Judge Unsympathetic To "Poor Business Decisions" Defense As Title Agent Gets 11+ Yrs For Looting Escrow Cash; 15 Refin'cing Homeowners Left w/ 2 Loans

In Fort Wayne, Indiana, The Journal Gazette reports:

• The courtroom was packed Friday to see what sentence Joseph Garretson would receive for running what state officials called one of the worst fraud cases they had seen. Allen Superior Court Judge Fran Gull ordered the former title broker to spend 11 1/2 years in prison and to pay more than $3.4 million in restitution. Friday’s sentence came more than five months after Garretson, 37, pleaded guilty – admitting to conversion or misappropriation of title insurance escrow funds, corrupt business influence and unlawful loan origination activities.

***

• Along with numerous letters from family and friends, Garretson’s sister, Jodi, and his grandmother-in-law spoke on Garretson’s behalf. Most, as well as Garretson himself, characterized his conduct as “poor business decisions,” made to keep up a certain lifestyle as the economy and mortgage industry tanked.(1)

***

• [Judge] Gull listened to victim after victim describe their anxiety over the possibility of losing their homes.(2) [...] So far, Garretson has paid less than $60 in restitution, which, if paid at that pace, would take more than 28,000 years to make the victims whole, [Allen County Deputy Prosecutor Tim] McCaulay said.

For the story, see Broker given 11.5 years in fraud scheme.

See also, The News-Sentinel: Broker gets 11.5 years for $3.4 million mortgage fraud scheme.

(1) Reportedly, Garretson said he was a victim of a shakedown and was adamant that he gave much of the money taken, about $1.8 million, to Todd Leary, former Indiana University basketball star and radio commentator, who faces 17 felony counts alleging his involvement in the title fund scheme. Leary was arrested in February, days after Garretson’s guilty plea and minutes before he was to call the IU-Purdue basketball game at Assembly Hall in Bloomington. According to court documents, Garretson told prosecutors Leary pressured him for money, threatening to reveal the scam, the story states.

(2) According to this story, several of Garretson's victims described him as a friend whom they trusted to refinance their home mortgages with title insurance, settlement and escrow services through Fort Wayne Title. The plan Garretson sold was to use an escrow agent to immediately pay off the mortgages using money derived from the refinancing. But Fort Wayne Title did not pay off the mortgages, pocketing the funds and using fraudulent statements to fool the homeowner into a false sense of security. The scheme resulted in net losses to homeowners of more than $2.7 million. It left 15 victims with two mortgages on their plate, according to Secretary of State Enforcement Officer David Maxwell.

Reportedly, Judge Gull was visibly moved, and said she was troubled by the stories the victims told about Garretson's actions, saying he “wreaked havoc” for his own benefit. Gull recalled one victim saying she could not plant flowers at her home because it would inevitably be taken from her for non-payment. “I'm just a lowly criminal court judge, Mr. Garretson, and I don't deal a lot with financial crimes,” Gull said. “I have a front-row seat to some of the most horrible crimes in humanity. What you've done here is horrible.”

BofA To Rescind Foreclosure Sale After Media Intervention Attracts Attention; Jerked-Around Homeowner Says She'll Believe It When She Sees It

In Wheat Ridge, Colorado, KDVR-TV Channel 31 reports:

• The Wheat Ridge woman who had the Bank of America sell her house out from under her could be getting her home back. On Thursday FOX31 News first reported 61-year-old Stephanie Martin's story. She's lived in her home for 20 years and now takes care of her 84-year-old mother and 7-year-old granddaughter. Martin never had any trouble making her house payments, until last June when her legs were crushed in a horrible accident at the Target store where she worked.

• She applied for and was accepted into a Freddie Mac program that lowered her mortgage payments and stopped any foreclosure proceedings. [...] But, even though her participation in the program was supposed to stop all foreclosure proceedings, Bank of America earlier this month sold her house at a foreclosure auction, to itself.

• Martin says they never sent any warning or notification. And she found out about the foreclosure only after her lawyer coincidentally saw the public notice at the courthouse.

***

• For nearly a month, Martin unsuccessfully tried to get some answers or help from the Freddie Mac program and the bank. After she contacted FOX31 News and KHOW Radio Talk Show host Peter Boyles, her case received attention. She and her lawyer say the Bank of America called them Friday and said they are going to rescind the sale and give Martin her house back. They indicated they will also work with her to keep the lower house payments. Martin is relieved, but says after all she's been through, she'll believe it when she sees it. "I hope this is true because I've been told so many things."

For the story, see: Bank to return woman's home sold without notice.

Woman Cops Plea In "Rescue" Racket That Clipped Homeowners Of $35-40K; Three Felonies To Be Reduced To Misdemeanors If Scammer Coughs Up Restitution

In Santa Barbara County, California, the Lompoc Record reports:

• The manager of a Los Angeles-based foreclosure consultation business which had a Santa Maria office, entered a no-contest plea this week to eight counts of committing prohibited foreclosure practices. Irma Diaz, 41, of Hacienda Heights, entered the plea Thursday in Santa Barbara County Superior Court in Santa Maria.

• Prosecutors had charged Diaz with eight felony counts, but Judge Edward Bullard permitted her to plead no contest to five misdemeanors and three felonies, which could all be reduced to misdemeanors if she follows the judge’s terms. “Over our objection, he reduced them to misdemeanors,” said Senior Deputy District Attorney Jerry Lulejian. Sentencing was postponed until Jan. 6 to allow Diaz time to make restitution to the victims.(1)

***

• Lulejian has said all but one of the victims are from Santa Maria, and the crimes happened here. She took between $35,000 and $40,000 from the victims in all, Lulejian said, which she didn’t keep directly but that instead went to the organization she is a part of. [...] Lulejian said that he believes Diaz should have been convicted of all the felonies. “We want to scare people away from doing this kind of activity in the community,” he added.

For the story, see Woman pleads no contest in foreclosure fraud case.

For an earlier post, see Manager Of Foreclosure Consulting Outfit Bagged & Held On $1M Bail; Accused Of Pocketing Upfront Cash From Homeowners In Or Nearing Mortgage Default.

(1) Apparently, the judge has given Diaz six months before being sentenced to come up with the needed cash to buy down the three felony convictions. Hopefully, someone will keep an eye on her to see that she doesn't victimize anyone else to come up with the loot needed for the victim restitution.

Philly Feds: F'clsure Rescue Operator In Sale Leaseback, Rent Skimming Scam Stalled Lenders w/ Bogus Bankrptcy Filings, Stiffed IRS On Illegal Profits

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):

• Gennaro Rauso, who owned and operated a real estate management company that purported to help financially distressed homeowners with their foreclosure problems, was charged [] by information with several mortgage fraud related offenses. The information alleges that as part of his scheme, Rauso took advantage of desperate homeowners with the promise of staying in, or saving, their homes when, in fact, he was using them to defraud the mortgage holders.(1)

***

• According to the information, between January 2005 and December 2008, Rauso owned and operated a real estate management company, D&B Property Investors, to carry out a scheme to defraud mortgage companies out of hundreds of thousands of dollars in mortgage payments. Rauso sought out homeowners who were facing immediate foreclosure on their homes and offered to help them avoid foreclosure. In a flyer mailed to these homeowners, Rauso claimed that he could help homeowners fight the mortgage companies on their behalf, while at the same time helping them to rebuild their credit so they could keep their home. Rauso also boasted that even if their home were lost to foreclosure, he could still keep them in their home for an additional 12-18 months after the sheriff’s sale.

• Once a homeowner agreed to participate, Rauso had the homeowner transfer the title of the home over to him for a nominal sum. Rauso then had the homeowner sign a lease, making the homeowner a tenant who paid rent to Rauso. He then delayed and obstructed the foreclosure process by, among other things, filing federal bankruptcy petitions.(2)

During this time when foreclosure was delayed, Rauso collected monthly rent payments from the homeowners, but made no payments to the mortgage companies. Ultimately, Rauso used more than 200 homeowners and their properties in his scheme to defraud mortgage companies, resulting in Rauso pocketing at least $400,000 in diverted or lost mortgage payments.

***

• In addition to the mortgage fraud scheme alleged in the information, Rauso is also charged with willfully failing to file a tax return on behalf of D&B Property Investors, defrauding the government of taxes owed on more than $1.6 million in income.(3)

For the U.S. Attorney press release, see New Jersey Man Charged In Foreclosure Rescue Scam.

For the charging document detailing the allegations in this case, see U.S. v. Rauso.

(1) Rauso has also been the target of at least one civil lawsuit, filed in a U.S. Bankruptcy Court in Philadelphia, brought by a homeowner/couple in a successful attempt to unwind/undo a sale leaseback, foreclosure rescue equity stripping ripoff Rauso perpetrated on them.

See Fowler v. Rauso (aka In re Fowler), Chapter 13, Bky. No. 07-11692ELF, Adv. No. 07-00139ELF (Bankr. E.D. Pa. March 3, 2010).

For a summary of the court ruling in the civil lawsuit, see Pennsylvania B'kruptcy Court Voids Sale Leaseback Scam; Victimized Homeowners' Continued Possession Leads To Invalidation Of Subsequent Deed, Mortgage.

(2) See Final Report Of The Bankruptcy Foreclosure Scam Task Force, a report by the U.S. Bankruptcy Court in Los Angeles, California that identifies various kinds of foreclosure scams that are perpetrated through the abuse of the Federal bankruptcy system.

(3) The full set of charges Rauso faces are:

• 18 U.S.C. §§ 1341 (mail fraud - 1 count),
• 18 U.S.C. § 157 (bankruptcy fraud - 1 count),
• 18 U.S.C. § 1029(a)(5) (access device fraud - five counts),
• 12 U.S.C. § 1709-2 (equity skimming, aka rent skimming, - 4 counts),
• 18 U.S.C. § 1344 (bank fraud - 1 count),
• 26 U.S.C. § 7203 (failure to file federal income tax returns - 4 counts),
• 26 U.S.C. § 7206(1) (filing a materially false federal income tax return - 1 count),
• 18 U.S.C. § 2 (aiding and abetting),
• Notice of forfeiture.

MD Feds Obtain Guilty Plea From Loan Officer Who Screwed Homeowners By Stripping & Pocketing Their Home Equity In Sale Leaseback F'closure Rescue Scam

In Baltimore, Maryland, The Annapolis Capital reports:

• An Annapolis loan officer admitted [] he promised to help two homeowners avoid foreclosure, only to strip them of their equity and leave them homeless. James Dan, 45, faces up to 20 years in federal prison when sentenced Sept. 2 in U.S. District Court in Baltimore. Under a plea agreement - which involved a guilty plea to one count of conspiracy to commit wire fraud - he is allowed to appeal any sentence longer than three years and five months. Similar charges are still pending against Dan's alleged accomplice, James Fox, 40, of Crofton. Prosecutors contend the two cost homeowners $262,059 and their banks at least $308,612.

***

• Beginning in 2006, Fox would identify homeowners who had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes to foreclosure. Fox, sometimes in Dan's presence, told potential victims that they could "rescue" them and save their houses, prosecutors said.

• In the scheme, the owners would transfer their homes to Dan, who had excellent credit and could obtain a new mortgage. Dan would then make the payments for six months to a year while the original owners continued to live in the houses and worked to "repair" their credit. After the agreed-upon time, the original owners were to refinance the property and reacquire it. Prosecutors said Dan knew the scheme would rarely, if ever, work in favor of the original owners.

For more, see Loan officer guilty in foreclosure scheme (Promised to help 2 owners, but left them homeless).

"Morgan Stanley Knew They Were Making Loans Designed To Fail!" Declares Massachusetts AG After Scoring $102M Settlement In Subprime Mortgage Case

In Boston, Massachusetts, The Boston Globe reports:

• Attorney General Martha Coakley has won a $102 million settlement from Wall Street’s Morgan Stanley & Co., money that will help more than 1,000 Massachusetts homeowners who are in foreclosure or saddled with unwieldy subprime mortgages.

• The deal, the first of its kind in the country with Morgan Stanley, followed an investigation by Coakley’s office into the firm for fueling subprime mortgages written by New Century Financial Corp., a large California lender that went bankrupt in 2007. She said Morgan Stanley knew that New Century was making predatory loans, but continued to provide the lender billions of mortgage dollars by buying the loans to turn them into securities.

• Morgan Stanley “uncovered signals pretty early on that the lending practices of New Century were not sound,’’ Coakley said at a press conference yesterday. “Morgan Stanley knew they were making loans designed to fail.’’

***

• Under the agreement, $58 million would go to cut the principal due on New Century loans for about 600 borrowers, as well as to assist 400 other New Century borrowers who have already lost their homes in foreclosure. Another $23 million would go to the state pension fund, which invested in the securities packaged by Morgan Stanley; those securities went bad when the mortgage market collapsed. The Commonwealth will get another $19.5 million in the settlement.(1)

For more, see Mass. wins $102m in subprime loan case.

For the Massachusetts AG press release, see Morgan Stanley to Pay $102 Million for Role in Massachusetts Subprime Mortgage Meltdown Under Settlement with AG Coakley’s Office.

(1) For the terms of the settlement agreement, see In re: Morgan Stanley & Co. Incorporated: Assurance of Discontinuance.

Federal Appeals Court To Review Ruling Lifting Statewide Injunction On All BofA Foreclosures In Utah

In St. George, Utah, KCSG-TV Channels 14, 16 reports:

• A Notice of Appeal to Federal Judge Clark Waddoups court order vacating an Injunction against Bank of America and its subsidiary ReconTrust Company halting all foreclosures in Utah was filed Friday, June 25, 2010 by St. George attorney John Christian Barlow. Barlow told KCSG News he was “troubled by Court ruling but unrelenting in pursuit of redress for his client (Cox) and other homeowners who have become victims of mortgage lending gone mad.”

***

• The David and Goliath legal battle over federal versus states-citizens rights is headed to the 10th Circuit Court. Judge Waddoups' Memorandum of Explanation in support of vacating a statewide Preliminary Injunction halting all foreclosures by the Bank of America only served to raise more questions.

For more, see Notice of Appeal Filed and Stay of Court Order Vacating Injunction Stopping Bank of America Foreclosures in Utah Requested.

(1) According to the story, some of the questions raised by vacating the statewide injunction temporarily jamming all BofA foreclosure actions are:

1. Why is the judge's ruling at variance with his previous rulings this year as noted in a Letter to Judge Waddoups submitted to the court June 10th, 2010 by the Plaintiff's counsel John Christian Barlow, Esq. and E. Craig Smay, Esq. and posted June 21, 2010 in the court docket, after the Ruling and Memorandum of Explanation.
2. Why did Judge Waddoups essentially brush aside the Plaintiff’s pleading that included the Supreme Court decision Cuomo vs. Clearing House Association in which the Court said...“If a State chooses to pursue enforcement of its laws in court, its targets are protected by discovery and procedural rules” meaning a state has a right to enforce its own laws against national banks.
3. Why hasn’t Judge Waddoups recused himself from all Bank of America or ReconTrust Company related cases since he was a senior partner in the law firm Parr, Waddoups, Brown, Gee & Loveless now Parr, Brown, Gee & Loveless that represented the Bank of America in Utah Fourth District Court, Case No. 070402786 before he took the bench. And, the law firm continues to represent the Bank of America and its subsidiaries. According to the Code of Conduct for US Judges, a judge should recuse himself when there may be a conflict of interest.
4. Why shouldn’t Judge Waddoups recuse himself from any case in which his old law firm represents either the plaintiff or the defendant until he takes full distribution of his retirement fund with the law firm as disclosed in Judge Waddoups most recent Financial Disclosure Statement that shows he only took a partial distribution of his retirement from the firm's 401K.

False Claims Act Lawsuits Say MERS' Mortgage Holder Status A Fraudulent Attempt To Dodge Payment Of Filing Fees, Taxes When Home Loans Are Assigned

In Reno, Nevada, The Reno Gazette-Journal reports:

• A Reno law firm has filed two lawsuits alleging fraud against a nationwide mortgage registration firm, and if those legal actions prevail, the firm and dozens of mortgage lenders could be liable to Nevada’s counties for billions of dollars in compensation and penalties.

• Law partners Robert R. Hager and Treva J. Hearne, with Reno attorney Mark Mausert, have filed a case in Nevada and one in California against Mortgage Electronic Registration Systems, which operates an electronic registry of mortgage loans in the United States. MERS serves as the mortgagee of record for lenders, investors and loan servicers in county land records, but doesn’t own any mortgages.

• By using the firm’s names on deeds and other paperwork, the lenders are able to avoid county recording fees, according to the firm. MERS has no financial interest in the loans, but is listed as actual owner or surrogate for the owner on millions of deeds of trust, even as individual mortgages are repeatedly traded and packaged inside of mortgage pools. The lawsuits argue that listing the firm as the owner of mortgages in which it has no interest in order to avoid filing fees and taxes that are legally required constitutes fraud.

• “We look forward to holding these financial institutions and foreclosure mills responsible for their actions that have deprived the states and counties of much-needed revenue,” said Hager.(1)

For more, see Mortgage registration firm sued for fraud, billions in penalties in Nevada, California.

(1) According to the story, the lawsuits, which were filed last year, removed from under seal this year and amended this month, are brought under a statute called the false claims act. That law allows citizens to file complaints concerning fraud and waste on behalf of governments. The lawyers filed the suits on behalf of individuals, the two state governments and Nevada and California counties. In Nevada, the false claims act allows for triple damages and penalties of $5,000 to $10,000 per individual offense. The governments would collect most of the damages if the suit is decided in favor of the plaintiffs and damages are assessed. Hager said taking the 5-year statute of limitations and other factors into account, MERS and its members face a potential judgment of $6 billion to $12 billion in Nevada alone, the story states. Reportedly, there are 47 lenders listed as co-defendants in the lawsuit, including Countywide Home Loans Inc., Bank of America, Citimortgage Inc., GMAC Mortgage, Wells Fargo, N.A. and J.P. Morgan Mortgage.

200+ Renters Given 72 Hours To Vacate 4-Story Buildings As City Officials Declare South Florida Apartment Complex With Rusted Staircases Unsafe

In Lauderhill, Florida, the South Florida Sun Sentinel reports:

• Sydney White and his family spent all day Wednesday loading their belongings into a moving truck, worrying about where his new home will be. His anxiety was triggered by a pink letter posted on his door Tuesday afternoon, telling him and other residents they had 72 hours to leave Brampton Court, a complex of four buildings in the 4500 block of Northwest 19th Street.

• White is among an estimated 260 tenants who must leave their apartments by noon Friday after city officials deemed the complex's staircases unsafe. City officials said residents living on the complex's second, third and fourth floors must move because there would be no easy way to escape in an emergency. First-floor residents are allowed to stay because they don't need the stairs.

***

• Some residents who haven't found new homes said they can't afford moving costs and expect anger, resentment and instability to rule their lives in the coming days..

For more, see Hundreds at Lauderhill apartment complex told to leave by Friday.

For story update, see:

• Company: Repairs start at Lauderhill apartments under evacuation order,
• Deadline for Brampton Court residents to leave postponed again (About 260 residents must be out by noon Sunday because of safety concerns): A Friday noon deadline was pushed back to noon Sunday, and Mayor Richard Kaplan said city officials were willing to keep extending the deadline as long as repair workers were making headway on fixing the problems.

Illinois AG Hammers 5 Home Repair Contractors In Seperate Suits Alleging Outfits Pocketed $167K In Upfront Payments & Performed Substandard Or No Work

From the Office of the Illinois Attorney General:

• Attorney General Lisa Madigan [] urged consumers to use caution when choosing home repair and remodeling contractors as she announced five lawsuits filed against home repair businesses,(1) alleging they defrauded Illinois consumers of more than $167,000 in down payments by performing substandard work or no work at all.

For the Illinois AG press release, see Madigan Cracks Down On Home Repair Fraud (Attorney General Urges Consumers to Be Aware of Potential Fraud During Spring and Summer Home Repair Seasons).

(1) The five outfits who made the Illinois AG hit parade are:

• C & P Development, Inc., and DM Realty & Building Inc., both of Chicago, and the owner of the companies, David S. Paul (five consumer complaints filed);
• Paul Bunyon Tree Services, Inc., a Melrose Park, Ill.-based firm, and its president, Timothy Mullis;
• All Seasons Contracting, Inc. with addresses in Manhattan, Ill., and Frankfort, Ill., and business owner Carol Richard and General Manager Patrick Richard;
• Jody Dobrinich, who does business as AAA Bloomington Construction, AAA Bloomington Concrete Company and Bloomington Construction & Handyman Services (eleven consumer complaints filed);
• J. Robert Rankin, who does business as Rankin Backhoe & Septic System (six consumer complaints filed).

Oregon AG Reaches Resolution Of Consumer Complaints With Two Loan Modification Outfits

From the Office of the Oregon Attorney General:

• Oregon Attorney General John Kroger [] announced two settlements that will provide refunds to Oregon homeowners and prohibit two connected Orange County, California companies from doing further loan modification work in Oregon.

***

• The settlement with Noah Savings Mortgage resulted in $6,500 in full refunds to two Oregon consumers. The company also must pay $5,000 to the Oregon Department of Justice and cease doing loan modification work in Oregon. [...] The settlement with Liberty Law Firm prohibits the company from doing modification work in Oregon. If any Oregon consumer complaints arise before August 20, 2010, Liberty Law Firm must pay restitution to those victims and $5,000 to the Department of Justice.

For the Oregon AG press release, see Oregon Bans Two California Loan Modifiers.

Lawyer Faces Bar Charges For Alleged Failure To File F'closure Objections In One Client's Case, Communication Problems In Landlord Dispute In Another

In Wilkes-Barre, Pennsylvania, The Citizens Voice reports:

• Wilkes-Barre attorney Jim Hayward [...] is facing disciplinary action over allegations he violated professional-conduct rules. The allegations include failing to keep clients informed, not filing court documents for clients, not using a written fee agreement and not paying court fees on time. According to a May 4 report, a hearing committee for the state Supreme Court recommended Hayward receive a public censure with probation. Another committee has scheduled a July 19 hearing on another petition alleging three more misconduct charges.

Among the misconduct charges to be considered in the next hearing:

• Timothy and Tanya Pintsch hired Hayward in 2009 to handle a foreclosure claim against their Hanover Township home. They claim a default judgment was entered because Hayward failed to file objections to the court action. A sheriff's sale of their home was postponed after they hired another lawyer, the petition says.

***

• According to another charge in the petition, Frank and Carole Myers hired Hayward in 2008 for a landlord dispute involving a mobile home camp in Carbon County. They claimed they had problems communicating with Hayward and had to slip papers under his locked office door.

Source: W-B attorney faces censure.

Mississippi AG Warns Consumers Against Online Rental Scams Advertised On Craigslist

In Jackson, Mississippi, WLBT-TV Channel 3 reports:

• A good priced house in a normally higher priced neighborhood is reason for consumers to put up a red flag. Craigslist is one of the fastest ways to find a great deal in today's market, as thousands of home rental listings dominate the online ad site. That's why the Attorney General's office sent out a notice on Monday, for potential renters to be weary of scammers.

***

• "It's best to try to prevent it by letting people know those scams are out there," Hood said. Hood said these cases are popping up more and more in Mississippi. However, he says online advertisers are making bank at the expense of others. "They are making tons of money off of illegal activity and the con artists are just trying to scam people," said Hood.

***

• [T]he Attorney General's office recommends for consumers to watch out for money wires through Western Union or MoneyGram. Also, to be aware of anyone out of the country listing a house or saying they just moved from the United States.

For the story, see Attorney General warns consumers of rental housing scam.

Armed With Search Warrant, Feds, California State Bar Pay A Visit To Law Center Offering Forensic Loan Auditing, F'closure/Loan Modification Services

In Oceanside, California, North County Times reports:

• Agents with the FBI, the Internal Revenue Service and the State Bar of California served search warrants Wednesday at two related Oceanside loan modification businesses. The raids took place at the First American Law Center, 615 Mission Ave. in downtown Oceanside, and the Lead Source, 2101 El Camino Real.

• FBI officials said there were no arrests Wednesday, and they declined further comment. Dean Chandler, president of the First American Law Center, said he was in Arizona when his office was raided. He said he had not been contacted by agents, and he was not sure why his business was being investigated. [...] Chandler is an attorney who was admitted to the California Bar in 1992, according to the California State Bar's website. He has never had any action against his license, according to the site.

For more, see Agents serve search warrants on loan modification businesses (FBI officials say no arrests made in raid).

Six To Cop Pleas In Flipping Racket That Left Unwitting Would-Be Homebuyers Under Rent-To-Own Deals, Straw Buyers, Foreclosing Lenders Holding The Bag

In Fort Myers, Florida, The News Press reports:

• Seven defendants accused of participating in a more than $3 million mortgage fraud scheme appeared in state court [] with six of them ready to enter pleas. Before Lee Circuit Judge Edward Volz Jr., attorneys for Paul Bosnyak, Brian Chili, Erling Hall, Jeremy Hatlee, Trinity Ruffino and Mark Wallen indicated their clients were ready to enter pleas and testify against co-defendant Erich Heckler, who also was in court. A plea date has been set for July 12.

• "We have come to an understanding with every defendant except for Mr. Heckler," assistant state attorney Douglas Sprotte said in court. "Mr. Heckler has to make a decision if he wants to plea."

• According to court documents filed last year, Bosnyak, Hatlee, Chili, Ruffino and James Dalonzo worked with Heckler, Hall and Kim Jack as part of a conspiracy dating back to 2002. Heckler, Hall and Jack ran Alternative Home Financing Inc. on Dean Street in Fort Myers.

• According to the documents, Alternative would find people and pay them to allow the company to apply for mortgages in their names to buy houses. Authorities allege the company would falsify application information so the person could qualify for the mortgage. Dalonzo, Hatlee, Bosnyak, Chili and Ruffino would distribute the money, knowing the loans were fraudulent. Alternative would manage the property, finding tenants who would make monthly payments in a lease-to-own option.

• After a specified amount of time, the company would stop making payments, causing the house to foreclose. The tenant would be kicked out of the house and the person whose name was used for the loan would be associated with the foreclosure.

For the story, see Six in fraud scheme want to plead (Ready to testify against seventh).

Indiana AG Files Suit Against Loan Modification Firm Accused Of Screwing Homeowners Out Of Upfront Fees & Failing To Successfully Assist Homeowners

In Evansville, Indiana, the Evansville Courier & Press reports:

• Attorney General Greg Zoeller came to the Civic Center [] to file the suit against Mortgage Modifiers LLC, based in Tampa, Fla. The complaint alleges that the firm took $907 from Karen Helmbock, an Evansville resident, in return for services intended to prevent her from losing her home in a foreclosure. Mortgage Modifiers “failed to successfully assist Helmbock in obtaining a postponement of her payments, a postponement of the foreclosure, a stoppage of the foreclosure, or any other services the defendant advertised,” the suit alleges.(1) Helmbock, [...] is one of 18 of Indiana residents who entered into contracts with the company, Zoeller said. “And we are likely to find in the middle of this case that there were more victims,” he said.

***

• Zoeller said he has taken action in the past three months against 14 companies that claim to help clients avoid foreclosures, either filing a lawsuit against them or reaching a settlement with them.

For more, see Attorney General files suit in defense of Evansville woman.

(1) According to the story, the suit alleges that the company said it had a 100-percent-money-back guarantee but never refunded Helmbock her initial payment after failing to get her home out of foreclosure, Zoeller alleged. The suit also says that Mortgage Modifiers neglected to buy a surety bond, to be in the amount of $25,000, as required by Indiana law, which would have served as insurance for Helmbock had she not received the services she had bought, the story states. Mortgage Modifiers also reportedly failed to give her a written notice of her rights, according to the suit.

Death Threats Begin Coming In To Texas HOA That Foreclosed On Active Duty Servicemember While Away In Iraq Over Unpaid $800 Fee

In Frisco, Texas, WFAA-TV Channel 8 reports:

• An Army officer on active duty lost his house when his homeowners' association foreclosed for back dues. It's a story first reported by News 8, and it outraged people around the world.(1)

• Now the HOA is breaking its silence, saying the board is getting death threats — even though it did nothing wrong. [...] The [Heritage Lakes Homeowners' Association] has now hired public relations specialist David Margulies as its spokesman. He says the HOA is getting negative attention it does not deserve. "The death threats have been reported to the Addison police, and they're being investigated," Margulies said.

• And now, other residents of Heritage Lakes, [...] are coming forward, too. They say they are embarrassed to live in a community that could foreclose on an officer's home while he is defending his country.

For more, see Frisco HOA that foreclosed on soldier getting death threats.

(1) According to the report, the Clauers owned their $300,000 home free and clear; it was a gift from family members. Capt. Michael Clauer says when he got called up, his wife May became depressed, missed two HOA payments totaling about $800, and said she did not open letters from the HOA alerting her to foreclosure proceedings, the story states. Reportedly, Select Management Company — which runs the Heritage Lakes HOA and many more in North Texas — says it is adding procedures that will keep this from happening to another family in the future, and says it will attempt to call families facing foreclosure to check on their situation, instead of relying only on certified mail, which, in the Clauers' case, was never opened.

Foreclosed Home Preservation Contractor Says It's Also A Victim Of Mortgage Crisis In Suit Against BofA; Claims Bank Gave It $400K Stiffing

WFAA-TV Channel 8 reports:

• A property preservation company with business in Texas charges Bank of America with fraud and deceit, breach of contract, and unjust enrichment in a civil suit in California. Diversified Field Services of Tustin, California — which maintains foreclosed properties for banks — says in the lawsuit that Bank of America signed DFS to a contract to maintain repossessed homes in 14 states last year. The company says it spent nearly $2 million preparing for the work, but that the work never came.

***

• "Homeowners are not the only victims of this [mortgage] crisis; it extends to firms like DFS and onward to the mom-and-pop businesses who actually mow the lawns and clean the countless homes that now sit empty," said DFS attorney Eric Goodman. DFS also alleges B of A publicly misrepresented the quality of the work DFS did, destroying its business and ruining its reputation. DFS also alleges the bank never paid it for nearly $400,000 in work that it did do. The suit seeks unspecified damages.

Source: Property preservation firm sues Bank of America.

For a press release issued by Diversified's attorney, see Diversified Field Solutions, Inc. Sues Bank of America.

NY AG Fires Off 180+ Cease & Desist Warnings To Loan Modification Outfits Peddling Services To Empire State Residents

From the Office of the New York Attorney General:

• Attorney General Andrew M. Cuomo [] announced that his office is sending over 180 cease-and-desist letters to mortgage rescue companies with customers in New York, warning them to immediately end all misleading and illegal conduct.

• The Attorney General’s ongoing investigation into the mortgage rescue industry revealed that many companies routinely collect illegal up-front fees from homeowners on the brink of foreclosure and then fail to help them lower their mortgage payments or save their home as promised. Thousands of New Yorkers have been affected by mortgage rescue scams.

• Mortgage rescue companies target homeowners facing foreclosure by claiming to be able to modify home mortgage loans and lower monthly payments. Often, these companies engage in deceptive and illegal marketing practices to lure customers and then fall short on their promises. After using a mortgage rescue company, homeowners can find themselves in worsened financial circumstances and at greater risk of losing their homes.

For the entire NY AG press release, see Attorney General Cuomo Orders Mortgage Rescue Companies To Cease Fraudulent Practices Against Homeowners (Cuomo Sends Cease-and-Desist Letters to Over 180 Mortgage Rescue Companies).

Go here for the New York AG's website on avoiding foreclosure rescue rackets.

Go here for a copy of the cease & desist letter.

Rockland County DA Charges Duo In Equity Stripping Foreclosure Rescue Scam; Allegedly Duped Struggling Homeowner Into Bogus Sale Leaseback Ripoff

In New City, New York, The Journal News reports:

• Two men were arrested and charged today for swindling a Tomkins Cove homeowner on the verge of foreclosure, the Rockland County District Attorney's Office said.(1) Edward DeFrancesco Sr., 59, of [...] Highland Lakes, N.J., was charged with one felony count of second-degree grand larceny, District Attorney Thomas Zugibe said. DeFrancesco is accused of purchasing the Tomkins Cove home for one price, then telling the bank it cost $160,000 more than it actually did, Zugibe said.

***

• A second man, [attorney] Glenn Allyn, 52, of Elmsford, was charged with one felony count of third-degree grand larceny, Zugibe said. Allyn was supposed to be representing the bank at the real estate closing for the sale of the home from the victim to DeFrancesco.(2) He stole a $5,000 check he was not entitled to after telling the victim work had been done at the house and that a contractor was owed the money, Executive District Attorney Gary Lee Heavner said.

• Authorities believe Allyn and DeFrancesco were both involved with a company that purported to help Rockland homeowners avoid foreclosure, Heavner said. As far as the D.A.'s office could determine, DeFrancesco's business consisted of nothing more than fliers and a phone number, Heavner said.

***

• Zugibe said "rescue scams" similar to the one DeFrancesco is accused of have become common. Scammers visit the County Clerk's Office to locate homeowners facing foreclosure or serious debt crisis, then target those people. Typically, the scammer offers to take temporary title to a home, with an option for the homeowner to buy it back once the homeowner has gotten caught up with their debts. But by that time, Zugibe said, costs have been run up so high by the scammer that it becomes impossible for the homeowner to buy back their house.

• DeFrancesco paid off the victim's mortgage, but not the one he took out as part of the scam. Instead, he tried to walk away from paying it and put the home into foreclosure, Heavner said. The victim continues to live in the home for now, Heavner said.

For the story, see 2 accused of swindling Rockland homeowner facing foreclosure.

See also, Mid-Hudson News Network: Two arrested in North Rockland foreclosure scam.

(1) The investigation was carried out by the Rockland County Special Investigations Unit and the New York State Banking Department's Criminal Investigations Bureau, the story states.

(2) According to this story, Allyn has since been disbarred for unrelated matters.

One NYC DA's Office Invokes State Hate Crimes Law As Added Leverage When Hammering Scammers Targeting Elderly In Home Equity, Other Ripoffs

In Kew Gardens, Queens, The New York Times reports:

• In the public’s imagination, the classic hate crime is an assault born of animus against a particular ethnicity or sexual orientation, like the case of the Long Island man convicted in April of killing an Ecuadorean immigrant after hunting for Hispanics to beat up.

• But in Queens since 2005, at least five people have been convicted of, or pleaded guilty to, committing a very different kind of hate crime — singling out elderly victims for nonviolent crimes like mortgage fraud because they believed older people would be easy to deceive and might have substantial savings or home equity.

• And this month, Queens prosecutors charged two women with stealing more than $31,000 from three elderly men they had befriended separately. The women, Gina L. Miller, 39, and Sylvia Johns, 23, of Flushing, were charged with grand larceny as a hate crime.

• This approach, which is being closely watched by prosecutors across New York State, has won Queens prosecutors stiffer sentences, including prison for criminals who could otherwise go free, even after draining an elderly person’s savings. Without a hate crime, theft of less than $1 million carries no mandatory prison time; with it, the thief must serve for a year and may face 25.

• The legal thinking behind the novel method is that New York’s hate crimes statute does not require prosecutors to prove defendants “hate” the group the victim belongs to, merely that they commit the crime because of some belief, correct or not, they hold about the group. “Criminals that prey on the elderly, they love the elderly — this is their source of wealth,” said Kristen A. Kane, a Queens assistant district attorney.(1)

***

• Some New York prosecutors, who asked not to be named because they did not intend to criticize colleagues, said that while the approach intrigued them, they were waiting to see if convictions were overturned on appeal before considering it. The strategy has never been tested in appellate court; many of those charged have pleaded guilty, waiving their right to appeal. But Queens trial judges have allowed it against defense lawyers who argue that the hate crime charges are inappropriate.

For more, see A Novel Twist for Prosecution of Hate Crimes.

(1) Kane said the hate charges gave her extra leverage in plea bargaining; by winning felony pleas and probation, prosecutors ensured that repeat offenders would receive strong sentences, the story states.

Unforgiven Debt Balances On Foreclosure, Short Sales Leave Ex-Homeowners Stunned; Failure To Obtain Written Waivers Drive Some Into Bankruptcy Court

In Gainesville, Virginia, The Washington Post reports:

• After the bank foreclosed on Fernando Palacios's home in March, he thought he was done with what he described as the most stressful financial situation of his life. The bank sold the home for far less than Palacios owed on it, as often happens with foreclosures. What Palacios did not see coming was the letter from his lender demanding that he pay the shortfall: $148,064.02.

***

• Over the past year, lenders have become much more aggressive in trying to recoup money lost in foreclosures and other distressed sales. In many localities, lenders have the right to pursue borrowers whose homes have sold at a loss to collect the difference between what the property sold for and what the borrower owed on it, also called a deficiency.

• Before the housing bust, when the volume of foreclosures was relatively low, lenders seldom bothered to chase after deficiencies because borrowers had few remaining assets to claim and doing so involved hassles and costs. But with foreclosures soaring, lenders are more determined to get their money back, especially if they suspect borrowers are skipping out on loan they could afford, an increasingly common practice in areas where home values have tanked.

***

• To avoid personal liability for the deficiency, Palacios is filing for bankruptcy protection, as many people do who are in similar situations, said Nancy Ryan, his bankruptcy attorney.
  "I am definitely seeing more people come through my door who walked away from houses a year or two ago and thought they were as free as the dead," Ryan said. "They're stunned when they realize they're not."

***

• Borrowers should get a waiver in writing from their lenders to protect themselves, said Diane Cipollone, an attorney at the nonprofit Civil Justice. "Nobody should assume the deficiency is forgiven," she said.

For more, see Lenders get aggressive in recouping foreclosure losses.

Maryland Judge Grants Ground Rent Investors Class Action Status In Suit To Preserve Their Ability To Snatch Homes Over Miniscule Debts

In Anne Arundel County, Maryland, The Baltimore Sun reports:

• From fat-cat Wall Street financiers to oil-polluting energy companies like BP, nobody induces public rage quite like the unprincipled speculator who makes huge profits by brazenly running roughshod over the average citizen. Such purveyors of greed and their wanton disregard for others are easily spotted but not so easily deterred — they usually come armed with lawyers.

• Four years ago, two Baltimore Sun reporters identified this sort of behavior in a previously overlooked provision of ground rent, the arcane and loosely regulated system wherein homeowners lease the land on which their houses are built. To collect overdue rental payments of as little as $24, some ground rent holders were seizing properties, selling them off and receiving the full proceeds, sometimes in the tens of thousands of dollars.(1)

***

• Three years ago, the General Assembly passed reforms that allow ground rent owners to collect the rent that is due to them — and even reasonable penalties where appropriate. It gives them the right to seek liens and seek foreclosure, if necessary. But if homes are sold for overdue rent, the law calls for them to be reimbursed only for back rent and expenses they are rightfully due, not for the obscene profits some collected in the past.

• Last week, an Anne Arundel County judge ruled for purposes of a lawsuit that the interests of ground rent owners can be represented collectively. Now certified as a class, the plaintiffs can press their case that the three-year-old reforms caused their leases to be substantially devalued and unconstitutionally impinged on their contractual and private property rights. The lease owners are seeking hundreds of millions of dollars in compensation from taxpayers. The sheer audacity of the claim is a wonder to behold.

For more, see Ground rent redux (Ground rent owners are suing to preserve their ability to seize homes over miniscule debts).

For a related story on Maryland ground rent ripoffs, see:

• Ground lease holders certified for class action lawsuit against Maryland.

(1) For The Baltimore Sun's December, 2006 series on the local legalized ground rent ripoff system used by some investors to seize homes or extract large fees from people who often are ignorant of the loosely regulated process, see On shaky ground (A Sun investigation into the secretive ground rent business in Baltimore).

Newark Feds Charge Trio In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff

In Newark, New Jersey, CBS 3 reports:

• Three people who offered distressed homeowners foreclosure rescue services have been arrested and charged with conspiracy to commit wire fraud, the U.S. Attorney's Office in New Jersey said Tuesday.

• Authorities say 40-year-old Ronald Harris Jr. of West Orange, 36-year-old Sterling Bruce of Old Bridge and 46-year-old Sabir Muhammad of South Plainfield conspired to defraud numerous mortgage lenders of over $10 million in fraudulently obtained loans.

***

• Court papers say the men targeted homeowners facing foreclosure, promising to help them improve their credit scores, straighten out their finances and get their homes back if they agreed to transfer the titles temporarily to a third party. The defendants allegedly used the properties to fraudulently obtain loans. Using two companies owned by Harris, Harris Capital and Skyline Capital group, as well as a group of shell companies, the three allegedly recruited distressed home owners and "straw buyers" with good credit scores to be listed as the property owners. The defendants then used the straw buyers financial information to fraudulently apply for mortgages and other loans, according to court documents.

• Authorities said the straw buyers were allegedly promised that they would not only be helping out distressed homeowners, but would make money from interim renters and from the eventual resale of the properties back to their original owners. Authorities said most of the loans went into default.

According to the U.S. Attorney's Office in Newark, the trio allegedly defrauded numerous mortgage lenders of over $10 million, making $1.5 million for themselves.

For the story, see 3 Charged With Mortgage Fraud In New Jersey.

For the U.S. Attorney (Newark) press release, see Three Arrested And Charged In Foreclosure Rescue Scheme.

For the criminal complaint detailing the formal charges, see U.S. v. Harris, et al.

"Sun" Shines Light On Sticky-Fingered Title Insurance, Real Estate Escrow/Settlement Agents Victimizing Homeowners

In Baltimore, Maryland, The Baltimore Sun reports:

• It's the lesser-known side of the mortgage disaster. As lenders foisted billions of dollars in mortgage debt on unqualified borrowers buying overpriced houses, too often there was a sticky-fingered settlement agent standing nearby. Since the beginning of 2008, the Maryland Insurance Administration has revoked the licenses of or imposed penalties on more than three dozen title and real-estate settlement companies, [...].

• In 2009 alone, the agency fielded about a dozen complaints concerning misappropriation of funds by title agents, estimates Darlene Arnold, assistant chief enforcement officer for the administration. Complaints of all kinds about title-insurance companies ballooned from 90 in 2005 to more than 600 last year, according to the agency. It had to double the number of agents investigating title complaints to four. If reform of Wall Street is a priority in Washington, stopping the homeowner heartache from title-insurance scams ought to be near the top of the list for Annapolis.

***

• Government knows it has a problem. In a recently concluded report, the Commission to Study Title Insurance in Maryland, appointed by the legislature two years ago, wants the insurance commissioner to study setting up a guaranty fund to pay back future victims. It also suggests making title-insurance underwriters more responsible for the behavior of agents [...] who represent them at the closing table. Those are decent ideas. But the report lacks a sense of urgency and outrage over the mounting rip-offs. It seems far too easy to obtain a title-insurance agent's license in Maryland; there are more than 400 agencies.

For more, see Lax oversight enables title-insurance crooks.

BofA Uses Computer Glitch As Excuse To Stiff Property Preservation Contractors Out Of Million$, Leaving Thousands Across Country Without Paychecks

In Fort Worth, Texas, WFAA-TV Channel 8 reports:

• If the nation's largest bank had lost the records of thousands of its customers, federal regulators would take swift action. But that's just what Bank of America has done — directly and indirectly — with the paychecks of thousands of its contractors and subcontractors in the property preservation business.

• The failure to pay contractors millions of dollars has created a tide of financial ruin in the backwash of the mortgage crisis. For most Americans, foreclosure is a personal tragedy. But Bank of America has a thriving business taking care of tens of thousands of foreclosed homes across the country. For months, the bank has not paid dozens of the contractors who do the work; and as a result, thousands of their employees have gone without a paycheck.

***

• News 8 obtained a memo that Bank of America Field Services sent to its contractors last October announcing "delays in payment" because of computer problems. [...] News 8 has talked to contractors who worked in California, Colorado, Alabama, Mississippi, Florida and Tennessee who say non-payment by Bank of America crushed their businesses.

***

• Bank of America declined to be interviewed on camera. In response to written questions, the bank said: "We apologize to our vendors for the system issues that resulted in late payments. We have been working diligently with our vendors and contractors to resolve any outstanding payments." [...] The institution won't say how much money is involved, but News 8 has learned the amount is in the millions.

For more, see Bank of America admits it did not pay dozens of contractors.

Wells Fargo Pre-Foreclosure Inspection Contractor Accused Of Repeatedly Sledge-Hammering Delinquent Borrower; Claims Self Defense

In Reno, Nevada, The Reno Gazette Journal reports:

• When Ralph "Pete" Peterson of Spanish Springs saw a stranger taking photos of his house and suspected the man might have sinister motives, he confronted the person, who he said refused to identify himself.

• The photographer sped off in a van, said Peterson, who went after him in his truck. The driver -- a contractor for Wells Fargo Bank who was "inspecting" the house because Peterson had missed a monthly mortgage payment -- pulled over. An argument ensued and the bank's agent, who claimed self-defense, hit Peterson repeatedly with a sledgehammer, according to a police report.

• The Christmas Eve incident is an example of a mortgage default inspection gone horribly wrong. Each man blamed the other for the escalation of violence. Each man said the other is lying about the circumstances of the case.

For the rest of the story, see Sparks man's overdue mortgage leads to sledge hammer beating.

Suspect In $3.3M Mansion-Squatting Case To Continuing Pursuing Claim To It & Ten Other Foreclosed, Bank-Owned Seattle-Area Homes

In Kirkland, Washington, staff columnist Danny Westneat of The Seattle Times observes:

• I figured the arrest of the Kirkland mansion squatter last week would be the end of that crazy story. But it only gets curiouser and curiouser. As we go down the rabbit hole of the housing meltdown. The woman who was hauled away for squatting in a $3.3 million house? She has no intention of backing down.

• She's going to keep staking her claim to a house she insists nobody actually owns. Plus she is staking claims to 10 other houses in the Seattle area that have gone into foreclosure and been passed from bank to bank. She's doing it all, she insists, not to make money. But to stick it to the banks.

• "Banks do whatever they want and nobody holds them accountable," Jill Lane said by phone from Disneyland, where she was vacationing after being released by Kirkland police. [...] "This is a national movement," seconded Jim McClung, a former Bothell real-estate agent and owner of NW Note Elimination, a company he runs with Lane that counsels people in how to "eliminate mortgages" as well as take over empty, foreclosed houses. "What happened in Kirkland is just the tip of the iceberg."

• It sure is, suggests the FBI. Last week the feds released a report saying housing-related schemes are soaring, including what the agency called "property theft targeting bank-owned properties." People file false deeds on houses in foreclosure, either to try to take them over or to bamboozle the police and courts long enough to rent them out to unsuspecting tenants, the FBI says.

For more, see Mansion squatter not finished.

Maryland Title Agent Gets Eight Years In $7M+ Escrow Swindle Occurring Over 10+ Years

In Baltimore, Maryland, The Baltimore Sun reports:

• State prosecutors say a title company executive accused of taking more than $7 million from escrow accounts has been sentenced to eight years in prison. Prosecutors say 67-year-old George Sybert Sr. of Reisterstown was also ordered to pay $2.9 million in restitution; another restitution hearing is scheduled Friday.

• Sybert pleaded guilty in February to 13 counts of theft and was sentenced Wednesday in Baltimore City Circuit Court. Prosecutors say the thefts occurred between 1997 and 2009. Sybert owned the Maryland Title Company in Baltimore and previously owned American Title Guarantee and Maryland Commercial Title.

• Victims said their lives were ruined by someone they trusted. Sybert apologized, saying he did not realize the full consequences of his actions.

Source: Title company executive gets 8 years in $7 million theft.

In a related column profiling Sybert's escapades, see Lax oversight enables title-insurance crooks.

Appeals Court Tells Lender To "Take A Hike" In Response To Request To Vacate F'closure Sale; Screw-Up In Calculating Minimum Bid Leads To $275K+ Hit

The Georgia Court of Appeals recently left untouched a lower court ruling that directed a foreclosing lender to provide a deed to the winning bidder at a foreclosure sale that the lender requested be invalidated due to a mistake in its calculation of its minimum opening bid that resulted in the lender taking a financial hit to the tune of $279,000.

Apparently, the "paralegal foreclosure processor" for the company that was "servicer of the non-judicial foreclosure process" for the law firm that represented the lender in the foreclosure sale mistakenly calculated the opening bid at $27,750.00 when in fact the opening bid should have been $333,000.00. The high bid came in at $54,000, resulting in the $279,000 hit.

In applying the relevant state statutes and case law, the Georgia Court of Appeals details the reasons for allowing the result to stand, and, reading between the lines, the court appears to imply that the lender would have been entitled to relief had it made the proper showings in the lower court that said relief was appropriate (ostensibly, the lender's attorney may not have been up to the challenge of making the case, relying primarily on an affidavit by the "paralegal foreclosure processor" in its request for relief).(1)

For the ruling, see Decision One Mortgage Company, LLC v. Victor Warren Properties, Inc., A10A0247 (Ga. Ct. of App. June 14, 2010).

(1) The appeals court stated, among other things (bold text is my emphasis, not in the original text of the ruling):

• In ruling against Decision One, the trial court determined that the mortgage company had failed to demonstrate any basis for relief under various statutes and case law. Having considered Decision One's arguments on appeal, together with the scant competent evidence of record, we find no error in the trial court's grant of summary judgment to Warren Properties.

(Based on the detailed analysis of the applicable statute and case law set forth in the ruling, it appears that a better job at introducing more "competent evidence" into the record by the foreclosing lender's attorney arguably would have led to a different fate for the lender.)

MD Feds Wrap Up Metropolitan Money Store Sale Leaseback, Equity Stripping Foreclosure Rescue Criminal Prosecution As Final Defendant Cops Guilty Plea

From the Office of the U.S. Attorney (Greenbelt, Maryland):

• Rolando Alonzo Cousins, a/k/a “Junior,” age 32, of Bowie, Maryland, pleaded guilty [] to conspiracy to commit mail fraud and wire fraud in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. With Cousins’ plea all 11 defendants in the Metropolitan Money Store case have now been convicted. [...] Cousins faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy. U.S. District Judge Roger W. Titus scheduled sentencing for September 13, 2010 at 3:00 p.m.

For the entire U.S. Attorney press release, see Senior Loan Officer with Metropolitan Money Store Pleads Guilty in Mortgage Fraud Scheme (Eleventh and Final Defendant to Plead Guilty in the Metropolitan Money Store Case).

Maryland High Court Revives Ex-Owner's Attempt In Civil Lawsuit To Undo Metropolitan Money Store Sale Leaseback Foreclosure Rescue Home Equity Ripoff

In Baltimore, Maryland, The Maryland Daily Record reports:

• Maryland’s top court has revived a woman’s attempt to retrieve the home she claims she lost in a foreclosure scam. The Court of Appeals said Harriette Julian can pursue her case even though she did not post a bond generally required in appeals of approved foreclosure sales. The instrument, called a supersedeas bond, stays execution of a circuit court’s approval while the appeal is pending.

• But the bond is required only when the foreclosed home is bought by a “bona fide purchaser” — one who has no reason to doubt the seller had clear title to the property, the Court of Appeals said. In this case, U.S. Bank knew of an alleged defect when it bid at the foreclosure sale, the court noted.(1)

• Julian had filed a notice of rescission in court, seeking to undo her transfer of title to the woman who took out the loan on which the bank was foreclosing. The bank admitted it knew of the notice before the foreclosure sale was held. “[B]ecause U.S. Bank, admittedly, had notice of an alleged defect prior to the foreclosure sale, its bona fide status at the time of the sale was in question,” Judge Lynne A. Battaglia wrote for the majority.

• In remanding the case to circuit court, the high court said Julian must persuade the judge her rescission notice complied with the law and put the bank on legally sufficient notice of a potential claim.

• Phillip Robinson, Julian’s attorney, called the court’s decision a warning to foreclosing lenders who, like U.S. Bank, take the property at a foreclosure sale. Lender-buyers must be diligent and make sure the foreclosed homeowner has no claim on the property under any consumer-protection law, or risk having a judge rule they are not a bona fide purchaser, said Robinson, executive director of Civil Justice Inc. in Baltimore.(2) “If I have a statutory claim and the lender proceeds to sale, the lender does so at his own peril,” Robinson said.

• Such statutes include the Maryland Protection of Homeowners in Foreclosure Act, which was the basis of Julian’s claim, as well as the Maryland Mortgage Fraud Act and the Maryland Consumer Protection Act, he said. U.S. Bank “had affirmative notice and chose to ignore it,” Robinson said.

• The court’s ruling contrasts with its Feb. 16 decision in Mirjafari v. Cohn,(3) which affirmed the general requirement that owners appealing a foreclosure sale must post a supersedeas bond. That case, however, did not involve an alleged foreclosure scam and a filed objection, Robinson said.

***

• Facing foreclosure, Julian agreed to convey her property to LaShawn Wilson. Wilson obtained a $482,000 mortgage from Wells Fargo Bank, N.A. The mortgage broker was Metropolitan Money Store, whose executives have been convicted of fraud in foreclosure scams, according to the Court of Appeals’ opinion. At settlement, Julian granted power of attorney to an investment firm, which was to put money from the sale in an account from which Wells Fargo would be paid. Wells Fargo assigned the loan to U.S. Bank. The lending institutions deny any knowledge of the alleged scam.

• No mortgage payments were made and U.S. Bank initiated a foreclosure action on Aug. 27, 2007, in Charles County Circuit Court. That day, Julian filed with the court a Notice of Rescission to revoke the power of attorney and rescind the conveyance. Trustees of U.S. Bank bought the property for $480,000 at the Sept. 20, 2007, foreclosure sale.

• Julian objected to the sale in circuit court, alleging U.S. Bank was not a bona fide purchaser because it had at least “inquiry notice” of her filed revocation notice. Circuit Judge Robert C. Nalley rejected the challenge. Julian appealed to the Court of Special Appeals, which did not address the bond issue but upheld Nalley’s ruling that U.S. Bank was a bona fide purchaser because it lacked knowledge of Julian’s objection on the date of its loan assignment from Wells Fargo.

• But the Court of Appeals said the date of assignment is irrelevant in determining if the assignee is a bona fide purchaser. The relevant date is the purchase date(4) and by then — as U.S. Bank acknowledged during high-court arguments — the lender had discovered Julian’s filed notice, the court said.

Source: Foreclosure appeal revived by Maryland Court of Appeals despite failure to post bond.

For the court ruling, see Julian v. Buonassissi, CA No. 37 (Md. Ct. App. June 16, 2010).

(1) The Maryland high court also agreed with the state intermediate appellate court that a foreclosure rescue scam victim’s conveyance of her home by Deed of Trust is merely voidable, and not absolutely void (ie. void ab initio), upon proof of violations of Maryland's Protection of Homeowners in Foreclosure Act. Finding the conveyance to be voidable necessitates a determination of whether the foreclosure purchaser was entitled to the protections accorded to a bona fide purchaser. An earlier conveyance obtained through fraud, deceit or trickery is voidable as between the parties thereto, but not as to a subsequent bona fide purchaser for value and without notice of any unrecorded rights and equities claimed by others.

Had the court ruled that the foreclosure rescue scam victim’s conveyance to be absolutely void, no determination of the foreclosure purchaser's bona fide purchaser status would have been necessary because a subsequent purchaser who would otherwise qualify as a bona fide purchaser for value and without notice of any unrecorded rights and equities claimed by others receives no protection where an earlier conveyance in the chain of title is void ab initio (ie. as in the case where an earlier conveyance involves a forged deed).

(2) According to their website, Civil Justice Inc. is a Maryland not-for-profit corporation formed for the purpose of increasing the delivery of legal services to clients of low and moderate income while promoting a statewide network of solo, small firm and community based lawyers who share a common commitment to increasing access to justice through traditional and non-traditional means.

(3) 412 Md. 475 (Md. Ct. App. 2010).

(4) The date of the foreclosure sale at which the lender acquired title to the home.