Wednesday, August 11, 2010

State AG's Office: News Of Earlier Probe Into Central Florida Foreclosure Mill Triggered Flood Of Complaints Against Current Trio Under Investigation

A short excerpt from a larger story in the Sarasota Herald Tribune on the recently-announced probe into Florida foreclosure mills Law Offices of Marshall C. Watson in Fort Lauderdale, Shapiro & Fishman in Tampa, and the Law Offices of David J. Stern in Plantation:
  • Another foreclosure mill, Florida Default Law Group in Tampa, is already the focus of a civil investigation by the AG's office into whether it presents faulty bank paperwork in thousands of foreclosures each month. News of that investigation led to a flood of complaints from lawyers and citizens about the three other law firms now under investigation, the attorney general's office said.(1)(2)

Source: State subpoenas records from 'foreclosure mills'.

(1) In a recent story in the St. Petersburg Times (see Attorney general investigates law firms in alleged falsified foreclosures), noted foreclosure defense attorney April Charney weighed on this probe:

  • "We have fraudulent documents in each and every foreclosure case of mine and in every foreclosure case filed in this country," said lawyer April Charney, a foreclosure expert with Jacksonville Area Legal Aid. "There is layer upon layer of bogus documents in the assignments, powers of attorney, pleading, judgments, affidavits, service of process, etc., from one end to the other," she said. The largest of what Charney and other critics call "foreclosure mills" is the Stern firm.

(2) Does anyone know if Florida U.S. Senate candidate Jeff Greene has started "selling short" the corporate stock of David Stern's public-held company in order to make another billion??? See St. Peterburg Times: Jeff Greene's real estate dealings need explaining.

Appeals Court Boots Back Another Florida Trial Judge's Rubber-Stamped F'closure Ruling; "Uncontested Facts Of Record" Show "No Evidence" Of Assignment

In Northern Florida, the state's First District Court of Appeal has recently issued this short & sweet unanimous ruling in a foreclosure action, vacating and booting back a rubber-stamped judgment of Walton County Circuit Court Judge Kelvin C. Wells (bold text is my emphasis, not in the original text):
  • In this mortgage foreclosure action, appellee, American Home Mortgage Servicing, Inc., obtained a final summary judgment. This judgment relies in part upon appellee's allegation that it is the assignee of the original holders of the mortgage and note executed by appellant. As all parties acknowledge, however, the uncontested facts of record do not establish that appellee is presently entitled to foreclose because the record contains no evidence of any assignment or comparable transaction.

    Accordingly, we VACATE the final summary judgment and REMAND this case for further proceedings.

For the ruling, see Kontos v. American Home Mortgage Servicing, Inc., Case No. 1D09-2803 (Fla. App. 1st DCA, August 10, 2010).

Attorney Matthew W. Burns, Destin, Florida represented the homeowner.

Mortgage Industry Move To Wipe Out Paperwork Maintenance Hassles Continues; Use Of Fraudulent Practices In F'closure Cases May Become Harder To Detect

Housing Wire reports:
  • BNY Mellon Corporate Trust launched a new eVault service for its clients to receive, process and store electronic mortgage documents. The service is the latest in the industry to provide deliver and secure storage for electronic documents. Xerox has its own MERS-compatible eVault system, introduced earlier this year.

  • BNY Mellon Corporate Trust is the corporate brand for The Bank of New York Mellon. The company said transforming paper-based processes into an all-electronic one boosts efficiency, creates transparency for participants to see data and exchange information and eliminates delays that come with physically mailing documents and manually entering data into computer systems allows faster delivery to the secondary market.

  • We’re excited to be redefining the role of a document custodian through our introduction of eVault, a service that changes how mortgage documents are generated and handled,” Rick Stanley, executive vice president and head of structured credit at BNY Mellon Corporate Trust, said in a press statement. “Documents no longer have to be printed on paper to be signed, and they don’t have to be manually shipped or physically stored. By making the mortgage process fully electronic, eVault allows lenders to reduce their costs through automation.”

  • The eVault system integrates with the Mortgage Electronic Registration Systems (MERS), an industry-led initiative to identify and track individual mortgages and related information electronically. “By using electronic commerce, eVault eliminates paper and helps streamline the mortgage process, which is one of the goals of MERS,” Stanley added.

For more, see BNY Mellon Launches eVault Service for Digital Mortgage Docs.

In related stories on the ongoing move to paperless mortgage lending, see:

Thanks to Mike Dillon of GetDShirtz.com for the heads-up on the story.

Homeowner Facing Foreclosure Scores $45K & 2% Loan Modification Workout In Lawsuit Settlement With BofA, Countrywide, Fannie

In Northern California, the Appeal Democrat reports:
  • A Linda woman who once faced eviction from her home will be paid $45,000 and have her loan modified as part of the settlement to her legal challenge to the foreclosure by a bank and a government agency. "You've got to use a big stick to get their attention," Mary Carter, 60, said of the lawsuit filed against Bank of America, Countrywide and Fannie Mae.

  • Gregory Guth, the Yuba City attorney who represented Carter, said he took on the case convinced the Linda resident hadn't been dealt with fairly by the large institutions. "She had been wronged," Guth said. Her situation stemmed in part from the size and number of the institutions Carter faced in the foreclosure. "Nobody was on the same page," Guth said.

***

  • Now secure in her home with the case resolved, Carter thanked Guth, who represented her after other attorneys who set up appointments with Carter told her they wouldn't take the real estate-related issue. "Without him, this would not have happened," she said. [...] Carter's loan, as part of the case settlement, will be 2 percent through 2015 and caps at 5.125 percent.

For the story, see Linda woman wins legal battle to keep her home.

Unwitting Tenant Evicted From One, Faces Boot From Another Home In F'closure w/in 6 Months; Loses Cash Paid For Home Repairs In Bogus Rent To Own Deal

In Reno , Nevada, The Reno Gazette Journal reports:
  • In just six months, Stephanie Williamson was evicted from one home that she was renting, and she is about to be evicted from a second. Both of the Reno homes Williamson rented were foreclosed on. “As a single mom with two boys, I don’t exactly have all this extra income to be shelling out deposits,” Williamson said.

***

  • Williamson’s first rental was a lease-to-own, and the 39-year-old thought she’d found the perfect spot for her family. She and her two sons were settled on the quiet cul-de-sac and friendly with neighbors. A garden was starting to flourish. But when she finally learned her landlord had been skipping mortgage payments for nearly a year, Williamson’s life was uprooted.

  • Despite investing in multiple home repairs, Williamson was forced to pack everything up and move across town in March.(1) Her children changed schools, leaving their friends behind. She found a new home through a property management company and thought she would be safe. But she wasn’t. Just three weeks after she moved in, before everyone finished unpacking, she found a notice of default taped to her door.

***

  • Though she hasn’t been formally evicted yet, Williamson said she’s “playing the waiting game” in a house that hardly looks like a home, because, “I don’t want to bother putting up pictures if I’ll just be taking them down in a few weeks.” “I’m just waiting for someone to come knock on the door and tell me to move out,” she said.

For the story, see Growing number of renters displaced (Legislation helps foreclosure victims assert their rights).

(1) While not to suggest that these methods of dealing in real estate are in any way nefarious in and of themselves, "rent to own" deals and sales pursuant to what are referred to in different parts of the country as land contracts, contracts for deed, agreements for deed (among other names) have long been used as handy ways for unscrupulous property owners to milk every last dollar out of a property with significant legal problems (ie. homes in foreclosure, homes with a defective title, building/health code violations, encroachments, improvements made without proper permits, etc., etc.) by unloading them on unsophisticated home buyers/tenants who fail to obtain title insurance or otherwise fail to check the legal status of the property being bought or rented.

Nowadays, it's gotten to the point where a prospective tenant can't even enter into a standard one-year lease without first checking the title history (and possibly obtain some evidence as to the fair market value of the property in the case of a 1 to 4 family home or condo) for the property being rented to see:

  • that the prospective tenant is dealing either directly with the property owner or someone with proper authorization to act for the owner,
  • that a foreclosure notice (ie. a lis pendens or a notice of default) hasn't been filed against the property, and
  • if a foreclosure notice hasn't been filed against the property, how far "underwater" the landlord is on the property being rented (the more "underwater" the landlord is - the greater the chance he/she will begin pocketing the rents and stiffing the bank out of its mortgage payments in the future - assuming, of course, he/she hasn't already started doing so).

Another Novice Homebuyer Gets Screwed Over In Land Contract Deal; Sinks $15K Into Property Rehab, Now Faces The Boot Over Undisclosed Title Claim

In Racine, Wisconsin, The Journal Times reports:
  • After transforming a hovel into a source of neighborhood pride, Noelia and Joaquin Raygoza have been ordered to leave. Not long after moving into a house they had agreed to buy at 1404 Buchanan St., the couple began receiving eviction notices - in someone else's name. Because of an apparent mix-up with an old foreclosure, the Raygozas and two grandchildren are the ones scheduled to be tossed out in a week.

  • That's a big blow to a family that spent much of the past seven months turning it into a habitable place, upgrading plumbing, repairing sidewalks, putting in floors and more. They remember hauling out 14 loads of garbage, too, all to the relief of neighbors.

***

  • In January, the couple signed paperwork to buy the property for about $26,000. A company called Original Resources Inc., based in San Jose, Calif., entered into a land contract that was supposed to transfer full ownership to the Raygozas after a two-year probationary period. Noelia and husband Joaquin, 53, moved in along with grandsons Sergio, 21, and Eric, 18. [...] Family members are skeptical that they'll get back what they put into the house. They put profits from previous sales and other savings toward the estimated $15,000 in renovations.(1)

For more, see Fixed up, then forced out? - Mix-up threatens family's eviction after extensive renovations.

For story update, see Family gets month reprieve from eviction over mix-up:

  • Noelia Raygoza said someone from Original Resources Inc., the California company that sold [the couple] the house, planned to arrive here soon to help sort it out. She also plans to meet with Legal Action of Wisconsin(2) for possible legal assistance.

(1) In all likelihood, the novice homebuyer failed to either obtain a title insurance policy or otherwise check the status of the property title, including the status of any unsatisfied liens, or other clouds on title / title defects that may require the filing of a lawsuit to clear up. See generally, The Quiet Title Lawsuit; Fixing Title Defects in Real Property.

This story provides a good example of what can happen to a homebuyer who begins sinking in cash and sweat equity into a home without first getting legal advice or doing any due diligence when attempting to buy the property.

(2) According to their website, Legal Action of Wisconsin is a non-profit law firm with offices in six cities serving 39 southern Wisconsin counties providing free legal representation for low-income people.

Tuesday, August 10, 2010

State AG Announces Probe Into Florida Foreclosure Mills For Allegedly Manufacturing Phony Documents Used To Take Homes Away From Delinquent Borrowers

The Palm Beach Post reports:
  • The Florida Attorney General's office announced this morning investigations into the state's three largest foreclosure law firms for allegations of unfair and deceptive actions. The firms, sometimes called "foreclosure mills," are the Fort Lauderdale Law Offices of Marshall C. Watson, Tampa-based Shapiro & Fishman, and the Law Offices of David J. Stern, based in Plantation.

  • Last month, a lawsuit seeking class action status was filed by a Fort Lauderdale attorney against Stern claiming the firm generated fraudulent mortgage assignments when pursuing foreclosures. An assignment is held by the entity that has the right to receive mortgage payments. Stern's practice, which the lawsuit claims filed up to 7,000 foreclosure cases in Florida every month last year, also is alleged in the suit to have pursued foreclosures for lenders that didn't own the debt on the homes.

***

  • A press release from Attorney General Bill McCollum's office says because many mortgages have been bought and sold by financial institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. "On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners," the press release states. "Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation."(1)

Source: State probes whether three law firms falsified foreclosure documents.

See also:

Sarasota Herald Tribune:

  • Sarasota's legal community has sounded the alarm for years over shoddy or fraudulent paperwork being used to take thousands of properties from Florida homeowners in foreclosure. Local judges have reversed foreclosure sales, thrown cases out of court and created extra reviews to help ensure that attorneys for lenders follow the rules. On Tuesday, Attorney General Bill McCollum took the fight statewide, launching investigations into three of the state's largest "foreclosure mills."

South Florida Sun Sentinel: Three South Florida law firms investigated over foreclosure cases:

  • The Florida attorney general issued [] subpoenas this week, requesting reams of paperwork by the end of the month from attorneys working in the foreclosure capital of the country. [...] The subpoenas request documents going back to at least Jan. 1, 2008.

Mother Jones: Florida AG Unveils Foreclosure Mills Probe:

(1) Those who have recently bought a home that had been previously foreclosed upon within the last several years better pull out and review their title insurance policy to determine that they are protected against future title claims that could arise by reason of these potentially void foreclosure judgments.

Whistleblower Lawsuit: Fannie Made Mess, Mishandled Money In Handling HAMP

The Center for Public Integrity reports:
  • Fannie Mae executives bungled their stewardship of the federal government’s massive foreclosure-prevention campaign, creating a bureaucratic muddle characterized by “mismanagement and gross waste of public funds,” according to a whistleblower lawsuit by a former Fannie Mae executive and consultant.

  • Caroline Herron, a former Fannie vice president who returned to the mortgage giant in 2009 as a high-level consultant, claims that the homeowner-relief effort was marred by delays, missteps and executives preoccupied with their institution’s short-term financial interests.

  • It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” she claims in the lawsuit.

For more, see Whistleblower: Fannie Mae Bungled HAMP Anti-Foreclosure Program.

In related stories, see:

For the lawsuit, see Herron v. Fannie Mae, et al.

The PSA & "The Alphabet Problem" In “Proving Up” Unbroken Chain Of “Assignments & Transfers” Of Notes, Mortgages In Foreclosure Defense Litigation

Consumer bankruptcy litigation attorney O. Max Gardner III writes:
  • The Pooling and Servicing Agreement (PSA) is the document that actually creates a residential mortgage backed securitized trust and establishes the obligations and authority of the Master Servicer and the Primary Servicer. The PSA also establishes that mandatory rules and procedures for the sales and transfers of the mortgages and mortgage notes from the originators to the Trust. It is this unbroken chain of assignments and negotiations that creates what I have called “The Alphabet Problem.”

For more, see The Alphabet Problem and the Pooling and Servicing Agreement.

For 20 of the reasons you need to request through formal discovery in any mortgage-related lawsuit the PSA Agreement and why it is relevant, see Max Gardner’s Top Reasons for Wanting a Pooling & Servicing Agreement.

See Finding Investor Restrictions on Loan Modifications for some guidance on locating pooling and servicing agreements.

Indiana AG Files Three More Lawsuits Against Foreclosure Rescue Outfits For Violating State Rules; Runs String Of Legal Actions To 22 This Year

In Indianapolis, Indiana, The Indianapolis Star reports:
  • Despite a two-year crackdown by his office, the state attorney general said for-profit foreclosure consultants are still ripping off Indiana homeowners by promising mortgage foreclosure relief but not providing it. Attorney General Gregory Zoeller filed three more lawsuits Friday against "foreclosure rescue" companies, using new state regulations meant to make it easier to put shady operators out of business.

***

  • A new state law, effective July 1, requires for-profit foreclosure prevention companies to post a $25,000 bond with the attorney general in order to do business in the state. The three lawsuits are the first against foreclosure prevention companies under the new law.

  • The new cases make 22 lawsuits that the attorney general has filed this year against foreclosure consultants. Investigations are under way on an additional 154 consumer complaints that might lead to additional lawsuits. Last year the AG filed 11 lawsuits against foreclosure consultants.

***

  • The new lawsuits were filed against Foreclosure Relief Services National of Indianapolis; Home Loan Modification of San Diego; and a group of eight interrelated companies and individuals in Florida. All are charged with not paying the Indiana bond and other violations of state consumer laws.

For the story, see State warns against 'foreclosure rescues' (Attorney general files 3 new lawsuits and says rip-offs are continuing).

Woman Wins Battle To Escape Legal Grasp Of Guardianship "Kidnapping"; Now Faces Possible Loss Of Home To Satisfy $100K+ In Unpaid Guardian, Legal Fees

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:
  • Isabelle Jessich went to court Friday with two goals: to regain her liberty from a court-appointed guardian and to prevent him from selling her Edina home to pay $100,000 in fees for himself and seven lawyers.
  • Jessich succeeded in getting control of everything but her money, but she now faces the prospect of being sent back to a nursing home while her 17-year-old daughter could be placed in foster care.
  • Jessich, 57, has been battling for 20 months to take control of her life from Joseph Vogel, a professional guardian and conservator appointed by a Hennepin County judge in December 2008 to make decisions for her. Last year, Jessich made major strides to overcome the eating disorder, neurological problems and alcoholism that had made her a ward of the court. But Vogel would not let her leave a Robbinsdale nursing home and rejoin her daughter Allison, who was left to fend for herself.
  • After the Star Tribune reported on Jessich's situation in August 2009,(1) state inspectors investigated and cited Robbinsdale Rehab and Care Center for failing to release Jessich. She moved back home in December. Since then, Jessich testified Friday, she has continued with physical therapy and other recovery activities. She said she is leading a "normal life."
  • But her struggle with Vogel over her finances could bring chaos back into her life. Vogel said he's owed almost $25,000, and lawyers in the case -- whose fees must be paid by Jessich -- have racked up more than $80,000 in bills.(2)
***
  • [Her] house was nearly lost at a foreclosure auction, but Jessich arranged for someone to pay the back mortgage payments. Jessich refused to identify her "guardian angel," and the judge warned that failing to answer the question would hurt her position.
For more, see Edina woman gets control of life, may lose home (Isabelle Jessich got rid of her court-appointed guardian, but her house could be sold to pay legal fees).
(1) See Minneapolis Star Tribune: 'I feel like I'm in jail' (A court is keeping Isabelle Jessich in a nursing home even though a doctor says she's sane, sober and fit to leave. Is this how guardianship laws should work?).
(2) For other posts and links to other media reports on state-sanctioned, court-ordered guardianship ripoff rackets, see:
These guardianship ripoff rackets have been going on for decades, as evidenced by a New York Times story that dates back to June 29, 1988. See 3 in Surrogate's Office Charged With Theftsgranny-snatching

Monday, August 09, 2010

Massachusetts AG Concludes Civil Action Against Equity Stripping Attorney, Five Confederates For Using Sale Leaseback Racket To Rip Off Homeowners

From the Office of the Massachusetts Attorney General:
  • [Last week], Attorney General Martha Coakley’s Office concluded its case against former Brockton attorney Alec G. Sohmer and five other defendants over their roles in a 2006 foreclosure rescue scheme. The judgments entered [] by Judge Thomas Connolly against Sohmer in the amount of $620,000 and against the four remaining defendants collectively in the amount of $364,000, together with the judgment obtained last May in the amount of $41,204, resolve allegations that Sohmer, with the assistance of the other defendants, orchestrated an unlawful foreclosure rescue scheme against 26 homeowners.(1)

***

  • According to the complaint, Sohmer preyed on homeowners facing foreclosure by promising them that they could avoid foreclosure with refinancing through Timeless Funding. Instead, Sohmer allegedly deceived the homeowners into conveying their properties to himself or to his wife. The complaint alleges that Sohmer concealed his fraud by deceiving homeowners into signing documents purporting to allow them to stay in their homes by making monthly payments to Sohmer, and then to "repurchase" their homes from Sohmer by obtaining new financing.

  • The lawsuit alleges Sohmer knew the homeowners would not be able to afford the monthly payments, or obtain the required financing to repurchase their homes because of the homeowners' financial distress and the onerous "repurchase" terms, After homeowners were unable to make the monthly payments, Sohmer then sought to evict them from their homes, and to sell their homes to new buyers. Sohmer also stripped the homeowners’ equity by charging fees, commissions and other payments.(2)

  • In a related action, on July 20, 2010, the Attorney General’s Office obtained a favorable decision against Sohmer, resulting in the denial of Sohmer’s bankruptcy discharge. In October 2007, the Attorney General objected to Sohmer receiving a discharge from the Bankruptcy Court of all of his debts alleging, among other acts, that Sohmer filed false Schedules and a false Statement of Financial Affairs with the Bankruptcy Court, thereby concealing assets, and also failed to maintain adequate financial records to evaluate his financial condition. In her decision, Judge Joan Feeney found Sohmer knowingly and fraudulently made false oaths on his bankruptcy Schedules and Statement of Financial Affairs, intending to mislead the Bankruptcy Court Trustee and creditors.

  • None of the attorneys involved in this scheme are currently practicing law in Massachusetts. The Supreme Judicial Court accepted Sohmer’s affidavit of resignation from the practice of law as a disciplinary sanction on September 28, 2009, suspended [Andrew] Palmer from the practice of law for 21 months on June 29, 2009, and accepted [Shaun M.] Ellis’ affidavit of resignation from the practice of law as a disciplinary sanction on other grounds, on April 28, 2009.(3)

  • Two years ago, the Bankruptcy Court approved a settlement between the Attorney General’s Office and 10 mortgage lenders and servicers who funded or serviced the loans thereby facilitating Sohmer’s fraudulent foreclosure rescue transactions. With respect to the 26 properties, the agreement was designed to provide approximately $1.8 million in reduced mortgage obligations, and to return each homeowner to his or her financial position before the foreclosure rescue transaction occurred. The agreement also provided an opportunity for Sohmer’s victims to reacquire legal title to their homes.(4)

For the Massachusetts AG press release, see Attorney General Martha Coakley Obtains Judgments Against Alec Sohmer and Other Defendants in Alleged Mortgage Foreclosure Rescue Scheme (Obtains Favorable Decision In Bankruptcy Court Case Denying Discharge To Sohmer).

(1) For some of the relevant court documents and other information, see:

See also: Foreclosure Rescue Sale Leaseback Deals Are Usurious Equitable Mortgages, Says Massachusetts AG's Civil Lawsuit.

(2) With respect to the Sohmer's confederates in this racket, the AG states that the court also entered a consent judgment for $90,000 against Sohmer’s wife, Jennifer Sohmer, who served as the purchaser and mortgage loan borrower for six properties in the foreclosure rescue scheme. Also entered were a consent judgment for $200,000 against former Norwell attorney Andrew Palmer, who served as the closing attorney for the foreclosure rescue transactions and default judgments against Timeless Funding, the corporation through which Sohmer marketed his scheme, in the amount of $130,000 in civil penalties, and against former Sandwich attorney Shaun M. Ellis, who referred distressed homeowners to Sohmer in exchange for a fee, in the amount of $34,000, to be used toward restitution and civil penalties, according to the AG's press release. A consent judgment against Edward de la Flor, a mortgage broker involved in many of the transactions, for $41,204 was entered on May 5th of this year.

(3) The victims of this scam who are owed restitution from Sohmer and the other attorneys involved in this racket might consider filing a claim with the Massachusetts Clients' Security Board of the Supreme Judicial Court, which manages and distributes the monies in the court's Clients' Security Fund to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the Massachusetts bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

A similar fund in Minnesota that reimburses the public for ripoffs involving licensed real estate brokers, salespeople, and closing agents made a distribution to a victim of the same type of foreclosure rescue scam. See State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent.

(4) See Court Approves Foreclosure Rescue Scam Settlement Between Massachusetts, Ten Lenders; Case Involved State AG Claims Of Equitable Mortgage, Usury, Etc..

NY Couple Gets 2 To 6 Years For Roles In Equity Stripping, Sale Leaseback Scam; Homeowners Who Sought Foreclosure Rescue Have Civil Suits Pending

In Westchester County, New York, The Journal News reports:
  • A judge admonished a Tarrytown couple Thursday for their roles in "sham real estate transactions" that cost four Westchester County families their homes. The judge then sentenced Hubert "Phil" Hall and his wife, Doreen Swenson, to two to six years in state prison.

  • "You perpetuated the complex schemes ... for your own financial benefit," acting state Supreme Court Justice Richard Molea said. Hall and Swenson had agreed to the prison term when they pleaded guilty in May to second-degree grand larceny and first-degree scheme to defraud, both felonies.

  • They are among a group of eight — including four lawyers — who prosecutors say worked together to take advantage of vulnerable people in Croton-on-Hudson, Yorktown, Cortlandt and Mount Vernon who were about to lose their homes.

  • The suspects are accused of promising to help save the homes, but instead draining them of their equity and leaving the owners with nothing.(1) The group also is accused of swindling two mortgage lenders out of $1.4 million. [...] At the court appearance, Swenson and Hall, both 61, each paid criminal restitution of $36,290. A civil suit against them and the other defendants is pending.

For the story, see Couple apologize for role in mortgage fraud, get 2-6 years.

(1) According to the story, prosecutors said that the group found victims through notices of public auction or foreclosure and reached out to them and gained their trust, saying they could transfer their deeds to an investor who would hold the title from 12 to 24 months so they could save money and reclaim their homes. But once the "investor" took title, phony checks were presented to the lenders for higher amounts than what the straw buyer paid for the home, the story states. Those checks allowed the group's members to get inflated mortgages, which they used to pay off the original mortgage and keep the rest for themselves.

Upstate NY Couple Left In Limbo After Refinancing Home As Closing Attorney Is Charged w/ Pocketing Payoff Proceeds Due To Existing 1st Mtg Lender

In Lake George, New York, The Post Star reports:
  • When Theresa Olson-Hoffman saw Patrick Reidy in the news last summer, in police custody and heading for a Saratoga County Court Room, she immediately recognized him. He was, she remembered, the same Saratoga Springs lawyer who had acted as a closing attorney when she and her fiancé completed paperwork to refinance a home loan almost a year earlier.

  • Reidy, of Gansevoort, was charged with stealing more than $400,000 from area residents who came to him for similar services. Checks from those residents, which were intended for banks, were instead kept by Reidy, police said. Olson-Hoffman thought she was fortunate to have escaped her real estate transaction unscathed. “Thank God it wasn’t me,” she remembers saying at the time.

  • Less than three months later, after a car crash prompted her to seek a new car loan, she discovered she wasn’t so lucky. Her credit, it turns out, was a wreck, and she soon learned the cause: Reidy had never paid off the first mortgage on a Lake George home she built in 2001, as he was supposed to do, Olson-Hoffman said. She has no idea what Reidy, who was working on behalf of the bank, did with the $135,000 check she had given to him.

***

  • [O]lson-Hoffman and her finance haven’t been able to recover any of the money Reidy is accused of stealing from them. Lawyers have told them it’s unlikely they’ll see anything unless Reidy is convicted.(1)

For more, see Fraud case leaves Lake George pair in financial limbo.

(1) The victimized homeowners and mortgage lenders left unwittingly holding 2nd mortgages due to the attorney's failure to pay off the existing mortgages in the refinancing transactions might consider filing claims with The Lawyers’ Fund For Client Protection Of the State of New York, which was established to reimburse clients who have suffered a loss due to dishonest conduct of a member of the New York Bar. According to the Fund's website:

  • The Trustees may reimburse losses caused by the dishonest conduct of lawyers admitted to the practice of law in New York State, up to a maximum of $300,000 for each client loss. Dishonest conduct means the wrongful taking of clients' money or other property, in the practice of law, after June 1, 1981. Clients must apply for reimbursement within two years after they discover their loss.

  • Typical losses covered include the theft of money from estates of dead clients; escrow funds in real property closing; settlements in personal injury actions; and money embezzled from clients in investment transactions.

For similar "attorney ripoff reimbursement funds" established to reimburse clients who have suffered a loss due to the dishonest conduct of attorneys in other states and Canada, see:

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

C. Florida Closing Agents Cop Pleas To Looting Real Estate Escrow Accounts; Ordered To Pay $7.9M In Restitution To Title Insurer Left Holding The Bag

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [last week] announced that a Pinellas County woman pleaded guilty to stealing nearly $8 million in a real estate fraud scheme. Cheryl Wehlau, owner of Gulf Coast Title Offices, entered her plea [last week] in a case prosecuted by the Office of Statewide Prosecution.

  • Cheryl Wehlau masterminded a scheme to funnel funds held in escrow for real estate closings into a business operating account, then spent the cash on a lavish lifestyle. Gulf Coast Title was placed into receivership by their underwriter Commonwealth in January 2006. Cheryl Wehlau pled guilty to 21 counts of misappropriation of $100,000 or more in funds. She will be sentenced at a future date to eight years in prison, to be followed by 15 years supervised probation. Should she violate any criminal laws or fail to show up to her sentencing at a later date, she will receive 30 years in state prison.

  • John Wehlau, Cheryl Wehlau’s husband, also pleaded guilty to one count of misappropriation of escrow funds, $100,000 or more and 20 counts of petty theft of $100 or more. Restitution will be ordered against both defendants in the amount of $7.9 million, payable to Fidelity National Title Group, the victim of the scheme.

  • As a condition of her plea agreement, Cheryl Wehlau may not be employed in real estate, title or mortgage services, or be directly or indirectly involved as fiduciary handling another person’s money. The Wehlaus will also have to pay $4,000 for the cost of prosecution and court costs.

Source: Pinellas County Woman Sentenced to 8 Years in Prison in Real Estate Fraud Scheme (Defendant and husband ordered to pay nearly $8 million in restitution).

Sunday, August 08, 2010

City Gives Residents In 36-Unit Condo The Boot As Rotting Wood Threatens Collapse Of 6-Year Old Structure; Suit Against Developer, Others Pending

In Bradenton, Florida, the Bradenton Herald reports:
  • They received their packing papers Friday night. And all day Saturday, U-Haul trailers and cars packed with personal items began trailing out of Mainstreet at Bradenton Condominiums, 210 Third St. W., after the city of Bradenton sent a letter to all 36 units, stating the 6-year-old condo was considered unsafe.

  • The primary issue: the two stairwells situated on opposite sides of the building. In many areas, stucco has been cut away to reveal rotting wood. One stairwell is completely closed off. “We’ve got to believe other parts of the structure are suffering the same damage,” said Darren Inverso, an attorney representing the condo association in a lawsuit that began two years ago against developers, subcontractors and engineers. “We’re not exactly sure what the cause of the water damage is, but we know we have dry rot, which is resulting in a partial collapse of the structure.”

For more, see Bradenton tells condo residents to move out.

Florida U.S. Senate Candidate Linked To Alleged Straw Buyer Mortgage Scam That Left Banks, Taxpayers Holding The Bag On Nearly $34M Of Worthless Paper

The St. Petersburg Times reports:
  • Democratic U.S. Senate candidate Jeff Greene says he had nothing to do with creating the sub-prime mortgage mess that made him fabulously wealthy. He was simply a savvy investor who "could see that the housing market was imploding" and lucky enough to make more than $500 million by betting against it.

  • But he wasn't just a spectator to the housing collapse. Four years ago, Greene was party to precisely the kind of deal that decimated the market. Greene insists he did nothing wrong. Yet the way he handled the deal left an opening for massive fraud and put him uncomfortably close to a man now under federal indictment.

For more, see Calif. deal put Jeff Greene on front line of mortgage mess.

NYC "Loan Scam Busters" Hit The Streets Of South Jamaica Targeting Side-Of-The-Road "Bandit" Signs Peddling Foreclosure Rescue Programs

In South Jamaica, Queens, the Queens Tribune reports:
  • Volunteers took to the streets of Southeast Queens [last week] to help the City crack down on the vultures who prey on victims of the foreclosure crisis. The City Dept. of Consumer Affairs ["DCA"], partnering with NeighborWorks America, enlisted volunteers to bike through South Jamaica on July 31 to find and report deceptive foreclosure prevention ads posted in the neighborhood.

  • For several months DCA has been canvassing neighborhoods in Queens and Brooklyn on foot documenting foreclosure scam ads and talking to residents about the fraudulent foreclosure aid practices they see happening in their area. These volunteers also give information to those who are in danger of losing their homes on getting free counseling from the city.

  • This event marked the first time the volunteers, known as “loan scam busters,” used bicycles donated by Bike and Roll to canvass the entire neighborhood, enabling the DCA to cover a larger area faster. Volunteers armed with cameras and DCA forms for documenting advertising information – including where the advertisement was spotted, what type of ad it was and a brief description – headed out in teams of two at 11 a.m., after a brief training session on what to look for and where to look.

  • This is a dual purpose [campaign] – to educate and document,” said Amelia Erwitt, chief of staff for the DCA Office of Financial Empowerment. [...] The NYC Distressed Property Consultant Law was recently passed in an effort to stop predatory advertisements in neighborhoods hit hardest by foreclosure. The new law, aimed at printed materials, requires that ads state certain disclaimers, including no guarantee to stop foreclosure proceedings, that consultants cannot take money up front and consultants cannot retain original loan documents.(1)

  • This law will make it easier for loan scammers to be prosecuted for predatory practices and enables DCA to gather more information about the foreclosure ads and ensure they are in compliance with the law.

For the story, see Fighting Predators Door-To-Door.

(1) The law also prohibits the consultant from snagging a power of attorney from a homeowner. New York City Administrative Code - Subchap. 5 - §20-723.3(b)(1)(iii).

Another Lender Jumps Gun Against Family In Foreclosure; Wife, Kids Discover Home Interior Destroyed While Hubby Is Deployed In Afghanistan

In Tuscola County, Michigan, WJRT-TV Channel 12 reports:
  • He's in Afghanistan, serving his country. Back home, his family is in a fight to preserve their home. A Tuscola County family thought they had worked out everything with their lender through a program that helps military families facing foreclosure.

  • The family still has the home, or what's left of it. Benjamin Kotzian's wife and kids spent a few months with him in Texas before he was deployed to Afghanistan in June. They arrived back home on Sunday, but it's a far cry from the home sweet home they remember. "It's sad enough to have your husband leave, but then when you just want to come home and you come home to this," said Michelle Kotzian. Kotzian and her children came back home to different locks and broken door frames. "I find my carpets ruined, I find broken pipes, I have no water, I can't turn the water on," she said.

  • In December, she contacted the bank which holds the mortgage on the Millington-area home she has owned for five years. Kotzian told the bank her family was going to Texas to see her husband, Benjamin, before he was deployed to Afghanistan. "I'm leaving in January," she said. "I will be back five or six months later. My husband is deploying. We intend on coming back."

  • She made the call because the family had just worked out a plan with the lender to avoid foreclosure with the help of the Servicemembers Civil Relief Act, which gives some protection to military families trying to keep their homes. Shortly after she arrived in Texas, she got a call from a neighbor saying people were at her house. "They come into the home, they are taking stuff out of the home," she said.

  • Afraid that her home was being foreclosed on, she called the lender. She says the company admitted a mistake was made and the house was not in foreclosure. But when she returned months later, the family's belongings were gone and the house had looked as if it had been ransacked. Water pipes were ruptured, even though the home was winterized.

  • "They've already admitted that they made the mistake. I just want them to come and fix it," Kotzian said. "I just want my running water. I want my clean carpet. I want my home. That's what I want. I want my home the way I left it."

  • We have made several attempts to get in touch with the bank that holds the Kotzian's mortgage, but we have not heard back from them.

Source: Soldier fights in Afghanistan while family fights to save house.

(1) See Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure for a recent court ruling which 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 was found to be a bit premature in entering the premises since the delinquent borrower was still the legal owner of the property.

See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure for a 2008 case in which the Nevada Supreme Court OK'd an award over over $1 million, including $968,000 in punitive damages, for a couple whose home was misidentified by a foreclosing lender and subsequently ransacked (for the actual court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008)).

Renters In 11,000-Unit NYC Complex In Foreclosure Score Big Win In Rent Overcharge Case; Tenants' Lawyer Pegs Haul At Approx. $200M

In New York City, Crain's New York Business reports:
  • Tenants of market-rate apartments at Stuyvesant Town/Peter Cooper Village won a significant victory on Thursday when a judge ruled that they are entitled to rebates for rent overcharges. The ruling stems from a court decision last October, which said that the owners of the sprawling Manhattan residential complex were not entitled to deregulate rents while they were receiving a particular type of tax abatement. The court didn't rule on the issue of retroactive payments at the time.

  • After the October ruling, former owner MetLife said the ruling should not apply to it because the decision came several years after the company sold the property to a partnership led by Tishman Speyer. That partnership paid an eye-popping $5.4 billion in 2006 and has since defaulted on its loans. However, the special servicer representing the lenders has yet to foreclose on the property. Sources expect the foreclosure in the next few months. MetLife had been trying to get the case against it dismissed but New York Supreme Court Justice Richard Lowe declined to do that and said the tenants are entitled to be reimbursed for rent overcharges.

  • Tenant lawyer Alex Schmidt estimated that tenants could be due a total of $200 million. However, he isn't sure whether MetLife will try to appeal the ruling. Mr. Schmidt says negotiations with Tishman Speyer over settling the rebate issue are ongoing.

For more, see Stuy-Town tenants take home big win (Judge rules that they are entitled to be reimbursed for years of rent overcharges on apartments whose rents were unlawfully de-regulated; decision's impact on other properties is unclear).

Go here for other posts on the Stuyvesant Town / Peter Cooper Village fiasco in NYC.

Florida Supreme Court Disciplines "Dirty Dozen" For Playing Fast & Loose With Their Clients' Money

The Florida Bar recently issued its quarterly "gossip sheet," in which it announced that the Florida Supreme Court in recent court orders disciplined 27 attorneys, disbarring eight and suspending 17.

The following 12 attorneys (or now ex-attorneys, as the case may be) were either booted or suspended from the profession for allegedly playing fast and loose with their clients' money or just outright ripping them off:(1)
  • Harvey Jay Goldstein, Milwaukee, Wis., suspended until further order, following a June 3 court order. (Admitted to practice: 1987) According to a petition for emergency suspension, Goldstein appeared to be causing great public harm by converting nearly $70,000 from three probate estates while acting as an administrator and using the funds to pay personal and business expenses and to finance real estate deals. Those incidents resulted in his suspension in Wisconsin.

  • Christine Marie Horn, Boynton Beach, disbarred effective immediately, following a June 17 court order. (Admitted to practice: 1980) Horn was suspended on an emergency basis in November 2009. A Bar audit revealed trust account shortages ranging from more than $3,000 in September 2006 to nearly $314,000 in October 2008.

  • Thomas Lemuel Hurst, Miami, disbarred effective immediately, following a June 3 court order. (Admitted to practice: 1972) Hurst, who previously had been suspended three times from practicing law, failed to respond to inquiries from The Florida Bar regarding a case alleging he misappropriated a client’s funds; and he failed to appear at a court-mandated final hearing.

  • John Joseph Liu, Safety Harbor, suspended for 91 days, retroactive to July 17, 2009, following a June 17 court order. (Admitted to practice: 1993) Liu failed to respond in writing to inquiries from The Florida Bar regarding the status of his trust account, which had been overdrawn. Nor did he appear for a hearing, despite being served a notice at his official Bar address.

  • Michael H. Lubin, North Miami Beach, disbarred effective 30 days from a June 24 court order. (Admitted to practice: 1981) Lubin misappropriated a portion of the funds he received from a client to hold in trust.

  • Matthew Glenn Palentchar, Colonia, N.J., suspended until further order, effective 30 days from a June 1 court order. (Admitted to practice: 2004) Palentchar failed to comply with a subpoena requesting that he produce trust account records on or before Jan. 15.

  • Jeffrey Stephen Rosenberg, Aventura, disbarred effective immediately, following a June 24 court order. (Admitted to practice: 1979) Rosenberg failed to explain the whereabouts of $27,750 placed in escrow with his title company for a client. During the course of a Bar investigation, Rosenberg agreed to disbarment.

  • David Philip Ryan III, Coral Gables, permanently disbarred effective immediately, following a June 17 court order. (Admitted to practice: 1997) Ryan misappropriated client trust funds for his personal use and he continued to practice law despite his suspension in March 2009. Also, Ryan produced some, but not all subpoenaed records requested by The Florida Bar, including bank statements, canceled checks, cash disbursements and client ledgers.

  • Mark David Swanson, Miami Beach, suspended for 50 days, effective thirty days from a May 20 court order. (Admitted to practice: 1984) Swanson shall pay restitution totaling $9,300 to two clients in separate cases. In both instances, after being retained, Swanson failed to adequately communicate with the clients. He also failed to respond to inquiries from The Florida Bar and the grievance committee.

  • Harry Mark Vieth, Miami, suspended for one year, effective 30 days from a June 3 court order. (Admitted to practice: 1984) In one instance Vieth misled clients into believing that their case was progressing normally, when in fact, he had taken little action on their behalf. In another case, Vieth was retained to assist a military veteran in increasing his disability benefits and filing a retroactive claim. After obtaining a $1.5 million judgment, Vieth failed to file for payment and the client never received his money. As a result, the client was forced to retain new counsel. Despite numerous requests by the client to secure his medical records for a new lawsuit, Vieth failed to communicate with him.

  • R. Scott Whitehead, Destin, suspended until further order, following a June 9 court order. (Admitted to practice: 1998) According to a petition for emergency suspension, Whitehead engaged in a systematic scheme to deprive his clients of their money in the form of fees and costs, while not performing the legal services for which he was retained. Additionally, he was arrested four times for alcohol-related problems since May 2009.

  • Marvin Deon Wilson Sr., Homestead, suspended for three years, effective retroactive to Dec. 1, 2008 following a May 27 court order. (Admitted to practice: 1998) A Bar audit found that Wilson used client funds for his own purposes. Additionally, Wilson was charged with three felony counts: organized scheme to defraud, grand theft and money laundering. Subsequently, the state attorney’s office dropped the charges against Wilson upon his agreement to refund $15,000 and attend a trust accounting workshop. In another instance, Wilson failed to keep a client informed as to the status of her case. He also failed to timely respond to an inquiry about the case from The Florida Bar.

For the entire press release, see Supreme Court Disciplines 27 Attorneys.

For those attorneys who have one or more client trust accounts to hold clients' money but are completely clueless on how to maintain the proper record keeping for one, I strongly recommend Handbook on Client Trust Accounting as required reading.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" established to reimburse clients who have suffered similar losses due to the dishonest conduct of attorneys in other states and Canada, see:

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

Saturday, August 07, 2010

End Draws Near In 17-Unit Building In F'closure; Water Shutoff Due To Unpaid Bill, Vacate Order For Health, Safety Issues Spell Eviction For Renters

In Daytona Beach, Florida, The Daytona Beach News Journal reports:
  • The worry on Shawn Ackerman's face spoke volumes as he sat outside his second-floor, riverfront apartment. After eight years in Unit 17 of Riverside Apartments, 245 N. Halifax Ave., Ackerman, 38, and his roommate, Sherrie Copeland, 52, said they may soon find themselves homeless. As of 12:30 p.m. Wednesday, the city's Water Utilities Department shut off the tap over an overdue amount of $4,292 on the water bill.

  • This is the latest in a string of problems at the 17-apartment complex including foreclosure and an order by the city's code enforcement board to vacate the building.

***

  • "The landlord has not paid the water bill," [Daytona Beach spokeswoman Susan Cerbone] said. But that is the least of the owners' worries. Cerbone said the property is accumulating city code enforcement fines of $1,000 per day -- so far $27,000 --since July 8 for a variety of code violations including health and safety issues.

For more, see Tenants face eviction over code enforcement fight.

20 Families Get Boot From Building In F'closure After Getting 24 Hours Notice; Village Officials Say Premises Unsafe, Uninhabitable; Landlords Go AWOL

In Maywood, Illinois, WLS-TV Channel 7 reports:
  • The village of Maywood has condemned a building as unfit for occupancy, forcing its residents to move out of their homes. About 20 families were given 24 hours notice that they must vacate their homes in the 1800-block of 5th Avenue. Flood damage is said to be only part of the reason the building is condemned. Residents say there have been problems for months and didn't realize the extent of the damage. They are devastated and angry and even the children are sad.

***

  • The building has been determined to be unsafe and uninhabitable. There is no fire alarm system, no power and no hot water. Some of the conditions are the result of recent flooding. Village officials say they are mostly due to poor management and maintenance.

  • "The fire alarm system isn't working. Some of the residents didn't have electricity, no hot water. The basement was flooded. Property maintenance issues," said David Flowers, Village of Maywood. "The building is not safe and we just wanted to avoid any disasters."

  • The building is in foreclosure. Many residents are looking for the building's previous owners who appear to be nowhere in sight.

For the story, see Residents displaced from condemned building.

Transitional Rental Housing Facility In Foreclosure To Shut Down; 14 Families Get Two Weeks Notice Before Having To Face The Boot

In Valparaiso, Indiana, the Post Tribune reports:
  • Fewer than half of Spring Valley Shelter's 14 families could attend [last week's] meeting about their future. One woman fought tears, and some bit their nails. Told that Spring Valley will shut down in two weeks and Friday was the employees' last day, they had one question.

  • "As of right now, what are our options?" asked Krystal Smith, who is pregnant with her third child and whose roofer husband was laid off. There's no certain answer, but the families will be helped by Darrell Franklin, the only Christian Community Action employee left, and staff from Housing Opportunities.

  • Franklin said alternatives that might break up families were never considered. However, moving all 14 families to the same place would overwhelm the resources of agencies helping, so the families will be moved in different directions.

  • Some residents questioned the two weeks because in foreclosures on rental units, there's a 90-day period. "It is our understanding that tenant law does not apply to Spring Valley," Franklin said.

For the story, see Spring Valley residents in shock, tears.

Atlanta's Largest Homeless Shelter Faces Foreclosure; Advocates Claim Legal Action's A Conspiracy To Rid Hundreds Of Residents From Downtown Area

In Atlanta, Georgia, National Public Radio reports:
  • The homeless problem in Atlanta may soon get worse. The city's largest homeless shelter has been foreclosed on because the group running it is deep in debt. Some say the foreclosure is a conspiracy to rid downtown Atlanta of homeless men, while others claim the shelter is a steady source of crime and civic frustration.

For more, see Atlanta Homeless Shelter Faces Eviction (Atlanta's largest homeless shelter is going into foreclosure, which may force hundreds of homeless men back on to the streets. Some say the foreclosure is a conspiracy).

60 Families Residing In Tacoma Mobile Home Park Face The Boot As Park Owner Facing Foreclosure Fails To Cure Safety, Health Violations

In Tacoma, Washington, The News Tribune reports:
  • They say they pay their rent on time and take pride in their community, but about 60 low-income families in Lakewood may still be out on the streets later this year. The city has identified a litany of safety and health violations at the Fir Acres Mobile Home Park, which is currently in foreclosure, on the 12600 block of Bridgeport Way Southwest. The city plans to evict the tenants at the end of August unless someone emerges with a plan to address the concerns and the money to pay for the work.

***

  • Fir Acres tenants and the city say the fault lies with the property owner, SLI Associates LLC, for allowing the property to fall into disrepair. Almost all the tenants own their homes and rent their spaces. “It’s like we’re being punished for their mess-up,” said River MystDragon, who has lived at the park for six years.

***

  • If the tenants are evicted, she said, they may end up in publicly funded housing – or, more likely, homeless. “Most families have invested in their homes and are proud of the fact they’re homeowners,” said [the tenants’ lawyer, Ishbel] Dickens of Columbia Legal Services, which provides legal assistance to low-income people. “They’re trying to be responsible homeowners and responsible parents and yet they’re going to potentially lose their only asset through no fault of their own. The city needs to take that into consideration.”

For more, see Lakewood family: ‘We have nowhere to go' (They say they pay their rent on time and take pride in their community, but about 60 low-income families in Lakewood may still be out on the streets later this year).

Friday, August 06, 2010

Atlanta Man Gets 39 Months In Attempt To Use Stolen IDs, Fictious Buyers, Phony Short Sales To Screw FDIC Out Of $2.2M

In Atlanta, Georgia, The Atlanta Journal Constitution reports:
  • An Atlanta man who took out millions of dollars in illicit loans from the now-failed Omni National Bank was sentenced [] to more than three years in prison as part of a federal investigation. Brent Merriell, 38, was sentenced to 39 months for making false statements to the Federal Deposit Insurance Corp. and for aggravated identity theft. He also faces five years of supervised release as part of U. S. District Judge Jack T. Camp’s order.

  • Mr. Merriell used stolen identities, created fictitious buyers, and negotiated phony short sale deals for properties, all in an effort to defraud FDIC of millions of dollars he owed on mortgages,” said U.S. Attorney Sally Quillian Yates. Merriell pleaded guilty in March.

  • According to a news release, Merriell faced foreclosure on 14 properties subject to Omni mortgages. After Omni failed and was taken over by regulators, Merriell asked the FDIC to forgive $2.2 million in loan payments, and instead allow him to “short sell” the houses at steep discounts. The seven new buyers, however, were phony, federal prosecutors say.

Source: Man sentenced in Omni National Bank scheme.

For the U.S. Attorney (Atlanta) press release, see Atlanta Man Sentenced to Prison for Fraud Related to Failed Omni National Bank (Defendant Used Stolen Identities for Short Sale “Buyers” When He Sought Forgiveness of $2.2 Million in Loans).

Foreclosure Limbo Leads To "Free" Temporary Housing For Some Delinquent Borrowers

In Northern California, the San Jose Mercury News reports:
  • Tens of thousands of Bay Area homeowners are trapped in a bizarre real estate limbo, living in houses but no longer paying for them, waiting and wondering if someone will help them — or throw them out. Some are victims of their own economic circumstances, unable to afford their mortgage and expecting to lose their homes if they can't get a break from their bank. Others are opportunists, choosing not to spend on a house worth less than they owe. Instead, they can live rent-free until their lender makes a move.

  • The limbo phenomenon is a radical departure from previous real estate crashes, when there were far fewer troubled loans and banks moved speedily on those who fell behind on payments. Now many lenders simply can't keep up, and others appear reluctant to flood a weakened market with foreclosed homes.

For more, see Many Bay Area homeowners in real estate limbo.

Another Lender Changes Its Tune When Local Media Intervenes On Behalf Of Screwed-Over Homeowner Seeking Loan Modification

In Douglasville, Georgia, WXIA-TV Channel 11 reports:
  • For Marci Williams, a single mother of two, it was a long day at the Neighborhood Assistance refinancing event at the World Congress Center but it was worth it. "I got there at 3 a.m. and after nine hours I was seen," Williams said. "I left with a 2 percent interest rate on my home." She had a signed contract with her lender, Bank of America.

  • Then 35 days later, the bottom fell out. "My loan was approved in the beginning of June and about 35 days later I received this letter saying it would be rescinded. In addition, I had to pay some monies and if I didn't pay, my home would go into foreclosure in September," she said. Williams says she tried numerous times to reach Bank of America, but she says she got no response. "It could have been the end for me but for my kids. Probably would have done the worst, but my kids just kept me going. I had to fight for them," Williams said.

  • Reaching a dead-end, she turned to the 11Alive Help Desk. 11Alive's Bill Liss contacted Bank of America in Charlotte, determined not to let the house go into foreclosure. The bank responded quickly and decisively. It honored the contract. "Because of you (11Alive), I am here in my house with the 2 percent that Bank of America gave me, and then rescinded. You made it right by being in my home and standing by me," Williams said. Standing by what was right.

Source: Bank Rescinds Refinance, Threatens Foreclosure.

State Lawmaker Among Many Bagged By Central Florida County Appraisers For Illegal Homestead Exemption Claim

In Hillsborough County, Florida, The Tampa Tribune reports:
  • If you know somebody claiming an illegal homestead exemption, Hillsborough County wants to hear from you. The appraiser's office has rolled out an online reporting site to make tattling on double-dippers quick and easy.

***

  • So far in 2010, the county has placed 240 liens on homes for homestead abuse, representing just more than a million dollars, according to [Hillsborough County Property Appraiser Rob] Turner. Turner said after an anonymous online report is filed, county investigators will handle the rest of the investigation. [...] Those caught are required to repay the taxes back as far as 10 years. The state also tacks on a 50 percent interest penalty, which retroactively accrues at 15 percent.

  • State lawmaker Janet Cruz is one of the most high-profile and costly cases. The county hit her with $32,000 in back taxes and fines this year after appraisers discovered she wrongly claimed a homestead at 4114 Empedrado St. in Tampa. Cruz repaid the taxes in full. "Nobody should get special treatment, including me," she said.

  • Turner said so far his office has received more than 300 anonymous online reports of exemption abuse since online reporting began in February. Sixty people lost exemptions as a result, and 235 more are under investigation.(1)

For the story, see Appraiser fights homestead fraud.

In a related story, see Orlando Sentinel: Who's that talking to neighbor? Investigators hunt homestead tax cheats.

(1) See Office of the Inspector General, Miami-Dade County press release for an example of a case that lead to criminal charges that resulted in connection with making bogus tax exemption claims under the state homestead law.

Those in Florida interested in legally renting out their homes without losing/relinquishing their homestead tax exemption garnted under Article should be made aware of two exceptions in the statute, which I refer to as the "roommate" exception, and the "U.S. Armed Forces Servicemember" exception.

See Section 196.061, Florida Statutes treats the rental of an entire dwelling (as opposed to the rental of only a portion of the dwelling) previously claimed to be a homestead for tax purposes as an abandonment of said dwelling as a homestead. Accordingly, one taking in roommates need not be concerned with losing their tax exemption by reason of renting out a portion of the dwelling. This homestead abandonment statute also does not apply to U.S. Armed Forces Servicemembers.

  • 196.061 Rental of homestead to constitute abandonment.--The rental of an entire dwelling previously claimed to be a homestead for tax purposes shall constitute the abandonment of said dwelling as a homestead, and said abandonment shall continue until such dwelling is physically occupied by the owner thereof. However, such abandonment of such homestead after January 1 of any year shall not affect the homestead exemption for tax purposes for that particular year so long as this provision is not used for 2 consecutive years. The provisions of this section shall not apply to a member of the Armed Forces of the United States whose service in such forces is the result of a mandatory obligation imposed by the federal Selective Service Act or who volunteers for service as a member of the Armed Forces of the United States.

But see, Karayiannakis v. Nikolits, 23 So. 3d 844; 2009 Fla. App. LEXIS 19251; 34 Fla. L. Weekly D 2534 (Fla. App. 4th DCA 2009) (homestead exemption for property tax valuation purposes held not applicable to entire 5-unit apartment building where property owner lived in one of the units and rented the other four units to tenants);

And, Haddock v. Carmody, 1 So. 3d 1133; 2009 Fla. App. LEXIS 354; 34 Fla. L. Weekly D 207 (Fla. App. 1st DCA 2009) (property owners not entitled to the tax exemption for homestead property where, in renting their condominium unit to others, they "carved-out" of the rental aggreement two closets for storing personal items that they maintained under lock & key and was not accessible to the tenants, in an attempt to fall within the "roommate" exception contained in Section 196.061, Florida Statutes).

Note that the foregoing only applies to homestead exemption determinations under Article VII, Section 6 of the Florida Constitution (relating to property tax exemptions for homestead property), and not to exemptions from forced sale for homestead property under Article X, Section 4, Florida Constitution.

Thursday, August 05, 2010

Attorney Accused Of Running Upfront Fee Loan Modification Racket Gets Booted From Legal Profession

The Florida Bar recently issued its quarterly "gossip sheet," in which it announced that the Florida Supreme Court in recent court orders disciplined 27 attorneys, disbarring eight and suspending 17. Among those attorneys getting the boot was:
  • Rudolph C. Campbell, Lutz, disbarred effective 30 days from a June 3 court order. (Admitted to practice: 1998) Further, Campbell shall pay restitution of $1,500 to one client. Campbell used his law firm as a loan modification and foreclosure assistance business. He charged up-front fees to homeowners, in violation of the Foreclosure Rescue Fraud Prevention Act, Florida Statute, 501.1377; he used deceptive advertising and he failed to respond in writing to an inquiry from The Florida Bar.

For the entire press release, see Supreme Court Disciplines 27 Attorneys.

Alleged Loan Modification Scammer Hit With 11 Felony Theft Charges; Accused Of Ripping Off 100+ Denver-Area Homeowners Out Of $300K+ In Upfront Fees

In Denver, Colorado, KMGH-TV Channel 7 reports:
  • More than 100 homeowners in the metro area are out $2,500, and some have lost their homes. Investigators said it is all because of a company that promised to modify home loans, but instead stole homeowners' money.

***

  • Santiago Pineda, has been arrested and charged with 11 counts of felony theft. Pineda, along with two other employees, worked with American Mortgage Consultants, also referred to as American Mortgage Counselors.

  • According to the Ramirez family, he told them he would help them modify their loan in order to avoid foreclosure, in exchange for $2,500 up front. During the process, the Ramirez' said Pineda told them not to contact their bank or even let them know they were dealing with AMC.

***

  • [Denver District Attorney Prosecutor Joe] Morales said AMC stole more than $300,000 from more than 100 families over the last two years. "We have not been able to determine that anything they were doing was legitimate," said Morales.

For the story, see DA: 100+ Scammed By Fake Mortgage Company (Mortgage Company Pretended To Modify Home Loans).

Cleveland Housing Judge Invites Homeowners Living Near Blighted Houses To Submit Restitution Claims Against Absentee Property Owners

In Cleveland, Ohio, The Plain Dealer reports:
  • Cleveland Housing Court Judge Raymond Pianka is ratcheting up the costs for absentee property owners who spread the damage from the foreclosure crisis. They will have to pay neighbors for economic losses caused by their neglect. Pianka plans to hold his first restitution hearings on the issue this month. The move comes as Cleveland's lone housing judge contends with the fallout from the foreclosure mess.

***

  • A troubling number of homes have become vacant, neglected commodities bought and sold -- often by out-of-state companies -- for dirt-cheap prices and left to languish. That can undermine safety and nearby property values.

***

  • In prior rulings involving companies that dealt in distressed properties and routinely defied local law, Pianka levied substantial fines. His aim: to deter illegal practices and make fines more than just a cost of doing business. Now he is broadening the lens on financial liability.

  • To be sure, restitution is not new -- nor is holding property owners responsible for nuisance conditions. But Pianka's strategy is considered unique because he has determined that neighbors could be victims under state law and he's giving them the chance to make a financial claim as part of the prosecution of another property owner.

***

  • Pianka declined to comment because the cases are pending. But the judge has sent letters to potential victims telling them they have a right to present their claims in court. Owners who live near the property and can show they suffered economic loss as a direct result of the defendant's criminal failure to maintain the property may be eligible for restitution under state law.

  • For instance, a person may be able to recover costs associated with maintaining the cited property to lessen its impact on their property, such as for mowing the lawn or picking up garbage. And former owners who sold their nearby home during a certain time period and can show that the property lost value because of the condition of the house in question may seek restitution. The companies can challenge any claims, with the victim having the burden of proving the amount of the claim.

For more, see Cleveland Housing Judge Raymond Pianka requiring negligent property owners to pay victim restitution to neighbors.

Federal Appeals Court Affirms Lower Court Dismissal Of Cleveland Civil Suit Alleging Subprime Loan Peddlers Created A Public Nuisance

In Cleveland, Ohio, The Plain Dealer reports:
  • A federal appeals court has ruled that Cleveland's attempt to punish banks for bankrolling subprime loans has no merit, leaving the city with little hope of ever collecting millions of dollars in damages related to the foreclosure crisis. The 6th Circuit U.S. Court of Appeals rejected arguments that the city's lawsuit should go to trial.

  • A U.S. District Court judge dismissed the same lawsuit in May 2009, stating that the city could not prove that the banks were directly responsible for blight, crime and other problems foreclosures had caused in Cleveland. Law Director Robert Triozzi said Tuesday that the 3-0 ruling by the three-judge panel was disappointing. He said the city plans to ask the entire 6th Circuit to hear the appeal.

For more, see Cleveland loses appeal in nuisance lawsuit vs. financiers of subprime loans.

For the court ruling, see City of Cleveland v. Ameriquest Mortgage Securities, Inc., et al., No. 09-3608 (6th Cir. July 27, 2010).