180 such companies that are considered of interest, and cases haven't been filed yet for any of those. And guess what: In every one, if anything is ever filed, the plan is to make each a civil case, not one where anyone ever has to worry about spending time behind bars. Could a scammer dare ask for a better set up?

For the entire column, see Hollow court victories no deterrent to scams.

(1) According to an earlier story, Boyle plans to try another case in December against the same defendants - Gideon Rechnitz, Thomas Cook and their companies - alleging the same scam. Rechnitz owns nine other properties in Sarasota and Manatee counties, apparently under the same scheme, which makes him the trustee on a trust with the homeowner's name on it.

Convicted C. Florida Scammer Charged w/ Using Phony Non-Profit To Make Bogus Loan Offers Designed To Swipe Home Equity From Those Facing Foreclosure

In Tampa, Florida, the St. Petersburg Times reports:
  • Peter Porcelli, the telemarketing tycoon who poured part of his fortune into the former world champion Tampa Bay Smokers fast-pitch softball team, has been indicted on a mail fraud charge in connection with a mortgage foreclosure program. Porcelli, 57, of Oldsmar is already behind bars. Two years ago, he was sentenced to 13 years in federal prison and ordered to pay $11.9 million in restitution for a credit card scam that victimized tens of thousands of credit-poor consumers nationwide. A federal indictment unsealed Friday accuses Porcelli of using a foreclosure salvage service and a mortgage lending business to defraud homeowners in financial distress.(1)

***

  • Kathy Visceglie, a Pasco County resident who organized homeowners to expose Porcelli's foreclosure salvage tactics, cheered news of the indictment but said it comes too late to help dozens of area residents who lost their homes. "Porcelli's company looked like a nonprofit that was offering hope, but it turned out to be the worst kind of fraud," she said. "I'm relieved the government finally took action. But it's too late to put people back into the homes they lost."

For the story, see Convicted telemarketing tycoon now facing mail fraud charge.

(1) Porcelli incorporated the Safe Harbour Foundation, a Clearwater nonprofit firm that offered to "help save homeowners from foreclosure by introducing them to lenders," according to court papers. But homeowners then found themselves referred for financial help to Silverstone Lending, a second company set up by Porcelli. Prosecutors say Silverstone used high-fee second mortgages and short-term balloon loans in which a quick default often ended with borrowers losing their homes. One victim reportedly said he phoned Safe Harbour looking for help with a foreclosure and he was talked into borrowing $35,000 when he needed only $20,000 to settle the case. He says he didn't understand that the Silverstone loan carried an option to take his house.

Porcelli's alleged foreclosure rescue, equity stripping racket is more fully described in civil lawsuits filed against him by victimized homeowners who faced foreclosure. See C. Florida Foreclosure Rescue Operator Faces Another Suit; Racketeering, Conspiracy, Criminal Usury, TILA Violations Alleged. foreclosure rescue

NYC Feds Describe Short Sale Flipping Deals, Sale Leaseback Foreclosure Rescue Arrangements In Recent Indictment Of Ten Suspects

In New York City, the Office of the U.S. Attorney recently announced criminal charges against 41 suspects in eight separate cases involving a variety of mortgage and real estate fraud. One case is described as follows:
  • According to the Superseding Indictment, the defendants identified distressed properties that could be purchased at a low price, usually by targeting homeowners who had fallen behind on their mortgage payments and whose homes were facing foreclosure. In most instances, the defendants induced the homeowners to sell their homes to companies controlled by the defendants, including NNI, LLC, which was controlled by LAVETTE M. BILLS, and Recani Inc., which was controlled by WAYNE GREEN.

  • These companies usually purchased the properties via "short sales," in which the lenders agreed to sell the properties for less than the balance owed on the loans and to discharge the remainder of the loans. The defendants then resold or "flipped" the properties to third party straw buyers at a higher price, usually on the same day.

  • In other instances, the defendants tricked the homeowners into deeding or selling their homes to other persons, by falsely promising the homeowners that title would be returned to them at a later date or telling the homeowners that they were merely refinancing their homes.

For the criminal charges in this case, see Indictment - U.S. v. Bills, et al.(1)

For the U.S Attorney press release, see Manhattan U.S. Attorney Charges 41 Defendants In Coordinated Mortgage Fraud Takedown Across New York State (pages 4-5).

(1) The ten indicted suspects are: Lavette M. Bills, Kirk Lacey, Wayne Green Sherese W. Glenn, Revlon Hinds, Joseph Evans, Jerry Calonge, Mark Barnett, Omar Henry, and Peter Chevere.

Monday, October 19, 2009

NYC Feds Bag 41 Suspects In Eight Separate Fraud Cases Involving Home Flipping, Short Sales, Foreclosure Rescue, Equity Stripping

From the Office of the U.S. Attorney (New York City):
  • PREET BHARARA, the United States Attorney for the Southern District of New York [and other Federal, state, and local law enforcement officials] announced [last week] the unsealing of charges against 41 defendants, in eight separate cases, for allegedly engaging in various mortgage fraud scams that collectively defrauded lenders out of more than $64 million in home mortgage loans on more than 100 properties across New York State. Among those charged are six lawyers, seven loan officers, three mortgage brokers, an accountant, and a residential property appraiser.

***

  • The mortgage fraud scams alleged in the cases announced [last week] included, among other things, property flips, equity stripping, and appraisal and loan fraud. In one case, defendants operated a foreclosure rescue scheme, targeting individuals who were on the verge of losing their homes by tricking them into giving up the equity in the properties with false promises that their homes would be saved.

For the U.S. Attorney press release, including a summary of allegations in each case, see Manhattan U.S. Attorney Charges 41 Defendants In Coordinated Mortgage Fraud Takedown Across New York State (Defendants Charged With Fraudulently Obtaining More Than $64 Million In Residential Mortgages On More Than 100 Properties; Lawyers, Mortgage Brokers, And Loan Officers Among Those Arrested In "Operation Bad Deeds").

Go here for links to the "OPERATION BAD DEEDS" Charging Documents for each of the eight cases.

Arizona AG Obtains $580K Default Judgment Against Alleged Loan Modification Racket For Fleecing Homeowners Out Of Upfront Fees, Breaking Promises

In a recent press release, the Office of the Arizona Attorney General announced the obtaining of a default judgment in a civil lawsuit it brought against a local foreclosure rescue operator who peddled loan modification arrangements to homeowners facing foreclosure, purportedly to help them avoid the loss of their homes.(1)
  • In the suit, [Attorney General Terry] Goddard alleged that [...] Matthew Castaneda, of Glendale, and Michael Winding, of Phoenix, through their limited liability company Hope for Homeowners Now, LLC, victimized homeowners facing imminent foreclosure with fraudulent claims of high success rates modifying mortgage loans. Hope for Homeowners Now advertised loan modification services for an upfront fee of $3,195.

Based on the Attorney General’s investigation, Goddard alleged that Hope for violated numerous state laws by:

  • Deceptively implying it was more successful at obtaining mortgage loan modifications than consumers who try to obtain modifications on their own or with the assistance of non-profit organizations. In fact, the company’s success rate was no better than that of its clients who tried to obtain loan modifications on their own,

  • Misrepresenting that the company was comprised of real estate and financial professionals, as well as “professional mitigation attorneys,” and that attorneys negotiate on behalf of Hope for Homeowners’ clients,

  • Charging consumers an upfront fee prior to the full performance of services and without first having obtained a surety bond,

  • Failing to provide its loan modification clients with the necessary substantive disclosures required by the Arizona Credit Services Act.(2)

For the press release, see Goddard Wins $1.37 Million for Consumers in Two Mortgage Fraud Cases.

For the related court documents in this case, see:

(1) According to the court judgment, the defendants must:

  • Pay $424,935 in restitution to consumers,
  • Pay $155,000 in civil penalties to the State of Arizona,
  • Permanently refrain from providing loan modification or origination services in Arizona or on behalf of an Arizona consumer.

(2) Title 44: Sections 44-1701 through 44-1712, Arizona Revised Statutes.

Defunct Miami Loan Modification Outfit Faces Class Action Suit; Key Company Employee Bolts Florida & Resurfaces In Nevada With New Firm, Says Attorney

In Miami, Florida, The Miami Herald reports:
  • A Miami lawyer has filed a class-action suit in hopes of recovering millions of dollars paid by thousands of clients to a mortgage-rescue company. [...] On Thursday, Miami lawyer John H. Ruiz filed a class action suit in the Lincoln [Lending Services] case. Ruiz said he already has more than 1,000 clients in the case and believes that thousands of others are in the same situation. The suit also names two people associated with the company, Guillermo Leyes and Rita Gomez, as defendants. Ruiz said he believes they have assets that could be used to pay restitution.

***

  • Ruiz said that Leyes recently resurfaced as a manager at a Nevada loan modification company. According to Nevada records, a Guillermo Leyes was a manager at 1st Loan Modification of America in Henderson. Ruiz said Leyes withdrew his name from that company this week.

For more, see Lawyer sues mortgage-rescue firm to recover improper fees (A local attorney is suing a mortgage-rescue company that he says broke state law, then failed to reimburse all its former clients).

(1) Florida's attorney general shut down the company, Lincoln Lending Services, earlier this year, saying it illegally demanded advance payment for mortgage-rescue services (See Florida AG press release, State of Florida v. Lincoln Lending Services lawsuit). Since October 2008, Florida law has prohibited companies from accepting payment in advance for mortgage rescues. The company paid back about $500,000 in restitution, then said it was out of money, according to the office of Attorney General Bill McCollum (see Status update concerning Lincoln Lending). The agency is now trying to determine whether Lincoln has other assets that could be used to repay additional customers.

NYS Regulators Form Fraud Unit To Tackle Title Insurance Crimes; Will Target Corrupt Closing Agents, Real Estate Scam Artists

From the Office of the New York State Insurance Department:
  • Superintendent James J. Wrynn [last week] announced the formation of a special Mortgage and Title Unit to fight title insurance crimes committed by criminals attempting to enrich themselves at the expense of consumers, financial institutions and municipalities.

  • Complaints alleging title insurance premium theft have increased with the downturn in the economy. The Insurance Department going to be very vigilant and is channeling its resources to enhance its ability to identify and root out this type of criminal activity,” Wrynn said. Wrynn cited the recent arrests of two men accused of stealing nearly $6 million in title insurance premiums, as well as other cases involving complex criminal schemes targeting indebted consumers.

***

  • Title insurance agents, in addition to providing title insurance, hold large sums of money including mortgage recording fees, real estate taxes and other fees related to commercial and residential real estate transactions. The lure of these funds, combined with the downturn in the economy, appears to be fueling an increase in title insurance related crimes,” Wrynn said.

***

  • Wrynn warned consumers to be wary of schemes involving title fraud used by so-called mortgage rescue companies. [...] These groups have targeted financially-troubled homeowners, low income people and others, including legitimate title insurance companies. The schemes have included such tactics as the use of “straw buyers” to purchase properties using false loan applications; the use of significantly inflated property values to obtain mortgages; and the enticement of financially-troubled homeowners to sell their homes in exchange for fraudulent leaseback arrangements.

For the entire press release, see Title Insurance Crimes Target Of New Frauds Unit (Insurance Department to Combat Upsurge in Premium Theft, Other Related Crimes).

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

Fake Attorney Gets 7+ Years For $1.7M Escrow Ripoff In Conducting Real Estate Closings; Pocketed Funds Due To Existing Lienholders, Homeowners

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
  • A con man who passed himself off as an attorney was sentenced in federal district court yesterday to 7 1/2 years behind bars in connection with a scheme to bilk homeowners, lenders, title insurance companies and the city of Philadelphia of $1.7 million. Jason Bloom, 39, of Mount Laurel, N.J., has been in federal custody since he pleaded guilty on July 13 to wire fraud affecting a financial institution.

  • Authorities said that Bloom [...] acted as a settlement and title-insurance agent for real-estate sales and refinancings for a firm in Trevose, Bucks County, and, later, his own company. Bloom kept money he received from settlements that was supposed to be used to pay off existing mortgages, pay real-estate taxes in Philadelphia and make refunds to homeowners for overpayments at closings.

***

  • By pretending to be an attorney, Bloom increased the number of settlements that he could handle. Some jurisdictions in New Jersey permit only attorneys to handle real-estate closings. [...] Joyner ordered Bloom to make restitution of $1,730,874 to three title insurance companies, two financial firms and the city. (Homeowners ripped off have already been made whole, the feds said.)(1)

For the story, see Bogus lawyer stole $1.7M, gets 7 years.

(1) I get the feeling that the insurance companies that underwrite the title policies in real estate transactions pay out more to cover the looting of escrow accounts committed by their agents than they do in actual title claims. EscrowRipOffKappa

South Florida Title Agency Duo Charged With Looting $10M From Escrow Account; Cash Earmarked For Completing Real Estate Closings

In West Palm Beach, Florida, the U.S. Attorney's Office announced four mortgage/real estate fraud indictments of 15 individuals in four separate cases, including the following:

West Palm Beach Residents Charged with Looting Title Company’s Escrow Account

  • According to an indictment returned by a federal grand jury sitting in West Palm Beach, between July 2005 and May 2008, Roger C. Gamblin, 61, and Peggy L. Gamblin, 53, both of Royal Palm Beach, Florida, defrauded companies and individuals out of approximately $10 million.

  • According to the indictment, the husband and wife owners and operators of Flagler Title Company teamed up to steal money from the escrow account for Flagler Title Company to cover company operating expenses and personal expenses. The fraud was committed by promising the Title Insurance Companies they represented and various companies and individuals with outstanding real estate transactions that money in the Flagler Title Company escrow accounts would be used solely in connection with real estate transactions and their fees would not be disbursed until the transactions occurred and Flagler had earned their fee. Instead, the Gamblins caused money to be transferred without completing the transactions or obtaining permission from the Title Insurers, buyers, sellers and mortgagees involved in the property transactions.

For the entire press release, see Palm Beach County Mortgage Fraud Task Force Brings Charges Against 15 Defendants For Lying To Banks To Get Money. EscrowRipOffKappa

Massachusetts Attorney/Title Agent Cops Plea In "Mortgage Stacking" Scam; Pocketed $2M+ While Stiffing Existing Lienholders On Loan Payoffs

From the Office of the Massachusetts Attorney General:
  • Attorney General Martha Coakley’s Office announced the guilty plea of a former Somerville real estate attorney [...] in connection with making false statements on mortgage applications and associated documents and using the funds secured from the loans for his own purposes, rather than paying off existing loans as directed by the new lenders.

***

  • While practicing as a real estate lawyer in Somerville and Medford, [Kevin] Carey engaged in a scheme called “mortgage stacking” on four residential properties he or his family members owned. The scheme involved serially refinancing the loans on these properties, without paying off the existing loans. Carey was also the agent for a New England title insurance company which allowed him to issue title insurance policies on mortgage transactions he processed.

***

  • When he received the proceeds of the loans, Carey did not pay off the existing mortgages on these properties, but rather used the funds for his own benefit. Carey issued title insurance policies or commitments in connection with the transactions, and the lenders were therefore protected, but ultimately the title insurance company suffered the financial loss. As a result of this scheme Carey stole over $2 million.

For the Massachusetts AG press release, see Attorney General Martha Coakley’s Office Announces Guilty Plea of Former Somerville Lawyer in Connection with Stealing Over $2 Million From Mortgage Lenders in Mortgage Stacking Scheme. EscrowRipOffKappa

Sunday, October 18, 2009

New California Law Strips Escrow Control From Lenders Selling Foreclosed Homes; Allows Buyers To Choose Their Own Closing Agent

In Sacramento, California, The Stockton Record reports:
  • Gov. Arnold Schwarzenegger has signed Assemblywoman Cathleen Galgiani's Buyer's Choice Act into law. The bill will allow buyers of foreclosed homes in the state to choose local escrow companies to handle their real estate transactions. In a housing market dominated by foreclosures, banks consistently have contracted most of their escrow services to specific companies, mostly in Southern California. Galgiani, D-Livingston, said this has hurt other escrow companies and caused headaches for Northern California real estate agents and mortgage brokers.

For the story, see Buyers now can choose local escrow companies.

State Lawmakers Take Closer Look At Aggressive "Debt Buyer" Practices; NC Statute Takes "Produce The Note" Approach When Filing Collection Suits

The Associated Press reports:
  • With many Americans in dire financial straits, states are cracking down to make sure aggressive debt collectors target only people who legitimately owe them money. [...] Since the recession started, at least a half-dozen states have adopted additional limits, like imposing statutes of limitation on collections and adding opportunities to punish abusive practices in court. Other states may follow suit. [...] Lawmakers are increasingly focusing on outfits that buy bad debt from credit card companies and other lenders for pennies on the dollar and profit when they collect more than they paid.

***

  • A North Carolina law that took effect this month requires debt buyers filing collection lawsuits to produce documents proving they're the ones owed the money. Trying to collect on a debt that a company should reasonably know is invalid could lead to lawsuits and civil penalties of up to $4,000 per violation. North Carolina Attorney General Roy Cooper cites the case of a 65-year-old woman who had been plagued by up to five collection calls a day until her lawyer demanded proof she owed the money, then learned collectors were looking for a debtor in Greensboro, about 140 miles to the west. "We've gotten a lot of cases that the debt is not owed or the debt has been paid off," Cooper said. "They call and they browbeat people to pay money that they don't even owe."

***

  • A New York City ordinance passed last spring requires similar proof from debt collectors, forcing them to tell consumers what company they represent, the original creditor, and the amount of the debt they owe. "Anyone contacted by a debt collection agency will now be empowered to demand written documentation regarding the status and history of the debt," Mayor Michael Bloomberg said.

For more, see States Raise Limits On Creditors As Debtors Squirm (Financial Misery Prompts States To Pass New Protections Against Aggressive Debt Collectors). zombie debt

Right To Counsel In Key Civil Cases Now Recognized In California; Levels Playing Field For Poor In Certain Housing, Other Litigation

In Los Angeles, California, the Los Angeles Times reports:
  • California is embarking on an unprecedented civil court experiment to pay for attorneys to represent poor litigants who find themselves battling powerful adversaries in vital matters affecting their livelihoods and families. The program is the first in the nation to recognize a right to representation in key civil cases and provide it for people fighting eviction, loss of child custody, domestic abuse or neglect of the elderly or disabled. Advocates for the poor say the law, which Gov. Arnold Schwarzenegger signed this week, levels the legal playing field and gives underprivileged litigants a better shot at attaining justice against unscrupulous landlords, abusive spouses, predatory lenders and other foes.(1)

For more, see California gives the poor a new legal right (Under a new law, the state will provide lawyers in key civil cases, such as those dealing with eviction and domestic abuse. Advocates say underprivileged litigants will get a better shot at justice).

(1) "How ironic that you can be arrested for stealing a small amount of food -- a box of Twinkies from a convenience store -- and you're entitled to counsel. But if your house is on the line, or your child is on the line, or you're being abused in a domestic relationship, you don't have the same right to counsel," said Assemblyman Mike Feuer, the Los Angeles Democrat who sponsored the bill.

Media Intervention Gets Loan Servicer To Cancel Foreclosure Sale Triggered By Its Own 7-Cent Error In Loan Modification Agreement

The Associated Press reports:
  • Towana Gooch, a single mom who lives with her 10-year old daughter, was on the verge of losing her town house in suburban Maryland after her mortgage lender kicked her out of a government loan modification program. The problem, she says she was notified, was a 7-cent error. Later, the lender told her the tiny error wasn't actually the issue, that her low income disqualified her from the program. She called the bank trying to get to the bottom of it all, but she got no answers and feared there was nothing to head off foreclosure, scheduled Friday.

  • After an inquiry by The Associated Press, the bank, America's Servicing Company, a division of Wells Fargo & Co., finally returned her call this week to apologize for the 7-cent error and say the foreclosure sale had been put on hold for now.(1)

For more, see Bank errors mar mortgage relief.

(1) According to the story, Gooch is far from alone in her problems with the Obama administration's loan modification program. Seven months in, many qualified applicants are being rejected, often through bank errors, with no avenue of appeal. Until this month, lenders didn't even have to tell them why. "If the servicer messes up, even by accident, there is no meaningful way to complain, no real appeals process, no viable ombudsman to consider," said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. "Most importantly, there are no consequences to the banks for failure to do what they have promised to do." Government officials can't say how many people have been turned down because of a typo, lost fax or an oversight by a poorly trained bank employee. But the Treasury Department acknowledges that far too many applicants have wrongly been rejected.

In Gooch's case, the bank initially notified her about her loan modification application and told her that her monthly payment would be cut in half, to $938. Gooch agreed to the payment. But America's Serving Company later notified Gooch that she no longer qualified for the program because her first automatic withdrawal payment should have been $938.07, not simply $938.

South Florida Couple Files Suit Against Lender, Saying B of A Welched On Loan Modification Agreement

In Broward County, Florida, the South Florida Sun Sentinel reports:
  • Weston attorney Kraig Weiss and his wife, Ana, are living what they call a "loan modification horror story." Earlier this year, the Weisses agreed to a loan modification with Bank of America, only to have the bank take the offer back. The Weisses sued. Now the bank is moving toward foreclosure, even though the Weisses are making mortgage payments. "The truth is, they don't care. They feel they are above it all and they don't have to answer to us," Kraig Weiss said.

***

  • The Weisses' suit, filed in June, accuses the bank of breach of contract. They've also said that bank representatives traipsed onto their property to take pictures of their house during Yom Kippur, frightening Ana Weiss' 76-year-old mother when she looked outside. Bank of America declined to comment on the case.

For the story, see South Florida banks and borrowers struggle with loan modifications (Sides have sharply different understanding of what it means to modify a mortgage).

Loan Servicer Confusion On Loan Modification Leaves Central Florida Homeowner Under Threat Of Foreclosure

In St. Petersburg, Florida, News Channel 8 reports:
  • Tricia Brady thought she was one of the fortunate homeowners to have her mortgage modified under the federal government's Making Home Affordable program. But, it turns out, she isn't so lucky.

  • Back in March, when the Making Home Affordable plan was announced, Brady contacted her mortgage company, EMC, to check into getting a loan modification. By June, Brady said, EMC had cut her payments from about $1,000 a month to $496. "Then on the fourth month, they send me the past due balance and tell me I'm three months overdue and they will foreclose on this property,'' Brady said.

  • Her mortgage company said she owes a payment of $3,500. A company spokeswoman said Brady was never part of the government program, but had been placed in one of the mortgage lender's repayment programs. [...] Now Brady is worried that the house she has owned for almost two decades could come under foreclosure. Brady said she thought the repayment agreement was part of a loan modification. "Had I known this, I would have struggled along with the mortgage I had,'' she said. [...] The Chase spokeswoman said the company has apologized for any confusion. She said one of the company's best loan counselors called Brady and was helping her understand her options.

For the story, see St. Pete homeowner faces loan modification confusion.

Saturday, October 17, 2009

Special Forces Iraq Vet Returns Home To Find Delinquent Mortgage On His Free & Clear House; Friend Accused Of Using POA To Drain Equity From Property

In Mount Clemens, Michigan, C & G Newspapers reports:
  • When Kevin Robertson, a sergeant with the Army’s Special Forces, returned from this third tour of duty in Iraq in May 2007, he was astounded to find that many of his financial dealings were out of whack. “He started to realize that something was really wrong. He didn’t know what had transacted,” said Elizabeth Geary, Robertson’s friend for at least 10 years.

  • Robertson discovered that a loan totaling $135,000 had been taken out on his home in Mount Clemens. The home was also going into foreclosure. Moreover, another home had been purchased in Robertson’s name in Florida for $340,000. “He went to Iraq and that’s one big nightmare over there, and he comes home and it’s a worse nightmare,” said Geary.

  • How did it all happen? According to Geary, one day before Robertson was deployed in November 2006, he gave power of attorney to a friend, Mark Powell, whom he had met at a gym several years ago in Sarasota, Fla. “He had been convinced by a friend of his over in Sarasota to turn over his power of attorney,” said Geary, adding, “Kevin reluctantly did this and when Kevin came home … this man he took out two loans on this house.” Geary lives in the house on Smith Street that Robertson owns and that Powell took the two loans out on. She said Robertson, who lives in Sarasota because that’s where the Special Forces train, had obtained the Mount Clemens home from his father, who had paid cash for the property and owed no money on it. She added that the Florida home, which Powell bought for $340,000, now appraises for $160,000. Geary said that Robertson gave Powell no such permission to take out either loan or purchase a home.

For the story, see Locals come together to help out soldier who was scammed. DeedContraTheft

Wisconsin Woman Charged With Ripping Off Dad Of $91K+; Used POA To Pocket Mortgage Money From Father's Home, Get Credit Cards

In Eau Claire, Wisconsin, WQOW-TV Channel 18 reports:
  • An Eau Claire woman is accused of stealing more than $91,000 from her dad as his power of attorney. Jill Peterson is charged with four counts of identity theft and forgery. According to the criminal complaint, Peterson told her father that she lost most of the money gambling. She told authorities that as power of attorney, she had no problem getting the money from the bank and that she also took out three credit cards in her father's name and even mortgaged his house. To throw off suspicion, her father says she created a fake website so he could view his bank account which was supposed to have more than $80,000 in it. After telling his daughter he was going to drive to the bank to see how much money he really had, she admitted that it was "all gone." Peterson will make her first court appearance later this month.

Source: Daughter gambles away $91,000 stolen from father. FinancialAbuseOfElderlyAlpha DeedContraTheft

Man Charged With Abusing POA, Looting $122K From Elderly Mom's Bank Accounts; 82-Year Old Woman Left With Big Nursing Bill & No Funds To Pay For Care

In Daytona Beach, Florida, the Daytona Beach News Journal reports:
  • A man who had power of attorney over his mother's affairs faces a felony exploitation charge after police said he emptied her bank accounts of $122,722. William Frank Kunselman Jr., 62, was arrested [...] on a charge of exploitation of the elderly. Daytona Beach detectives said Kunselman's 82-year-old mother, whose name was not provided, has lived at the Good Samaritan nursing home since 2006. She was relying on an income of $39,600 from her Social Security and investments.

  • Police said she had no idea her bills were not being paid at the nursing home, and she now owes $69,000. Kunselman, who wrote dozens of checks to himself from his mother's account, told detectives he has no money to pay for his mother's care.

Source: Man accused of emptying mother's accounts. FinancialAbuseOfElderlyAlpha

Buyer Of Foreclosed House Ignores Existing Lease; Seeks To Immediately Boot Family From Home, Says Tenant

In Bakersfield, California, KERO-TV Channel 23 reports:
  • A southwest Bakersfield family renting a foreclosed home claims the new owner is unfairly trying to kick them out just four days after he bought the home. Earlier this month, Anthony Moore received notice the home he and his family had been renting for the past four years was foreclosed and would be up for sale at an auction. Moore said the home sold [...], and already the owner is pressuring him to get out in 90 days or sooner.

***

  • Because of the new federal law Protecting Tenants at Foreclosure Act of 2009, Moore said he has the right to stay in the home until April 2010, that's when his lease is up. Congress passed the law in May aimed at protecting renters in foreclosure situations. Under the law, tenants are able to stay in their home until the end of their lease term, except if the new owner has plans to occupy the home then the tenant has 90 days to vacate.

  • Moore said he has been in contact with Monique Cervantes, who identified herself as the landlord. He said Cervantes told him that the owner, Shae Mhlay has no intentions on living in the home. "She's saying that it's not legal, that they don't have to follow the lease and basically told me the first day that the new owner is lethal, is ruthless and wants us out," said Moore. On the County Assessor's Web site, ABC 23 found Mhlay had purchased close to 70 homes since January this year.

For more, see Renter Claims Rights Are Being Violated (Federal Law Aims At Protecting Tenants Rights). RentSigmaSkimming

Overleveraged NYC Apartment Buildings Leave Tenants In Tens Of Thousands Of Units Threatened With Consequences Of Foreclosure

In New York City, National Public Radio reports:
  • Ever since it was purchased in 2007, tenants of the hulking old apartment building on University Avenue in the Bronx have endured cockroaches, leaking pipes, electricity outages and myriad other deprivations and indignities. But the low point probably came last winter, when the boiler ran out of oil. "For two weeks, we had no heat. This room right here? Icicles coming from the ceiling. That's how cold it was," says Luis Correa, 33, standing in the back bedroom of the apartment where he has lived his entire life.

  • The building was long owned by a small landlord who did a good job of maintaining it, Correa and his neighbors say. But one day in 2007, they awoke to find it had been purchased by Ocelot Capital Group, along with 24 other buildings, for the staggering sum of $36 million. Later, when the real estate crash left the owners unable to pay the debt service and keep up the property, the new owners abandoned it.

For more, see Some Tenants Pay The Price For Mortgage Excesses (Anywhere from 70,000 to 100,000 New York City apartment units are in foreclosure or at risk of it right now).

In a related story on an 11,000 unit, 56 building NYC apartment complex in deep financial trouble, see The Wall Street Journal: An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default). RentSigmaSkimming

The Broken Gavel Awards

Incorrigibles and other assorted knuckleheads seem to infiltrate all fields and occupations. A recent column in The Southeast Texas Record serves as a reminder that the judiciary is no less immune to such infiltration.

Whether its lying to investigators investigating sexual misconduct allegations, soliciting sexual favors in return for leniency, transporting prostitutes across state lines, tax evasion in kickback schemes, lying about neck and back injuries - and later abusing one's position on the bench - in order to cash in on roughly $440,000 in insurance payments following an auto accident, the columnist, Texas attorney John G. Browning, observes that "judges' recent foibles have demonstrated that they, too, are as prone to character flaws as the defendants appearing before them."

For the story, see Legally Speaking: The Broken Gavel Awards.

See also, Reader's Digest: America's Worst Judges (Our Broken Gavel Award winners, and the damage they do). knuckleheaded judges zeta

Friday, October 16, 2009

Psychiatric Patient Dodges Prosecution In Alleged Contract For Deed Scam; Court Officials Say Man Lacks Mental Capacity To Commit Crime

In Cloquet, Minnesota, KQDS-TV Channel 21 reports:
  • By midnight Tuesday, a Cloquet man must be out of his home, which he thought he partially owned. Mike Bond made monthly payments on the house since May 2008, then found out through an eviction notice he had been paying an alleged con artist. [...] "We just lost $30,000," said Bond. "I have over $15,000 in labor and material in this property and now I just have to walk away from it."

***

  • Bond says he was making cash payments to Ron Sampson, from whom he thought he was buying the home. "He had an ad posted on Craigslist contract for deed house. It was a quick easy deal." [...] That was until he learned the house was sold in a sheriff's mortgage foreclosure auction on January 6th to Lasalle Bank.(1)

***

  • Record–keepers [at the Carlton County Court Administrators Office] confirm in 1999, Ron Sampson was civilly committed as mentally ill and dangerous in Carlton county. [...] Cloquet Police say Sampson was also deemed mentally ill and dangerous in Washington County in 1994 and has been in and out of the Minnesota Security Hospital in St. Peter, MN, for treatment. [...] Because Sampson has been committed, court officials say he's treated as not having the capacity to commit a crime. If he gets in trouble, he's sent back to the Security Hospital.

For the story, see Cloquet family loses home in alleged scam by mental patient.

(1) Reportedly, Bond says Sampson got the house from the original owner by having her move out and pay Sampson to take care of her pending foreclosure. rent to own lease purchase option scams yellowstone hijack KappaPhonyLandlordScam

Mass. AG Settles With Straw Buyer In Alleged Foreclosure Rescue Scam That Used Sale Leaseback Deals To Rip Off Equity From Strapped Homeowners

In Boston, Massachusetts, the Worcester Business Journal reports:
  • Attorney General Martha Coakley's office has reached a settlement with Neville Francis, one of 18 defendants accused of taking part in a wide-ranging foreclosure scam.(1) Per a consent judgment, Francis will pay $5,000 in restitution and $1,500 in attorneys' fees and costs. Coakley's office said Francis acted as a "straw buyer" in a scheme along with several real estate brokers, mortgage brokers and attorneys that ran a fraudulent foreclosure rescue program. Francis allowed a mortgage broker to use his name in applying for a loan to purchase a property. Francis took title to the property without paying deposits, or closing costs and had no intention of occupying the property. Francis is the third defendant, and the second straw buyer, to settle with Coakley's office in the case.(2)

Source: Alleged Foreclosure Scammer Settles With Coakley.

For the Massachusetts Attorney General press release, see Straw Buyer Who Participated in Foreclosure Rescue Scheme Enters into Consent Judgment.

(1) The defendants in the case tricked homeowners on the brink of foreclosure into selling their homes while promising that they'd be able to remain in their homes and that they would maintain their homes' equity, according to Coakley's office. However, the alleged scammers would disburse sale proceeds among themselves without paying any fees, and in certain cases, would sell the homes several times among themselves.

(2) According to the Massachusetts AG's Office, it reached a similar settlement in August with straw buyer Marie Betey Mereus. Additionally, this past June, it reached a settlement with closing attorney Valerie Hanserd providing for a payment of $115,000 to resolve allegations over her role in both this foreclosure rescue scheme case and a second related enforcement action against her and Leo Desire Sr. and Primary Mortgage Resource, Inc.

California Tenant Advocacy Group In Forefront In Fight Against Banks, Real Estate Agents Attempting To Illegally Oust Tenants From Foreclosed Homes

In Sacramento, California, NewsBlaze reports:
  • Backed by Tenants Together, California's statewide tenant rights organization, tenants in Sacramento have fought off local realtors and a bank that tried to illegally trick them into moving out of their home after it was foreclosed. Golden 1 Credit Union, through its local realtors at the Bishop Real Estate Group, attempted to drive out tenants after foreclosure in blatant violation of a new federal law. In a letter [...], Tenants Together is demanding that The Bishop Real Estate Group and Golden 1 Credit Union take immediate steps to comply with the law and stop evicting innocent tenants after foreclosure.

  • Mr. and Mrs. Caesar are tenants who have a two-year lease to continue renting their home through September 2010. Golden 1 Credit Union, the lender, took over the property on October 2, 2009. Golden 1 Credit Union quickly dispatched local realtors at The Bishop Real Estate Group to carry out the bank's dirty work - throwing innocent tenants out of their homes after foreclosure. On October 7, 2009, Kendra Bishop of The Bishop Real Estate Group told Mrs. Caesar that she and her husband had to move. Ms. Bishop also handed Mrs. Caesar a threatening letter, informing her that Golden 1 Credit Union had "started eviction proceedings" and urging Mrs. Caesar to accept a "relocation offer" that would expire in 3 days. [...] As soon as the foreclosure occurred, Mrs. Caesar called Tenants Together and learned that, pursuant to the Protecting Tenants to Foreclosure Act,(1) her lease survived foreclosure and that she was entitled to continue renting her home until the lease expires on August 31, 2010.(2)

For more, see Sacramento Tenant Fights Off Realtor & Bank Trying to Illegally Evict Her Family.

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

(2) "This behavior is outrageous," commented Gabe Treves of Tenants Together, "The Caesars have every right to stay in their home, yet the realtors and the bank came storming in and demanded that they vacate. Banks and realtors routinely act in blatant violation of the law. That is why we are demanding that they change their policy, commit to following the law, and stop harassing tenants." RentSigmaSkimming

Porn Flick Operator Caused Rent Losses Of $100K/Month, Throwing $25M+ In Real Estate Into Foreclosure, Says South Florida Landlord In Lawsuit

In Miami, Florida, Courthouse News Service reports:
  • A South Florida landlord claims he was ruined by pornographic film-makers who rented his house to make a golf-themed porn flick. Raul Quintana says he never would have rented his house to Bangbros.com if he'd known they were going to use it to shoot "Sexing Golfing Experience." Quintana says Bangbros paid him $600 to use his home on Key Largo for a one-day photo shoot. Quintana says the defendants told him they would use the house for "a modeling photo shoot." But Quintana says Bangbros, which operates 17 pornography Web sites, exposed him to ridicule and cost him at least $100,000 a month, as he has "lost the right to rent [his and his family's] units on the island." Before the incident, Quintana says, he had "assets on the island in excess of $25 million in property," all of which is now in foreclosure. He demands damages for fraud, deceptive trade, breach of contract and defamation.

Source: Golf Porn Ruined His Life, Landlord Says.

For the lawsuit, see Quintana v. Bangbros.com, Inc.

Another HELOC Headache

A column in The Philadelphia Inquirer recounts the story of a Swarthmore, Pennsylvania homeowner who suddenly had his home equity line of credit frozen by his lender after an apparent screw-up regarding the bank's request that he provide them with an IRS Form 4506T.

For the story, see A 'mess' of a paper chase.

Go here for other posts on Frozen HELOCs.

For more on IRS Form 4506T, see IRS Form 4506-T tweaked to battle loan fraud. frozen heloc

Thursday, October 15, 2009

Could Recent Land Court Ruling Impact Title To Any Massachusetts Home Foreclosed Upon In Last 20 Years?

In Boston, Massachusetts, the Boston Herald reports on the recent Massachusetts Land Court ruling that threatens to undo thousands of foreclosures in the state:
  • Experts say the ruling paves the way for thousands of people who’ve lost houses to foreclosure to challenge their homes’ seizures. “The judge has thrown into question every foreclosure performed in the Commonwealth over the last 20 years,” said lawyer Lawrence Scofield, who represents Wells Fargo and U.S. Bank. Scofield said only foreclosures before 1989 are beyond review, as [Massachusetts] state law gives people two decades to dispute land ownership.

  • Market watchers add that the judge’s ruling affects far more than just foreclosed homeowners. For instance, any consumer who owns a house foreclosed on in the past two decades must now worry that a former owner will sue to reclaim the property. Such homeowners could also find it impossible to sell or refinance because of “clouded” titles.

  • In fact, some consumers who’ve tried to buy foreclosed homes in recent months haven’t been able to get mortgages or title insurance because of [Judge Keith] Long’s initial decision. Bank of America and other firms have even pulled some foreclosed homes off of the resale market.

For the story, see Ruling could undo thousands of foreclosures (if link expires, try here).

Go here for Judge Long's rulings in this case (Oct. 14 ruling, March 26 ruling). title insurance legal issues EpsilonMissingDocsMtg

Foreclosure Rescue Operator To Cough Up $690K+ To Resolve Arizona AG Civil Charges In Alleged Sale Leaseback Equity Stripping Scam

In a recent press release, the Office of the Arizona Attorney General announced the settlement of a civil lawsuit it brought against a local foreclosure rescue operator(1) who peddled sale leaseback arrangements to homeowners facing foreclosure, purportedly to help them avoid the loss of their homes.(2)
  • In March, [Arizona Attorney General Terry] Goddard filed a lawsuit on behalf of his office and the Arizona Department of Financial Institutions against an alleged foreclosure rescue operation believed to have defrauded some 270 Arizonans of their homes. In the suit, Goddard alleged that between 2003 and 2007, Richard Winer, 33, of Tempe, through his limited liability companies - Taken Care of Investments, LLC; Homeowner Solutions, LLC; Bourbon Street Property Management, LLC; and Filibuster, LLC - victimized homeowners facing imminent foreclosure with fraudulent offers to help them stay in their homes.

***

  • According to court documents, Winer and his salespeople persuaded struggling homeowners to deed him their homes in return for assuming their monthly mortgage payments and paying off the full value of their delinquent payments. Winer charged homeowners a monthly fee equivalent to the mortgage payment to remain in the home as a renter. Neither the owner’s mortgage lender nor servicer was notified of the transfer of title.

  • These owners-turned-renters had the option to repurchase the house from Winer within one year for a fee of approximately $15,000, if they met all of the conditions of the sale-leaseback agreement. If the owner-turned-renter violated any of the conditions, such as by making even one late rental payment, the option to repurchase the home became void and the individual was subject to immediate eviction. The State’s lawsuit claimed that homes obtained under this scheme were resold within two weeks to investors who paid a commission to Winer. Almost all of the owners-turned-renters proved unable to repurchase their properties, at which time the investor sold or refinanced the home at full market value, earning profits in the tens or, in some cases, hundreds of thousands of dollars.

For the press release, see Goddard Wins $1.37 Million for Consumers in Two Mortgage Fraud Cases.

For earlier post on this lawsuit, see 400 Sale Leasebacks Are Disguised Equitable Mortgages, Says AZ AG In Invoking State Consumer Fraud Act, TILA In Suit Against Foreclosure Rescue Firm.

For the related court documents in this case, see:

(1) According to the terms of the settlement, Richard Winer must:

  • Pay $391,500 in restitution to homeowners victimized by their alleged scheme,
  • Pay $150,000 in civil penalties to the Attorney General’s Office,
  • Pay $150,000 in civil penalties to the Arizona Department of Financial Institutions,
  • Refrain from participating in any manner in any financial institution or enterprise licensed by the Arizona Department of Financial Institutions.

(2) In similar settlements of lawsuits brought by other state Attorneys General in alleged sale leaseback, foreclosure rescue, equity stripping scams, see:

More Borrowers Using Court System To Save Homes From Foreclosure

CNNMoney reports:
  • During the housing boom, mortgage lenders were doling out the dough, giving loans to people who could never have qualified before. Now, homeowners and government officials are increasingly taking these institutions to court, alleging unfair and predatory practices. While many of these suits are still winding their way through the legal system, some banks have already settled for millions of dollars.

***

  • "Borrowers are looking to the legal system for help in keeping their houses," said Gary Klein, a partner in Boston-based Roddy Klein & Ryan, which focuses on consumer law. "There are more cases pending than I've ever seen in my 23-year career."

  • Homeowners are seeking the courts' help either individually or as part of class action lawsuits. With foreclosures continuing to rise, borrowers are looking to force banks to modify unaffordable loans or to stop them from foreclosing on homes. Often, they also seek money. To be sure, banks have faced unfair lending lawsuits for years and have paid millions of dollars in settlements. But the recent housing boom was fueled by questionable and exotic loans that many borrowers had no hope of repaying.

For more, see Predatory-lending lawsuits on the rise (Homeowners and government officials are taking mortgage lenders to court for unfair lending practices). EpsilonMissingDocsMtg UndoMortgageLoans TILAdelta

Ex-NBAer Leaves Adoptive Mom Homeless; Duped Her Into Signing Over Home, Failed To Make Payments On Subsequent Financing, Resulting In Foreclosure

In Cambridge, Massachusetts, The Detroit News reports:
  • Rumeal Robinson got famous for his performance under pressure -- two free throws with three seconds left in overtime to clinch Michigan's 1989 NCAA basketball championship.(1) But the Cambridge, Mass., public school security officer who raised Robinson after finding him abandoned at age 10 says he has fallen far from the image of someone you can count on. Helen Ford, 65, took Robinson into her home, and accuses him of cheating her out of her house.(2)

  • Ford cried while describing to a Detroit News reporter how she was evicted in April from the home on Rumeal Robinson Way in Cambridge where she and her deceased husband Louis raised nine children and provided temporary care to many more. "I didn't know I was signing my house over. I thought I was taking out a mortgage because my son asked me for help," Ford said. "He said he would make the payments and I thought all these years he was making the payments until the constable came and told me I was being evicted."

  • She unwittingly signed papers in 2003 that sold the home for $600,000. The property has since changed three times and finally went into foreclosure. Her attorney bought time for her to remain in the home, but he now is uncertain if there is any way to get the place back.

  • Ford lives in a two-bedroom apartment. She said she doesn't sleep well because, for the first time in her life, she is alone. She had raised five of her own, four adopted children and provided temporary care for many more foster children in the five-bedroom house. She was honored for her dedication during the halftime of a Boston Celtics game in 2006.

For more, see U-M hoops hero Rumeal Robinson accused of swindling mom, others.

In a related story, see Broward-Palm Beach New Times: That's Foul (Hoops hero Rumeal Robinson blew a fortune on strippers, got indicted, and left his mom homeless).

(1) According to the story, his famous free throws downed Seton Hall, 80-79, and landed Robinson on the cover of Sports Illustrated. His adoptive parents accompanied him to the 1990 National Basketball Association draft in New York, where he was selected 10th overall in the first round by the Atlanta Hawks. He never lived up to expectations, and ended up literally bouncing around the NBA, playing for the New Jersey Nets, Charlotte Hornets, Portland Trail Blazers, Los Angeles Lakers and Phoenix Suns, the story states.

(2) No stranger to accusations of real estate hanky panky, Robinson was indicted by federal authorities in Iowa for his part in an alleged swindle of more than $2 million involving a proposed resort development called Harmony Cove in his native Jamaica. He was released last month on $50,000 bond, the story states. DeedContraTheft

Short Sales Coupled With Lease-Buyback Option A Way To Help Those Facing Foreclosure Stay In Their Homes?

In Manteca, California, The Stockton Record reports on local homeowner Rachael Vasquez and her attempt to stay in her home despite a pending foreclosure on her family's three-bedroom home:
  • Vasquez has opted for what appears to be a growing trend - albeit one that should be approached with caution and isn't without its down side - in the Central Valley for struggling homeowners. She struck a deal with an investor to purchase her home as a short sale then entered into a lease-option agreement to buy it back in three years. Vasquez will pay rent for 36 months and will then repurchase her home for $234,000, 130 percent of what she sold it for on short sale.

  • Manteca ReMax agent Christine Papworth, [...] crafted the local lease-buyback program a year ago, and has completed about 65 sales with investors. Papworth has worked the deals with one main investor, the Land Group of Modesto. She also is close to reaching an agreement with a group of Stockton investors represented by Grupe Real Estate broker Jerry Abbott. Abbott said his group has two lawyers reviewing the program to make sure there are no pitfalls.(1) [...] He added that he worries banks would reject offers once they know a lease/buyback is being offered to the seller that it approved for a hardship.(2)

For more, see Home program savior or sketchy? (Buyback investor deals risky, some experts say).

(1) One potential pitfall for the investor is that the deal could be recharacterized as an equitable mortgage (and possibly, an usurious equitable mortgage, if the overall profit to the investor exceeds any applicable limit on the charging of interest under state law). In that case the homeowner, in the event of a default or failed buyback attempt, can only be ousted from the home after a lawsuit to foreclose the investor's equitable mortgage, and not through a tenant eviction action. Go here for some case law on Equitable Mortgage Doctrine In California.

(2) Failure to fully disclose any contemporaneous side deals to the lender/loan servicer approving the short sale, or any lender financing the short sale, could land the participants in these deals in hot water. See:

Overleveraged 11,000-Unit NYC Apartment Complex Teetering On Foreclosure

In New York City, The Wall Street Journal reports:
  • One of the biggest, most high-profile deals of the commercial real-estate boom is in danger of imminent default, say people familiar with the matter, signaling the beginning of what is expected to be a wave of commercial-property failures. The sprawling Manhattan apartment complex known as Peter Cooper Village and Stuyvesant Town -- acquired for $5.4 billion in 2006 by a venture of Tishman Speyer Properties and a unit of BlackRock Inc. -- is running out of cash. As of the end of September, it had $33.7 million left of the $400 million in interest reserves set up to service its debt, according to the people familiar with the matter. At its current burn rate of about $16 million per month, the reserve could be depleted before the end of the year, the people said. Others have said the venture could avoid default until February.

***

  • Lenders who financed the deal first projected the complex's net operating income would triple to $336 million in 2011 from $112 million in 2006, according to Deutsche Bank AG. But net income is projected to be $139 million this year, according to Realpoint LLC, a credit-rating agency.

  • Investors who bought into the deal were confident that real-estate manager Tishman Speyer would be able to greatly boost profits by raising rents in Manhattan's sizzling apartment market. But today, the 56-building, 11,000-apartment property is suffering from a slowing New York economy, a lawsuit that has hindered the owner's ability to convert rent-controlled units to market rentals, and the debt load.

For more, see An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default).

See also, New York Magazine: WSJ: T Minus Four Months Until Stuyvesant Town Defaults.