Failing To Remit Mortgage Payments Collected From Client, Allowing Home To Be Lost To Foreclosure Among Acts That Lead To Disbarment For SC Attorney

In a recent ruling by the South Carolina Supreme Court, an attorney licensed in the state was disbarred over seven separate incidents of misconduct and was ordered to pay full restitution to all clients, banks, and other persons and entities, including the Lawyers' Fund for Client Protection (ie. South Carolina's "attorney ripoff reimbursement fund"),(1) who have incurred losses as a result of her misconduct and reimburse the Commission on Lawyer Conduct and Office of Disciplinary Counsel for costs incurred in this matter.

Among the matters was one incident (designated in the ruling as Matter 1) where the attorney ("Respondent") received checks and money orders from clients for payments to the clients' mortgage lender.

• Respondent admits she failed to make the mortgage payments for the clients, used the checks and money orders entrusted to her for purposes other than payment of the clients' mortgage, made material misrepresentations to the court at the foreclosure hearing regarding her clients' home, and that her failure to make her clients' mortgage payments resulted in the clients' home being sold at foreclosure.

• Respondent acknowledges she failed to communicate with her clients regarding the foreclosure action. Respondent's clients only learned that their home was sold at the foreclosure sale when approached by the lender's real estate agent. Due to respondent's misconduct, her clients had to obtain new counsel in an effort to save their home.(2)

• Respondent admits she failed to safeguard her clients' funds. Further, she admits she wrote checks from her trust accounts for expenses such as employee payroll, her children's school programs, parking tickets, and restaurant charges.(3)

For the full laundry list of escapades that left a slew of other screwed over clients in her wake, see In the Matter of Sherry Bingley Crummey, No. 26840 (S.C. July 26, 2010).

(1) For similar funds established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

(2) The court noted that clients' new counsel was able to persuade the court to set aside the foreclosure sale.

(3) In addition, the Respondent acknowledged that her trust accounts were completely out of whack. She carried a negative balance and she had trust account checks returned for insufficient funds. She admitted she did not reconcile her trust accounts, did not keep individual client ledgers, and did not retain the bank statements for her trust accounts, all of which are required by state bar rules. In addition, she admitted her records were such a disaster that the trust accounts cannot be reconciled. She also acknowledged that she failed to cooperate with Office of Disciplinary Counsel as she failed to respond to the Notice of Full Investigation in this matter.

Relentless, Taunting Phone Calls From Loan Servicer Constitutes Illegal Harassment, Says Delinquent Borrower/Homeowner In Recent Lawsuit

In Jupiter, Florida, The Palm Beach Post reports:

• A Palm Beach County woman diagnosed with terminal brain cancer is suing her home loan servicer following what she said were relentless harassing phone calls that further harmed her health when she fell behind on payments. The suit, filed by Angela Birster, 45, along with her husband, Paul Birster, 47, accuses American Home Mortgage Servicing Inc. of violating state and federal consumer collection laws, as well as intentionally inflicting emotional distress.

***

• The Birsters, who live in a Jupiter Farms home they bought in 2002, say employees of American Home Mortgage Servicing lied about foreclosure sales being scheduled for their home, taunted them by saying they would be "living in the streets in 120-degree heat," and sent people to their home who wandered the property and took pictures.

• On one occasion, the lawsuit says, Angela Birster collapsed in her front yard and had to be hospitalized after a distressing collection call. The calls allegedly persisted even after the Birsters sent a cease-and-desist notice requiring that communication go through their attorney.

• "The company's conduct is outrageous, beyond all bounds of decency, and cannot be tolerated by a reasonable society," said Henry Hicks, lead attorney for the Birsters. "The thing about debt collectors is they know the actions that get the most results are threats and lies and intimidation, even if it's against the law."

• Florida law forbids debt collectors from using abusive language, calling "with such frequency as can reasonably be expected to harass the debtor," and communicating with the debtor when he or she is represented by an attorney handling the specific debt case.(2) The Federal Fair Debt Collection Practices Act includes similar language.

For more, see Terminally ill Jupiter Farms woman behind on home loan alleges collector taunted, harassed her.

(1) Reportedly, the Texas-based company requested that the case, originally filed in state court, be moved to federal court.

(2) See the Florida Consumer Collection Practices Act (Florida Statutes Chapter 559 - Part VI - Sections 559.55-559.785).

Michigan Woman Fears Loss Of Business Due To Typo; Foreclosing Lender's Screw-Up With Wrong Property Leads To $35K Loss, Says Victim

In Clio, Michigan, WJRT-TV Channel 12 reports:

• A well-known master gardener in Mid-Michigan says her business could be headed for closure, all because of a paperwork error. She is speaking out and warning others to beware. After 12 years of doing business as Jenny B's Garden Party on Clio Road near Clio, Jenny Burrows says there's a chance her once-thriving business might not survive past next year because of a typo. "I just wanted a simple address changed, and that snowballed into a catastrophe for my business," she said.

• Because of the typo in a foreclosure address, her business instead of her neighbor's house was posted for foreclosure, even though she owns the property outright. So in the cold of January when the store was closed, a company hired by a California bank moved in to seize the property and winterize the building.

• "When they left they didn't lock the doors, the gates were left open in month of January," Burrows said. "They all froze, my seedlings. Right now, just physical property, I've lost $35,000 worth of stuff."

• Even though the property was never seized, she remains with the massive loss, and if there's no resolution with the bank for reimbursement, Burrows doesn't see how she'll survive. "I've actually started paperwork for discontinuance with the state of Michigan," she said. "It's hard to do."

• Burrows says she's spent the past seven months fighting with the California bank, hiring a lawyer and trying to let customers know she's still in business. In the meantime, she's still fighting to stay around for another 12 years. But part of her fight is a warning to others to not take what you may think is junk mail from a bank lightly. "If you get information from a bank, open it up," she said. "See if you have been a victim of a typographical error. It can cost you your home. It has almost cost me my business."

• For the business to stay afloat, Burrows says she'll need someone to reimburse her for damages by December. A spokeswoman for One West Bank in California says, quote: "Unfortunately, things like this happen from time to time. We would like to rectify it."(1)

Source: Typo could cost longstanding local business.

(1) A recent court ruling found a lender liable for $150,000 in exemplary (punitive) damages (in addition to $5,000+ in actual damages) in a trespassing case involving an improper padlocking by a foreclosing lender. In that case, the lender actually padlocked the right property, but was found to be a bit premature in entering the premises since the delinquent borrower was still the legal owner of the property. See Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure.

Foreclosed Homeowner Dodges Boot With Help From Local Media; Servicer Acknowledges Screw-Up In Handling Loan Modification

In Stockton, California, KXTV-TV Channel 10 reports:

• It has been an uneasy few days for homeowner Teena Blanco ever since she found a notice on her door informing her she had three days to vacate her Stockton home. Despite working for months with her bank to modify her mortgage, the house was sold on July 13 -- and the bank wanted her out.

• Her first clue, however, occured the week before when she noticed a stranger at her door and asked him what he wanted. "He said, 'I'm here to re-key your house,'" Blanco said. "I said, 'I'm sorry, you must have the wrong house.'" He left, but he didn't have the wrong house. Several days later, Blanco came home to find the three-day notice, just days after making her last mortgage payment.

***

• After News10 contacted Wells Fargo to inquire about the situation, the bank called back, telling Blanco their subsequent research revealed certain things had slipped through the cracks. They told her they would rescind the sale and continue to work with her on a possible modification.(1)

For the story see, Stockton homeowner crashes into modification mess nightmare.

(1) Reportedly, the bank itself bought the house at auction, so that any legal complications in attempting to rescind the sale involving the "bona fide purchaser" rights of a third party bidder are not present here.

Indicted NYC Real Estate Agent Identified By Queens Homeowner As Perpetrator Of Home Equity Ripoff

On Staten Island, New York, the Staten Island Advance reports:

• A New Springville man was part of a scheme that illegally obtained $1.6 million in mortgages for properties in Brooklyn and Queens, prosecutors allege. Nir Zeer, 30, [...] and four others are charged with conspiracy to commit wire fraud, said Manhattan federal prosecutor Preet Bharara. [...] The alleged crimes occurred in 2007 and 2008.

• Prosecutors said three defendants, Joan Powell, 46; Darlene Ritter, 45, and Orit Tuil, 39,(1) held themselves out as real-estate agents and recruited straw buyers to purchase the properties. [...] The trio allegedly submitted loan applications with inflated incomes on behalf of buyers and were aided by a mortgage broker, now cooperating with authorities. Another defendant, Annette Shereshevsky Fonte, 28, of Westbury, L.I., worked at a bank. She supplied phony deposit verifications in two instances to beef up purchasers' assets, said authorities.

For the story, see Islander charged for role in scam.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Charges 38 Defendants As Part Of Nationwide Mortgage Fraud Sweep (p. 10 - U.S. v. Tuil, et al.)

(1) Orit Tuil was identified through property records, according to a recent New York Daily News story (see Foreclosure scam victim staying put for now), as the individual a Queens homeowner said duped her in an apparent sale leaseback, equity stripping foreclosure rescue scam. Reportedly Tuil came to the homeowner's door in 2006 claiming to be a foreclosure specialist after the homeowner and her stepmother missed payments on a $180,000 mortgage. Reportedly, the homeowner said she had to signed over the deed to her home to Tuil, and that the $180,000 mortgage was paid back in an apparent equity stripping scam when Tuil took out two mortgages totaling $405,000, according to property records.

Iraq War Vet, Wife Get Back $300K+ Home Lost In Lien Foreclosure Sale Over $977 In Unpaid HOA Dues

In Frisco, Texas, The Dallas Morning News reports:

• The Frisco soldier and his family who lost their home to foreclosure while he was serving in Iraq will get the house back. Army National Guard Capt. Michael Clauer and his wife, May, lost their $315,000 southwest Frisco home in May 2008 after falling behind on Heritage Lakes Homeowners Association dues.(1)

• The Clauers sued the association and subsequent buyers in federal court. A court-ordered settlement conference led to an agreement this week that gives the house back to the Clauers. A gag order prevents those involved from sharing details. But the bottom line is that the Clauers once again will own the home in the Heritage Lakes subdivision. [...] The Clauers' attorney couldn't say whether the couple had to pay any money to get back the house, which they owned mortgage-free.

For more, see Frisco soldier who lost home to foreclosure while in Iraq gets it back.

(1) Reportedly, the Heritage Lakes Homeowners Association was initially owed $977.55 in dues on the house. The association sent multiple notices by certified mail, demanding payment. All went unanswered. The two-story brick home was auction off for $3,201, and subsequently resold for $135,000.

Oregon Homeowner Gets Clipped Out Of $3K For Bogus Loan Modification By California Outfit Owned By Now-Disbarred Attorney

In White City, Oregon, the Mail Tribune reports:

• Saul Cervantes thought he was making a smart financial move by accepting the services of a company claiming it would help him negotiate with his bank to lower his monthly mortgage payment. Instead, Cervantes was bilked out of $3,000 in a mortgage scam that has struck a handful of Southern Oregon households, according to Larry Kahn, the executive director of Help Now! Advocacy Center based in Medford. [...] Cervantes received a letter from a California-based company called Ideal Real Estate Solutions promising it would do the leg work required to qualify for government programs meant to help people with troubled mortgages.

***

• Out of desperation, Cervantes called Help Now! volunteers, who work with attorneys across the state to fight predatory lenders. It is illegal in Oregon to charge an up-front fee for loan modification.

• Help Now! contacted the California attorney who owned the company. They soon learned that the California Bar Association had word on owner Brian Columbana's practices. He has since been disbarred. Help Now! added Cervantes' name to an Oregon Department of Justice complaint with several other mortgage scam victims allegedly targeted by Columbana.

For the story, see Mortgage-payment scam trips up owner.

Judge Tacks 3 Years Prison Time Onto Scammer's Sentence For Failure To Pay $25K Upfront Restitution; Man Accused Of Ripping Off $227K From Mom's HELOC

In Norwalk, Connecticut, The Hour reports:

• A Westport man was sentenced to three years in prison [] at Norwalk Superior Court for stealing hundreds of thousands of dollars from his elderly mother. Charles Gamer, 54, [...] was also given a 10-year suspended prison sentence and five years of probation. He must also pay $234,933.24 in restitution.

***

• Gamer, who claims to have opened multiple computer technology businesses, was also arrested by Norwalk Police in 2009 for writing a bad check for more than $5,000 to his dentist, Dr. Michael Hodish, police said. Charges relating to that incident were dropped because of the plea deal. He agreed to the plea deal in March in which he would be given a [suspended] 10-year prison sentence and five years of probation in exchange for pleading guilty to one count of first-degree larceny and paying $25,000 toward the restitution by his sentencing date. He received a three-year prison sentence because he did not pay the restitution.

• Gamer turned himself in to Wilton Police on Jan. 30, 2009, after illegally withdrawing about $227,000 from his mother's Washington Mutual home equity account at the Wilton branch of the bank. He was living with his mother when the crime took place. The manager of the bank, who was later fired, told investigators that Gamer showed him documentation and said he had been authorized to access the account. [...] State's Attorney Donna Krusinski said Gamer's family almost faced foreclosure because of his financial misdeeds.

For the story, see Son who stole from mother to go to prison.

Cook County Continues Sitting On $18M Pile Of Unclaimed Surplus Foreclosure Sale Cash Belonging To Ex-Homeowners With Few Takers To Be Found

In Chicago, Illinois, CBS2chicago reports:

• Nearly $18 million; it's money that belongs to thousands of Chicago-area families who've lost their homes through foreclosure. But CBS 2's Vince Gerasole reports, many of those families haven't seen a cent. One former owner of a condo in Wrigleyville is owed $3,485 after losing a unit to foreclosure. Another former condo owner is owed $45,423 for a unit in a condo tower along North Lake Shore Drive.

• "When you lose your property to foreclosure you think you lost everything," Cook County Circuit Court Clerk Dorothy Brown said. But sometimes they haven't. If a bank sells a foreclosed property for more than it was owed, the surplus belongs to the original owner. Nearly $18 million from foreclosed properties in Cook County alone is sitting in a fund waiting to be disbursed. "We've collected almost $400,000 this year from surplus sales," Brown said.

***

• With relatively few people coming forward, the clerk's office has debuted a website where foreclosed-upon families can begin to learn whether they are owed surplus mortgage funds. In spite of the effort and the high number of mortgage filings, only 37 individuals have gone through the process so far this year and the call continues to go out to distressed families who might have thousands of dollars coming their way. "We still have an average of almost 2,000 individuals on this list, so it's very difficult," Brown said. Individuals on the list are owed as little as 13 cents and others are owed as much as $460,000.

For the story, see Some Foreclosure Victims Due Thousands Of Dollars (Clerk's Office Holding Millions Owed To Former Homeowners).

Ongoing Probe Turns Up The Heat On Two Phoenix Cops Accused Of Ripping Off Homeowners Using Fraudulent Sale Leaseback Scam

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

• For the past seven years, Tim and Ellie Gray have been forced to live with their parents. They are the latest victims to come forward claiming they were scammed by two Phoenix police lieutenants, Lee Brent Shaw and Mark Tallman. "They took our house, you know? They took our home. They were just lying to us all the way through and it's a big vicious scam. This in particular, because they were able to hide behind their badges," said Tim Gray.

• The Grays were facing foreclosure, so they signed a "quit claim" deed that they thought would keep them in their home. It's supposed to allow the Grays to repurchase their home over time. But after Better Choice Investments, run by Tallman and Shaw, took control of the Gray's property, the company didn't make the mortgage payments as promised. The Grays said Lt. Shaw even threatened them with eviction and jail time when they complained.

• They said Shaw said, "Get the (expletive) out of my house. It's my house now, not yours." Without warning, the Grays were suddenly being evicted. They were given only 15 minutes to grab what they could. "I got out with a pair of shoes and a bag of clothes," said Ellie Gray.

• The Grays showed CBS5 pictures of all of their belongings simply thrown about in the backyard and stacked haphazardly in the carport as Better Choice Investments gutted the home. In three days, they say Better Choice Investments destroyed or stole everything they owned. "Even our car. Our car was in the driveway. We lost everything," said Ellie Gray.

• Lts. Tallman and Shaw are currently facing civil punishment from the attorney general, and sources close to the investigation told CBS5 News the two will soon face new internal allegations of public corruption fraud and racketeering.

• "They need to be fired, first of all. They should not be police," said Ellie Gray. "It scares me because people are able to do it behind a badge. That makes me really scared. And I haven't talked about it to anybody until now," said Tim Gray.

• Lieutenants Tallman and Shaw are not currently facing any criminal charges, but the internal allegations include committing fraud against at least nine other officers who lost thousands as investors. If the allegations stick, the lieutenants will most likely lose their jobs. That investigation will be concluded after the attorney general gets a turn at them. That process should take about a month.

Source: Two Phoenix Cops Accused Of Fraud, Racketeering (Lieutenants Lee Brent Shaw And Mark Tallman Face Multiple Investigations).

See also, The Arizona Republic: Phoenix lieutenants face probe over real-estate business (Two Phoenix police lieutenants are under investigation after residents complained that some of the 120 real-estate purchases conducted by their off-duty business were unethical or illegal).

Feds Settle Civil Suits With Operators Of Loan Modification Rackets In Three Separate Cases

The Federal Trade Commission recently announced:

• Eight marketers are banned from selling mortgage modification or foreclosure relief services under settlements with the Federal Trade Commission. The FTC alleged that the marketers charged homeowners up-front fees and falsely claimed they could get their mortgage loans modified or prevent foreclosure on their homes. The settlements in three separate actions are part of the FTC’s ongoing efforts against scams that target financially distressed consumers.

The FTC settled with the following defendants:

• Federal Loan Modification Law Center and Steven Oscherowitz;
• Loss Mitigation Services, Dean Shafer, Marion Anthony “Tony” Perry, and Bernadette Perry, also known as Bernadette Carr and Bernadette Carr-Perry;
• Hope Now Modifications LLC, Hope Now Financial Services Corporation, Salvatore Puglia and Nicholas Puglia.

For the details of these cases and links to the relevant court documents, see Deceptive Marketers Banned from Selling Mortgage Relief Services; One Defendant Ordered to Pay $11.5 Million.

Use Of Obama Name & Likeness, Federal Logo Popular With Scammers Running Loan Modification Ripoffs

The New York Daily News reports:

• Scammers are using President Obama's mortgage relief program - and his photo - to squeeze bogus fees from homeowners trying to avoid foreclosure. Across the country, dubious loan modification firms are claiming affiliation with the Obama administration's $75 billion program to help struggling homeowners trim mortgage payments. Some are running websites with photos and video of Obama and the logos of federal government agencies.

***

• The hucksters mail solicitations to foreclosed homes in official-looking letters that make reference to the Obama program. For a hefty upfront fee, they offer to negotiate an Obama loan modification, but do virtually nothing to get payments lowered.

For more, see Scams use Obama's picture, federal logos to lure customers into phony loan modification programs.

Vegas Trio Charged With Ripping Off Homeowners Facing Foreclosure While Running Alleged Loan Modification Racket

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• Rena Starks was a homeowner advocate who said she wanted to stand up for Nevadans hit hard by our housing crisis. A TV commercial for her company, Homekeepers, said the business "modified all types of home loans." "Do you owe more on your mortgage than your home is currently worth," an announcer asked. "Are you on the verge or in foreclosure? Homekeepers can help." "If you're in trouble, call me," Starks said in the ad.

• Now, Starks is in trouble with the law. A criminal complaint alleges Rena Starks, her husband Terry, her daughter Tracey, and employee Lourdes Damian stole money from their clients. "There's at least $25,000 to $40,000 involved in this case," said Chief Deputy Attorney General Conrad Hafen. "There may be more."

• Hafen says the defendants would rip off homeowners who feared foreclosure by taking their money and not contacting the homeowners' lenders as promised. "This is clearly a case of individuals who are preying on the bad luck of other people," Hafen said.

For more, see Las Vegas Mortgage Broker Charged with Theft.

Lenders' Loan Modification Runarounds Physically, Emotionally Overwhelming For Many Homeowners

In Southern California, KPCC 89.3 FM (Southern California Public Radio) reports:

• Lydia Mojica of Pasadena has been trying to save her home for the past year. “It’s been a nightmare. I can’t talk about it without starting to cry,” she says. She's negotiated with National City Mortgage for her loan. “It’s just been like a hamster in a wheel for the last seven months.”

***

• “I just felt like a toy. They were playing with me. The run around they kept giving us.” She says the lenders told her things like, “'We’ll have answers. Oh, we are going to delay this answer. Oh, we need one more document. Oh, now that’s April, we need your March documents.' It was being strung along to the very last minute.”

• The ceaseless financial stress began to physically and emotionally overwhelm her and her family. She wasn’t able to sleep or eat for days. Her mother suffered as well. “My mother’s blood pressure is completely out of control. She has had to be medicated recently.”

• Stories like this are nothing new to lawyer Pat Pinto of Orange Country Legal Aid. Her job is to help families negotiate with banks for mortgages they can afford. “They sit in my office and they cry, they vomit.” She says homeowners start to break down. “They’re so upset because they love their home. They want to stay in their neighborhood. They want their children to stay in their schools.”

• In fact, she says she moved her trash can from behind her desk to in front, “because people sit in my chair and they are so upset they vomit all over the floor.” She describes the process families go through dealing with the banks to get better terms on their mortgage. “This is an emotional upsetting experience for them. And I tell you because this loan modification process is taking so long, over a year, that we watch homeowners become mentally unstable. And as the process goes on, they sink deeper into depression.”

For more, see Bank runarounds take toll on homeowners' mental health.

NJ An Unfriendly Place For Sale Leaseback Peddlers As Judge Slams Another Operator With $225K In Triple Damages, $50K+ In Homeowners' Legal Fees

In Bergen County, New Jersey, another foreclosure rescue operator who entered into a sale leaseback arrangement with a financially strapped local couple was found to be on the wrong end of a court ruling in a civil suit.(1)

In finding that the foreclosure rescue operator violated the state Consumer Fraud Act ("CFA"), Judge Ellen Koblitz found that the amount of actual damages suffered by the homeowners was $75,347, which she calculated by taking the $120,000 value of the home equity that the homeowner signed over to the operator, and reducing it by $44,653 worth of improvements to the home (after accounting for collected rents) made by the operator subsequent to the title transfer.

By voiding the conveyance, title in the property remained with the homeowner-couple as if no conveyance took place. In making the award of triple damages, Judge Koblitz made the following statement:

• This Court is bound by the CFA and thus plaintiffs are entitled to treble damages. In granting the equitable relief of returning the property to the plaintiffs, the Court has—in essence—provided the plaintiffs with one third of the treble damages to which they are entitled. The return of the property compensates them for their ascertainable loss and
  makes them whole. The plaintiffs are thus entitled to the remaining two thirds of the treble damage award required by the CFA, in the amount of $150,694, as well as $50,590 in reasonable counsel fees and $1,912 in costs for a total of $203,196.(2)

For the full details of the case, as well as how the court calculated the amount of the homeowners' attorneys fees, the obligation for payment of which was imposed on the operator, see D'Agostino v. Maldonado, Docket No. C-84-09 (N.J. Super. Chancery Div., Bergen County, June 30, 2010) (when link expires, try here).

(1) For past posts on other New Jersey civil court cases involving similarly situated sale leaseback peddlers, see:

• Woman Recovers Home Title Lost In Equity Stripping Scam; Judge Belts Sale Leaseback Peddlers w/ $75K In Punitves, Refers Case To Criminal Prosecutors (involving a case also presided over by Judge Koblitz),
• Foreclosure Rescue Operator, Closing Attorney Found Jointly Liable For $690K+ In Bogus Sale Leaseback, Equity Stripping Ripoff,
• Judge Sticks Sale Leaseback Peddler With Tab For Victim's Interim Attorney's Fee Even Though NJ Consumer Fraud Act Lawsuit Is Still In Discovery,
• Foreclosure Rescue Operator Violated State Consumer Fraud Act By Using Bogus Sale Leasebacks To Strip Equity From Homeowners, Says NJ AG In Civil Suit,
• NJ AG Targets 39 In Suits Alleging Equity Stripping, Sale Leaseback Scams; Involved $13.5M In Bogus Loans & 48 Homeowners Screwed Out Of $3M+, Says AG.

Federal criminal prosecutors in New Jersey have also been getting into the act. See:

• Newark Feds Charge Trio In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff,
• NJ Feds Squeeze Guilty Plea From Brooklyn-Based Foreclosure Rescue Operator; Admits To Role In Peddling Sale Leaseback, Equity Stripping Scams,
• Veteran Fraudster Gets 97 Months For Running Realty Scams; Bogus Sale Leaseback Foreclosure Rescue Deals Among Rackets Resulting In $1M+ In Losses.

(2) Interestingly, Judge Koblitz comes off in her ruling as being somewhat sympathetic towards (and possibly even a bit impressed with) the foreclosure rescue operator (a full-time kitchen remodeling salesman for Sears who had a history of working serious overtime hours for his employer, and who did occasional real estate deals on the side), and who completed only the ninth grade ("Although uneducated, his street sophistication and moxie allowed him to profit, while putting some money into the hands of the distressed homeowners that they may not have had the ability to obtain for themselves").

She also made clear that she wasn't all that impressed with the testimony of the homeowner-couple (for example, the husband, a college graduate who worked on Wall Street for ten years, earning as much as $250,000 a year before getting canned from his job, was described by Judge Koblitz as "an extremely non-responsive witness. He seemed totally unable to respond to a direct question, whether it was posed by his counsel, adversary counsel, or the Court. He cried several times during his testimony and generally bewailed his plight and that of his children.").

Notwithstanding, in reaching her decision, she explained (bold text is my emphasis, not in the original text):

• The CFA mandates, with no discretion permitted, an award of treble damages, as well as reasonable counsel fees, once the claimant has established a CFA violation and an ascertainable loss. Cox v. Sears Roebuck, 138 N.J. 2, 24 (1994).

• In this case, the requisite result imposed by the finding of a violation under the CFA may be harsh, but it is mandated by law.

• Thus although it appears to this Court that Maldonado’s actions were motivated by what he viewed as legitimate profit, rather than an intent to defraud, his actions nonetheless constituted a violation of the CFA, and thus the Court is bound by the statute. See Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 470 (App. Div. 1982) (“The act is broadly designed to protect the public, even when a merchant acts in good faith.”).

• While Maldonado may have kept up his end of the oral agreement, his written agreements were severely one-sided and unconscionable in that they did not conform to statutory requirements and were contradictory. Additionally, he held out an unlikely prospect of repurchasing the property and thereby obtained an unreasonable profit from the transaction. To hold that Maldonado did not violate the CFA because he was not formally educated, and was seemingly unaware of the legal implications of his behavior, would vitiate the intention of the CFA.

In addition, in finding that the state Consumer Fraud Act applied to the foreclosure rescue operator (even though he was not engaged in the real estate business full time, only doing deals occasionally), Judge Koblitz made this observation (footnotes appearing in original text omitted; bold text is my emphasis, not in the original text):

• While the plain language of the CFA makes the act applicable to all persons involved in the “sale or advertisement of any merchandise or real estate,” courts have held the CFA applicable to professional and part-time merchants as they can be said to be involved in commercial practices. The CFA is not applicable to the casual seller.

• Prior to his involvement with the D’Agostinos, Maldonado had been a party to other real estate transactions involving distressed properties. Each one involved a different situation and no proof was presented that he engaged in other fraudulent transactions, or that the other parties did not believe they were well-served by the transaction.

• Maldonado’s past experience in this area of business, however, is sufficient to bring him under the purview of the CFA. The applicability of the CFA to Maldonado’s business dealings is further supported by the fact that he advertised for his services. It was this advertisement, displayed on the side of his car, which brought Maldonado to the attention of the plaintiffs.

Boston Feds Pinch Mortgage Broker In Fraudulent Sale Leaseback Foreclosure Rescue Scam; Suspect Stripped Home Equity, Leaving Owner With More Debt

In Boston, Massachusetts, The Herald News reports:

• A North Dartmouth mortgage broker was charged Monday with defrauding mortgage lenders in connection with a mortgage rescue scheme in Wareham and Tiverton. Ryan Lazar, 31, of Tiverton, has been charged in a written allegation, called an “information,” with three counts of wire fraud, according to a press release issued by United States Attorney Carmen Ortiz, Robert Bethel, Inspector in Charge of the United States Postal Service and Jon Rymer, Inspector General of the Federal Deposit Insurance Corporation.

• The information alleges that in 2005, Lazar schemed with others to defraud mortgage lenders in connection with the purchases and/or refinancing of properties located in Wareham and Tiverton. For each property, Lazar allegedly submitted false mortgage loan applications, which fraudulently concealed his prior indebtedness and falsely represented that he intended to reside in the property.

• It is alleged that the Wareham transaction involved a mortgage “rescue” scheme, whereby homeowners who were on the brink of foreclosure purported to sell their home to Lazar. According to the information, in the course of the transaction, Lazar pocketed loan proceeds and ultimately caused the homeowners to incur significantly higher mortgage debt.

Source: Police: 'Rescue' scheme defrauded lenders.

Victimized Homeowner "A Piece Of Garbage!", Judge "A Bleeding Heart Liberal!", Court Ruling "A Disgrace!", Says Attorney For Equity Stripping Clients

A recent story in the New Jersey Law Journal reported on how a foreclosure rescue operator group was slammed in a civil lawsuit for screwing a financially strapped Marva Coleman out of the equity in her home while she lay seriously ill in a hospital bed after being initially admitted into the hospital through the emergency room.

The following excerpt, buried at the end of the story, describes the apparent hard feelings of the attorney representing the losing sale leaseback peddlers after Bergen County, New Jersey Chancery Division Judge Ellen Koblitz gave his clients a well-deserved hammering:

• The lawyer for Kohout, Gentles and Salvation, Verona, N.J., solo practitioner Peter Caplan, calls Coleman "a piece of garbage" and said she "participated in this transaction, she profited from this transaction, she was fully aware of this transaction, and it's a disgrace that the judge found my clients did anything wrong." Caplan says Coleman was coherent when she signed the documents in the hospital.

• Caplan says of Koblitz, "the judge is a bleeding heart liberal who used to be a public advocate. The judge's mind was made up long before the trial began." He says no decision has been made whether to appeal.

Source: Mortgage Rescue Firm Hit With Punitive Damages, Attorney Fees.

For Judge Koblitz' court ruling, see One West Bank, FSB v. Capo, Docket No. F-5952-09 (N.J. Super. Chancery Div., Bergen County, July 19, 2010) (when link expires, try here).

Report: Servicers' Claims That Investors Owning Delinquent Mortgages Won't Allow Loan Modifications A Bunch Of BS

ProPublica reports:

• Arthur and Alberta Bailey are about to lose their home near New Orleans, and their mortgage company says one thing stands in the way of relief: The investors who own their mortgage won’t allow any modifications.

• It’s a story heard again and again across the country as desperate homeowners try to participate in a federal program created to foster loan modifications and prevent foreclosures. Loan servicers say their hands are tied by Wall Street. Federal officials, bank officers, housing counselors and investors themselves say that excuse is cited far more often than is justified. In fact, they say, few mortgage deals include such restrictions.

• Consider the case of the Baileys. Litton, a subsidiary of Goldman Sachs, services their loan, and Litton’s contract with investors has no clear language banning modifications. In fact, documents show that over 115 other mortgages from the same investment pool have already been modified.

For more, see When Denying Loan Mods, Loan Servicers Often Wrongly Blame Investors.

In a related ProPublica story, see Resources for Investigating Investor Restrictions on Mortgage Modifications.

Accused Foreclosure Rescue Operator Under Indictment & Free On Bond Continues To Target Financially Strapped Homeowners

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

• Brooklyn homeowner Angela Neysmith scraped up $1,500 when real estate broker Lavette Bills promised to trim her loan payments via President Obama's foreclosure prevention plan. "She said she could put me into the Obama program," Neysmith said, recalling Bills told her, "I could get a fixed rate and everything would be good for me."
  Everything was not so good. Neysmith, 50, did not get the promised loan modification to bail her out of the foreclosure she was facing on her Midwood St. home, but Bills managed to jack up her fee to $3,000. Neysmith says she was forced to send papers to the bank to process her modification application because Bills failed to do so.

***

• What Neysmith didn't know was that a month before Bills began dealing with her, she and three others were indicted in a $3 million mortgage fraud scheme. Bills pleaded not guilty and is awaiting trial, free on $250,000 bond.

• Authorities say Bills' victims were distressed homeowners who called a radio show Bills hosted on WBLS and WLIB in 2007 in which she held herself out as a "foreclosure specialist." In a brief interview last Thursday, Bills denied scamming Neysmith, but declined to answer questions.

• A few hours later, Bills showed up at Neysmith's house with a check for $1,500. Neysmith says Bills promised she'd get the rest of her money next month. "She says she wants no publicity," Neysmith said.(1)

For the story, see Homeowner victimized by broker promising to trim loan using Obama's foreclosure prevention plan.

(1) Bills' desire to keep this matter quiet is understandable inasmuch as a simple phone call to the U.S. Attorney's Office could be enough to set in motion the process of revoking her $250K bond and lead to her waiting for her criminal trial sitting in jail.

Parties In Michigan Predatory Lending Lawsuits Wrestle Over Forum Selection; Homeowners Ask Federal Judge To Kick Cases Back To State Court

In Troy, Michigan, the Daily Tribune reports:

• Officials at an organization representing homeowners battling their mortgage lenders say hundreds more people in the tri-county area will join additional lawsuits. Officials at Michigan Loan Compliance Advisory Group Inc. in Troy said they plan to file lawsuits including up to another 1,000 plaintiffs against financial institutions for deceptive lending, excessive fees and other wrongdoing in granting subprime mortgages. That’s on top of the 88 plaintiffs representing 78 mortgages in Oakland and Macomb counties who through Michigan Loan Compliance sued more than two dozen banks for awarding inflated mortgages to borrowers.

***

• The pending cases in Oakland, Macomb and a third in Wayne County were filed in state circuit court, but have since been moved to U.S. District Court in Detroit. However, Loan Compliance attorney Ziyad Kased has asked federal Judge Arthur Tarnow to return the Oakland case to Judge Colleen O’Brien in the Oakland court in Pontiac and said he believes federal Judge Nancy Edmunds on her own may return the Macomb case back to circuit Judge John Foster in Mount Clemens. Kased said the Oakland case should remain in state court because all of the defendants and plaintiffs do not have different state residences, which is a requirement to get the case moved.

***

• Kased urged the federal judges to act soon. “Plaintiffs pray this court remand this case as quickly as possible because certain plaintiffs are facing imminent foreclosures and plaintiffs must file requests for temporary injunctions to prevent irreparable harm,” Kased said.

For more, see Mortgage fraud accusers promise hundreds more cases (Oakland, Macomb cases currently in federal court but may return to local state courts).

Use Of Private Process Servers In Chicago Foreclosure Actions Leading To Increased Incidents Of "Sewer Service"?

Buried in a recent story on the blog Chicago Now is an account of a local homeowner facing foreclosure who may be the victim of "sewer service" when a private process server purportedly served the foreclosure papers upon her when the lawsuit was commenced:

• [Zabrina] Worthy, who lives on the South Side, came home in the winter of 2008 to find her bungalow boarded up. "I knew I was headed toward foreclosure," she said. After falling behind on her monthly payments, which ballooned from $1,500 to $2,100, she applied for a home loan modification. Her plan B was to sell the home. "I had hired a realtor and we were going back and forth on a modification and the house was boarded up."

• According to court records, the firm hired to deliver the summons made four attempts. Three were delivered to homes that were thought to be Worthy's relatives. A special process server reported that he delivered another summons to her house, which he noted was vacant with no furniture, according to a court affidavit.

• Worthy's court file is indeed chock full of evidence that her home was not vacant as the special process server noted. Under a judge's order, she was eventually allowed to go back into the house to retrieve her belongings, many of which were ruined by squatters who broke into the house in the meantime, according to Worthy and court documents.

• Worthy's attorney Kelli Dudley, who also works with the Fair Housing Legal Support Center at the John Marshall Law School, said she thinks that the mortgage company's "hired guns" submitted "bogus" documents to the court confirming that they delivered the summons.

Source: Foreclosed without notice: How a court order could be violating homeowners' due process.

For a report on the "sewer service" problem in the City of New York, see Justice Disserved: A Preliminary Analysis of the Exceptionally Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York.

Go here for other posts on "sewer service."

Woman Recovers Home Title Lost In Equity Stripping Scam; Judge Belts Sale Leaseback Peddlers w/ $75K In Punitves, Refers Case To Criminal Prosecutors

In Bergen County, New Jersey, the New Jersey Law Journal reports:

• A Bergen County, N.J., judge [...] ordered the president of a mortgage firm and one of its salespeople to pay $75,000 in punitive damages, and more in attorney fees, for leading a homeowner into unknowingly selling her house and losing $162,000 -- for their own benefit. The defendants "continuously concealed the character of their enterprise and the true nature of the transaction" and "preyed" on the homeowner's "weakened health condition and financial vulnerability," Chancery Division Judge Ellen Koblitz said in the case, One West Bank, FSB v. Capo, F-5952-09.(1) (when link expires, try here).

***

• When [the unwitting bank that financed the sale leaseback] foreclosed on [straw buyer Maria] Capo, [victimized homeowner Marva] Coleman was included as a defendant by her status as tenant. Coleman brought a third-party complaint against the [foreclosure rescue operators]. Coleman also named Capo but dismissed claims against her [...] when Capo agreed to deed the property back to her.

• Koblitz said Coleman demonstrated the five elements of common-law fraud: material misrepresentation of facts, knowledge or belief by the defendant of its falsity, intention that the other party rely on it, reasonable reliance thereon by the other party and resulting damages. Koblitz ruled that the deed conveying Coleman's house to Capo and the mortgage Capo took out on the house were void ab initio. Koblitz also ordered IndyMac's successor, One West Bank, to issue an equitable mortgage in Coleman's name on the house.(2)

***

• She referred the case to the Bergen County Prosecutor's Office and the state attorney general's office to determine whether the third-party defendants committed criminal acts.

Attorney Anthony Viso, Lodi, N.J., reportedly successfully represented the screwed-over homeowner.

For the story, see Mortgage Rescue Firm Hit With Punitive Damages, Attorney Fees.

See also Cliffview Pilot.com: How a mortgage scheme nearly claimed an innocent victim.

For Judge Koblitz' court ruling, see One West Bank, FSB v. Capo, Docket No. F-5952-09 (N.J. Super. Chancery Div., Bergen County, July 19, 2010) (when link expires, try here).

(1) According to the story, Charles Kohout, president of Salvation Home Buyers LLC of Bergenfield, N.J., and Linton Gentles, a salesman, offered to help arrange refinancing when Marva Coleman of Teaneck, N.J., a home health aide, fell behind on her mortgage payments.

The story states that a seriously ill Coleman had been taken by ambulance to a local hospital, where she remained for a week on oxygen and medications, and that Gentles visited her with numerous documents prepared by Salvation and she signed them from her hospital bed. Coleman was not given copies and later did not recall signing the documents, but the contract she signed conveyed her house for $422,000 to Maria Capo, who obtained a mortgage from IndyMac Bank, according to the story.

(2) Although she found both the deed and the mortgage to be absolutely void, Judge Koblitz reportedly then awarded the lender an equitable lien / equitable mortgage against the home to the extent that the proceeds of the loan that financed the scam were applied towards Coleman's benefit, the story states. The amount of the equitable mortgage awarded to the lender was $268,156, and breaks down as follows:

• Payment of Coleman's existing first mortgage at the time of the ripoff - $231,950,
• Payment of judgments in her name - $7,500,
• Back taxes owed by Coleman - $2,800,
• Cash received by Coleman - $10,000, and
• One West's payment of real estate taxes and homeowner's insurance - $15,116 and $760.

To the extent the proceeds of the new loan did not benefit Coleman, but were instead diverted into the pockets of the foreclosure rescue operators, the lender was left holding the bag. According to Judge Koblitz, One West "was not involved in the fraud and should not be penalized beyond losing that portion of their security in their $337,600 loan beyond Coleman's original debt."

Reportedly, Koblitz then set punitive damages against Gentles at $20,067, the amount he profited in the scheme carried out by Kohout. Finding Kohout the mastermind of the deal, the judge set his punitives at $55,500 -- three times the profit he realized, the story states. "His casual, flippant, self-important attitude and disrespect for Coleman and others in economic distress was readily apparent. Kohout's arrogance is exemplified by the letter of gratitude he required Coleman to write after he defrauded her," Koblitz wrote.

Utah Court Declares Rental Agreement, Eviction Invalid; Future Trial To Determine Property Title In Lawsuit Between Homeowner, Sale Leaseback Peddler

In Taylorsville, Utah, KTVX-TV Channel 4 reports:

• A Taylorsville man faced with the prospect of losing his home turned to a foreclosure rescue company for help. But instead of help, he claims the company practically tricked him out of his home.

• Mark Jeffs was months late on his mortgage, and his bank was looking to collect. Jeffs says one day a man with a plan came knocking on his door, promising Jeffs he'd save his home. Jeffs claims that the man's company, Foreclosure Connection, helped catch him up with his mortgage and said they'd assume his mortgage from the bank. In return, Jeffs signed over the deed to his home but asserts that he didn't understand what he was doing at the time. "I thought my home was saved," Jeffs told ABC4 but continues, "a few months later I got an eviction notice." Turns out, Jeffs had in effect become a renter in his own home. And when the Taylorsville man couldn't afford to make payments to the foreclosure rescue company on his own home he was evicted. "They said it was a lease option," Jeffs told ABC4 and we asked, "did you understand what you were signing at the time? No."

• However, Jason Williams, owner of Foreclosure Connection says that simply isn't true. [...] The Foreclosure Connection owner says Jeffs knew exactly what he was doing, and in fact Jeffs fell behind in his payments to William's company that was why he was being evicted.

***

• Williams could not elaborate further on his situation with Jeffs due to current litigation and an impending trial. But Williams did say that the Jeffs were frustrated because they fell behind, "when things don't go their way it's no longer a buy and sell, it's a loan because I lent them money."(1)

• Currently, the two head to court in December to find out who really owns the Taylorsville home. A judge has ruled that Jeffs lease and eviction are invalid but Williams still holds the deed to Jeffs' home.

For the story, see Homeowner claims "lender" tricked him out of home.

(1) Apparently, Williams, like many other sale leaseback peddlers, are clueless that one of the risks of entering into these types of transactions is the possible recharacterization of the deal from a sale leaseback arrangement into a secured loan through the judicial invocation of the centuries-old equitable mortgage doctrine. See, generally:

• When is a Sale-Leaseback an Equitable Mortgage?,
• Sale-Leasebacks: Things May Not Be What They Seem,
• Recharacterization Issues in Sale-Leaseback Transactions,
• Loan Participations: Recharacterization Issues,
• Recharaterzation Issues In Participating and "Equity Kicker" Mortgages,
• Clogging Revisited,
• To pay or not to pay: Claiming damages for recharacterization of sale leaseback transactions under owner's title insurance policies.

BofA Demands Death Certificate As Condition For Loan Modification; Financially Strapped Homeowner Refuses To Comply, Exclaims "I Am Not Deceased!"

The Wall Street Journal reports:

• Sarah Larson had been trying for months to get a break on her mortgage payments when a letter from her bank arrived in March. Sitting at the dining-room table of her Minneapolis house, the 33-year-old acupuncturist ripped open the envelope and pulled out a list of important documents demanded by Bank of America Corp. Bank statements. A utility bill. Her death certificate.

• Ms. Larson, who was struggling to make her $1,055-a-month mortgage after client appointments dropped off by half, is in good health. So she replied to the nation's largest bank in assets with a letter. "I am not sending a death certificate because I am not deceased," she wrote. "I am currently still living."

• Turns out the bank had erroneously asked for proof of her demise—the sort of paperwork snafu that has roiled applicants since the Obama administration's foreclosure-prevention plan was announced in February 2009. [...] Across the nation, applicants are flush with tales of the absurd. Lenders and mortgage-payment processors—sometimes in error—ask borrowers to demonstrate the impossible. Or they ask them to verify events of many decades past.

For more, Grave Errors as Undead Rework Loans.

Chicago Suit Challenging Use Of Private Process Servers In F'closure Actions Could Void Thousands Of Cases In Cook County; "Sewer Service" A Concern

In Chicago, Illinois, Chicago News Cooperative reports in The New York Times:

• In the summer of 2007, with the housing bubble bursting and the number of foreclosure cases soaring, [Dorothy Kirie Kinnaird, the presiding judge in the Chancery Division of Cook County Circuit Court,] issued an order making it easier for mortgage-foreclosure lawyers to hire special process servers to do what otherwise would be carried out by Cook County sheriff’s deputies, according to records reviewed by the Chicago News Cooperative and the Better Government Association.

***

• A lawsuit filed last week in federal court in Chicago is challenging the practice, saying it is a violation of state and federal law for the judge to allow freer use of special process servers. The lawyer for David L. Washington, the foreclosed property owner who is the plaintiff in the suit, said he hoped to convert the case into a class-action suit that would void tens of thousands of foreclosure cases handled by special process servers in recent years.

***

• Edward T. Joyce, the lawyer for Mr. Washington, the plaintiff in the case, said Judge Kinnaird’s order was well-intentioned. But Mr. Joyce said her action was most favorable to banks and foreclosure lawyers because it allowed them to serve papers on debtors more quickly and cheaply. He also said the private process servers often engaged in “sewer service” — stuffing court papers between sewer grates in front of debtors’ homes.

For more, see Use of Private Process Servers Is Up; Concern Is, Too.

For the lawsuit, see Washington v. Wells Fargo Bank NA.

Subprime Loan Investors Gain In Effort To Force Major Banks To Buy Back Crappy Mortgages

Reuters reports:

• U.S. mortgage bond investors have quietly banded together to gain the long-sought power needed to challenge loan servicers over losses the investors claim resulted from violations in securities contracts. A group holding a third of the $1.5 trillion mortgage bond market has topped the key 25 percent threshold for voting rights on 2,300 "private-label" mortgage bonds, said Talcott Franklin, a Dallas-based lawyer who is shepherding the effort.

• Reaching that threshold gives holders the means to identify misrepresentations in loans, and possibly force repurchases by banks, Franklin said. Banks are already grappling with repurchase demands from Fannie Mae and Freddie Mac, the U.S.-backed mortgage finance giants.

For more, see Mortgage bond holders get legal edge; buybacks seen.

Lenders, Mortgage-Backed Bond Packagers May Eat As Much As $30B In Crappy Loans Owned by Fannie, Freddie, Says Regulator

Bloomberg News reports:

• Fannie Mae and Freddie Mac’s regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase, according to Joshua Rosner, an analyst who in 2007 predicted the collapse in the market for the securities.

• The Federal Housing Finance Agency this month said it issued 64 subpoenas seeking loan files and other documents related to so-called non-agency mortgage securities bought by the two government-supported companies. The U.S. is trying to determine whether misrepresentations might require issuers to repurchase debt, producing funds from firms that may include Wall Street’s largest banks to help repay taxpayer money.

For more, see Fannie Subpoenas to Show $30B Bad Mortgages, Rosner Says.

Recently-Passed Wall Street Reform Law Tacks On Two Add'l Years To Protecting Tenants At Foreclosure Act

From the Office of the National Low Income Housing Coalition:

• The National Low Income Housing Coalition applauds the expected enactment of the Dodd-Frank Wall Street Reform and Consumer Protections Act (H.R. 4173), which has passed the House and Senate and is likely to be signed by President Obama [...]. While the bill’s financial reform and consumer-protection provisions have been well documented, the act also includes housing provisions important to low income households and communities.

• The bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014.(1) One of NLIHC’s highest policy priorities, the PTFA provides renters whose landlords have lost their properties to foreclosure the right to stay in the home for 90 days after the foreclosure or through the term of their lease. Under PTFA, housing choice voucher holders are offered similar protections. The Dodd-Frank bill also clarifies that any lease or tenancy created prior to the change of title as a result of foreclosure is protected by PTFA.

For more, see Dodd-Frank Reform Bill Includes Extension of Protecting Tenants at Foreclosure Act, Additional Housing Provisions.

(1) The law was originally written to terminate on December 31, 2012.

Minnesota Feds Charge Attorney In Alleged Mortgage Fraud Flipping Scam; Suspect Accused Of Using 86-Year Old Mom As Unwitting Straw Buyer

In Minneapolis, Minnesota, the Vadnais Heights Press reports:

• A White Bear Town Board official who was accused of using his elderly mother to “flip” a real estate deal and pay off a foreclosed office property was indicted in federal court July 14. The U.S. Attorney’s Office said Richard Sand, 58, was charged in U.S. District Court with three counts of mortgage fraud through interstate wire and 11 counts of money laundering. Donald W. Krause, 49, of Plymouth, and Brenda Epperly, 58, of Oak Grove, were also charged with mortgage fraud and Krause was charged with one count of money laundering.

• Sand, an attorney, has served on the White Bear Town Board for 33 years and was reelected to a three-year term March 9. He pled “not guilty” at a hearing July 15.

***

• According to the complaint, Sand, Krause and Epperly allegedly obtained approximately $1.5 million in fraudulent bank loans by submitting fraudulent applications and closing documents. The group allegedly used Sand’s 86-year-old mother, Antoinette Sand of White Bear Township, to obtain loans by inflating her income and net worth. The indictment alleges that from February through April, 2008 the defendants devised a scheme to obtain loans fraudulently, using two residential properties to get funds. On Feb. 21, a purchase agreement was executed for a $1.6 million home in Orono to RSN Companies, in which Krause was a general partner. The next day Krause sold the residence to Antoinette Sand for $2.6 million — a $1 million profit.

For more, see White Bear Town Board chair indicted in mortgage scam (Dick Sand, two others headed for federal court).

From the Office of the U.S. Attorney:

• Press release: Three indicted in connection with fraudulent $1.5 million loan scheme,
• Indictment: U.S. v. Sand, et al.

See also: Minn. Feds Suspect Attorney Of Leaving 88-Year Old Mom Holding The Bag As Straw Buyer In Scam To Generate Cash To Redeem His Law Office From F'closure.